“Bitcoin is not just digital gold,” Kelly said. “It’s a technology platform that fintech is being built on top of. It is a once-in-a-generation investment opportunity similar to the Internet, growing just as fast if not faster. It’s the Internet of money.”
The debate, which came to light earlier this week, precedes bitcoin’s history-making turn as the cryptocurrency surpassed the value of an ounce of gold today, going beyond parity.
Kelly noted that many parties are involved with bitcoin, such as the Federal Reserve, the New York Stock Exchange, the Bank of England and top banks, all of which have projects building on the technology.
If bitcoin got 5% of gold’s market share, the price would be at $22,000. “That to me equals a winning investment,” Kelly said.
“It’s not digital gold, I agree, it’s digital fool’s gold,” Schiff retorted. “Today’s bitcoin’s could be tomorrow’s Beanie Babies.”
The principle behind bitcoin was to replicate the properties that made gold suited to be money and an alternative to fiat money, Schiff said.
“It is a potential medium of exchange, but it’s not a store of value,” Schiff said.
“Meanwhile, nobody really uses it as a medium of exchange. It’s just a speculative asset. People own it because they think it’s going to be more valuable in the future. But it has no intrinsic value in and of itself.”
Kelly responded that 50,000 merchants worldwide accept bitcoin. No merchants accept it directly, Schiff replied.
“There are no merchants that price their merchandise in bitcoin,” Schiff said, to which Kelly disagreed.
Kelly also said bitcoin is being used in trade finance between Brazil and China. “There are plenty of people using it in the supply chain. It’s very useful,” he said.
“People are using it to circumvent currency laws to transfer money out of China,” Schiff said. “They are not really using it in commerce.”
The two debated about which asset is more volatile.
“Gold had a long history of intrinsic value before it was money,” Schiff said. “People desired it for its properties, and it was very scarce, so it had a lot of value because its unique properties were hard to come by.”
Bitcoin has no value other than exchanging it for something else, Schiff said. Kelly replied that bitcoin has the same value as gold or oil; all are backed by their utility.
“There is no limit to the number of digital currencies that can be created,” Schiff said. “There are hundreds of others.”
“Why doesn’t everybody use MySpace?” Schiff asked, referring to the once aspiring social media site. “Because somebody came up with Facebook.”
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