A Digital Dollar & Precious Metals: Can They Coexist?

“Truth, like gold, is to be obtained not by its growth, but by washing away from it all that is not gold.” — Leo Tolstoy

Thanks to diminished currency prices and ravaging inflation, the question of whether a digital dollar will displace precious metals like gold [/GC], silver [/SI], and copper [/HG] has been popping up in the financial neighborhood of twitter. The short answer is no, not right away. The dollar would have to fully tank to nil before this type of widespread hard money swap-out would take place.

If you’re like me, you’ve been noticing the “National Coin Shortage” signs by the self-check out lane at the grocery store, which begs the question; what does this mean for Silver and Gold if minting is down across the board? They’ve vaporized our optionality and forced us to exclusively swipe a card. If you think about it, we’ve been almost fully digitized during quarantine. [cc: stimulus checks]

For the most part, online currencies are backed by something physical, meaning they’re a trading platform for another commodity, á la precious metals. If they’re not backed by a platform, they’re likely an “advanced barter system” that issues credits for performing tasks or selling goods to members. They’re also super limited, as a minuscule portion of credit can be issued before the entire system becomes shaky.

Tbh, Bitcoin is the only digital currency that fully meets the criteria of money, which really chaps the Fed’s ass, I’m sure. By using cryptography to make bits of computer code scarce, Bitcoin has pioneered a lane that no other internet outfit has before. So long as you have those bits of code stashed away on your hard drive or online wallet, they can be traded anytime, anywhere. All you need is an internet connection. Many crypto bulls portend that Bitcoin, more so than Gold or Silver, is the future of hard money.

The difference? Although I’m not sure the Millennial and Gen-Z crowds give a shit ~ Bitcoin was released in 2009 and Gold was released thousands of years ago. Gold has functioned as a store of wealth for millennia, it was the global currency standard until WWII, and its recognized across cultures for this purpose. Bitcoin is promising, but volatile, and there’s a lot of alternative currency’s coming for the throne as the space is still very much in its infancy.

The upside for precious metals is that they don’t require a computer or energy to store, they maintain financial privacy, and they’re universally accepted. While digital currencies are slowly ingratiating themselves into the zeitgeist, none are currently positioned to challenge the status of precious metals as the ultimate reserve asset. The Fed’s adoption of a preexisting digital currency seems pretty unlikely, and as much as Powell denies it, rolling out their own Coinbase-esque app to deposit Fed Coin’s into is fully on the table.

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