From Coindesk | Gold is a commodity like bitcoin and other cryptocurrencies, Citi’s chief economist argues in a research note published yesterday, ahead of a Swiss vote that could cause the global gold price to spike. Switzerland will hold a popular referendum on Sunday called ‘Save Our Swiss Gold’. If passed, it would mandate the Swiss National Bank to hold a fifth of its assets in gold and to repatriate its holdings from England and Canada. The bank would also be banned from selling its gold in future.
Gold prices have dropped as markets await the referendum. If the referendum is passed, gold prices will surge, although this is unlikely, CNBC reported. Polls show that the initiative has the support of only 30% of voters, short of the 50% required, the broadcaster said.
Value by agreement
The low chance of a successful referendum hasn’t stopped the mega-bank’s chief economist, Willem Buiter, from warning that the proposal is a bad idea. Buiter spends much of the 14-page note describing the similarities between gold and cryptocurrencies like bitcoin.
“Gold as an asset is equivalent to shiny bitcoin,” he wrote in his note to clients. Gold, Buiter continues, is unlike any other commodity, but bitcoin and cryptocurrencies bear the closest resemblance to it. Like gold, bitcoin has to be mined, is limited in supply and has no significant utility.
He also notes that both gold and bitcoin are anonymous to a degree and are “outside assets”, that is, assets that are not a liability to any other party. Fiat currencies, he argues, are defined not by the legitimacy conferred upon them by political rulers, but by the fact that they have no intrinsic value. Instead, they are valuable only because enough people agree that they are. Therefore, gold can be thought of as a ‘fiat commodity’.
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