'Bitcoin v Gold': ASX companies bet on digital token, but is tokenised gold the future of money?

Bitcoin mania is reaching the ASX as listed companies put the asset on their balance sheet in the hope the digital token will extend a 15-year bull run versus fiat currencies such as the Australian dollar. 

The digital token's reputation as a get-rich-quick scheme for retail punters, and fee machine for Wall Street even had one ASX chairman declaring it a one-way bet last week. 

"Bitcoin stands as the digital equivalent of gold, resilient, scarce, and primed for growth amidst increasing global adoption," Lee Travers the chairman of ASX-listed Digital X (ASX: DCC) told investors on August 11. 

"Viewing bitcoin as a treasury asset is akin to backing the lone frontrunner in a one-horse race."

Travers' chutzpah is a calling card of bitcoin bros, but it's possible money ends up more closely aligned to gold than bitcoin over the next 20 years. 

This might sound dim to bitcoin evangelists, but the future is inherently uncertain as demonstrated by bitcoin's own arrival as a financial black swan. 

Tokenised gold 

Many fintechs are already moving to let individuals or companies hold tokenised assets such as stocks or gold to be traded on a blockchain to exchange wealth. 

Gold was pegged at a fixed exchange rate of $US35 to an ounce, until the collapse of the Bretton Woods system in 1971, with today's monetary reset (not dissimilar to the collapse of Bretton Woods) pushing gold's value rapidly higher, even if it's being outpaced by bitcoin. 

However, in principle, bitcoin doesn't work as money to exchange goods or services, as it's too volatile and isn't a stable unit of account. 

No central bank stands ready to redeem them, which means their price is nothing more than speculation around their future value. 

Central banks are also needed to manage excess volatility in output and employment, which is why they're also mandated to manage inflation via interest rate policy.  

As such with a basic understanding of the monetary system, we can see bitcoin won't work as money unless we abandoned central banks, the courts, and governments to decide there's no role for fiat to buy goods and services. 

However, gold may have a better shot as a tokenised form of money. It's more stable versus fiat and was previously pegged to it at a fixed exchange rate. 

Its tokenisation on a blockchain could see it return to fashion as a version of money that's still backed by central banks, governments and by extension society. 

Gold is also a better store of value than bitcoin. It has held its value for thousands of years, whereas bitcoin is a bellwether of animal spirits and fiscal stupidity (in the US or Japan for example) that's only been around 15 years.

Tokenised gold could also offer market clearing prices in real time, with the potential to remove counterparties such as retail banks, given that blockchain can instantly verify the creditworthiness of both parties in a transaction. 

So we can see tokenised gold (backed by physical bullion) has a better chance of success than bitcoin as money, even though the latter was originally envisioned as money by its founder, Satoshi Nakamoto. 

Bitcoin mania reaches ASX companies

Still, most corporates now prefer to tie their share prices to the future of bitcoin rather than gold, which means their decision making is largely guided by their status as price followers. 

Recently, ASX-listed Locate Technologies (ASX: LOC) revealed it owns 12.3 bitcoin worth $2.2 million as it issues shares to raise money and fund the purchases in a copycat approach to Michael Saylor at Microstrategy.

Saylor's plan is no different to raising money to bet on red or black at the casino, but so long as bitcoin keeps rising the fear of missing (FOMO) will attract more buyers to the get-rich-quick scheme.

Other larger ASX businesses are reportedly considering adding bitcoin to their balance sheet, with one prominent crypto consultancy flagging to me that its business has received many inbound inquiries from public companies. This will be something to watch.