Are gold and crypto energy?

For the past couple of years, I have been listening to the debate between the gold bugs and the crypto bros. After listening to the arguments, I came up with my own definition of money which I may have shared in the past. Money is energy plus sweat plus output. It is sound money where that output can be traded for other money, i.e., goods and services.

Currency is that instrument that derives its value from money. Currency represents the underlying money. It is a claim chit that you can turn in and claim the underlying money. By my definition, most of us have very little or no money because we either produce nothing or the output we do produce is intangible. Using paper currency to quantify the value of that output has led to an imbalance in identifying value or worse, led to an overvalue of labor. Is someone who spends three-fourths of the day reading emails worth $200,000 a year in USD but the 24-year-old cop with three kids is only worth $60,000?

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The gold bugs and the crypto bros will argue that a money reset is coming and gold or crypto are the mechanisms for bringing that reset about. I don’t buy that argument especially since both schools of thought price their money in the very fiat currency they rail against. If these moneys are to free us from the fiat system, then shouldn’t they be priced in the items that are being exchanged?

Then again, the price negotiated in terms of cash, gold, or crypto is not only based on the energy and sweat to create output but also on other items outside of the immediate trade the seller can get with the currency. If the currency can be used to settle other transactions in other markets, the currency itself should become valuable.

That means that workers have to produce valuable stuff in order to validate a currency. The more money created (energy + sweat + output) the greater the value of the overlaying currency. Currency’s value is validated and increased with an increase in the value of the underlying money.

Gold bugs leave out the issue of how to get gold into the hands of everyday people. Most gold bugs take issue with the ability of the Federal Reserve and its commercial member banks to issue currency out of thin air during the lending process. Banks exchange the currency created out of thin air for a promise backed by a signature, paychecks from a job, or income-generating collateral. The only thing that is a surety is the signature since the job and the collateral can both disappear. If the currency is gold, given that the supply is limited, consumer usage would be severely limited as well.

To be fair to the gold bugs, they specify that currency should be backed by real money, in this case, backed by gold. Given that there is only so much of it, the amount of paper currency produced would be limited by the total amount of gold on hand.

The crypto bros never offer cryptocurrency as the anchor for the dollar. They are too busy pushing crypto as an asset. Treating it as currency in the hands of people for buying groceries and paying rent would call into question crypto’s value as a settlement instrument or as a medium for buying other goods and services.

If a crypto coin is presented as a packet of priceless information, then that packet would represent intellectual energy and mental sweat. That would make crypto valuable. If cryptocurrency were the legal tender of Wakanda, that ability to clear and settle transactions for Vibranium would make crypto a store of value.

Neither gold nor crypto meet my energy definition of money. If I cannot buy a cup of coffee or pay my employees with it so that they can go out and buy a cup of coffee and pay rent, then neither serve a monetary purpose.

Alton Drew

2 April 2025

I assist traders in developing legal strategies for navigating and managing risks. To make an appointment, contact me at altondrew@altondrew.com.

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The above post is not trading advice. Consult a trading coach or advisor if considering a trade. Trading is risky and you should obtain as much information as possible before placing a trade.