In a Real Apocalypse, Bitcoin Beats Gold

By John Banks

A few weeks ago, your mild-mannered TradeSmith Daily editor did something out of character.

At a private outdoor shooting range, we received tactical training instruction — from a professional firearms instructor, who is also a family friend — on the proper handling and use of a 12-gauge pump-action shotgun. 

The outing was fun, but the purpose was serious. We were taught how to handle the shotgun inside a house — or even in a hallway if need be.

The training included techniques like positioning the gunstock on your shoulder, with the trigger mechanism sideways, so that an intruder would have a harder time knocking the gun away from you.

Of course, the idea is to never reach that point.

If someone breaks into your home, the preferred course of action for a 12-gauge would be loading it within seconds (after gaining enough proficiency to do so blindfolded), firing a shell into the ceiling, and following up the warning shot with the CH-CHAK sound of a pump-action reload, so naturally menacing that any intruder who hears it should flee the premises if he hasn’t lost his mind.

Our next task is to practice a few minutes each day — one day on and one day off — until reaching the point where shells can be loaded subconsciously, within the space of seconds, in the dark, and in the heat of a fight-or-flight adrenaline rush, having just jumped out of bed.

The logic of doing this should be obvious. Our hope is to never pull the trigger, other than at a firing range, or at paper targets out in the brush.

But then again, you never know. The world is an unsettling place, and preparation for last-ditch home protection is worthwhile insurance that comes at a negligible cost.

Thanks to the efforts of my better half — the real survivor and warrior in the family — our garage has also become something of an emergency supply zone. There are well-organized caches of food, water, first aid, and medicines.

We don’t qualify as full-on “preppers” by any means, and would surely be regarded as amateurs by real aficionados in that domain. But that is totally fine — because this isn’t a lifestyle thing. It is just a prudent form of insurance that comes at a low cost.

Because again — you never know.

We have an acronym for this kind of thing: DELPHI, which stands for “Defined Expectation, Low Probability, High Impact.”

The food chain breaking down, or desperate marauders breaking into your house, would qualify as a DELPHI event. By definition, it probably won’t happen. But if it does, why not be prepared?

This train of thought led to a dark hypothetical: In a real apocalypse — a full on Mad Max-type scenario — which asset would you rather have, Bitcoin or physical gold? 

In our view, the answer is obvious.

In a real apocalypse, Bitcoin beats physical gold easily. There is no contest.

To be clear, I’ve been a fan of gold for decades. My first ever sizable trading score — which produced $60,000 in about a week — was powered by call options in the gold futures market way back in 1999.

But I’ve also been skeptical, for quite a long time now, as to the reasoning behind the “physical gold versus paper gold” argument.

The “physical versus paper” rationale goes something like this:

  • Paper gold won’t be accessible if the financial system shuts down.
  • The only gold you can trust in an emergency is physical gold.
  • This means bars, coins, and metal you can get your hands on.

The premise is true as far as it goes. But few people think it all the way through.

A general reply, prior to Bitcoin’s existence, was something like this: “If things get so bad that the financial system shuts down, wouldn’t you rather have bullets than gold?”

By that meaning, there are certainly scenarios — DELPHI events to an extreme degree — where all of the trading exchanges and all of the mechanisms that underpin the global financial system suddenly stop.

But those situations are so extreme that, almost by definition, food and water and medicine — and ammunition to protect one’s stash — would be more important than physical gold at that point.

If things got so bad that all your paper assets became worthless — because the exchanges stopped functioning — you would probably have little cause to buy or sell anything at all, at least for a while.

Nor would you be buying food from the grocery store. Instead you would be in full-on survival mode, and thinking about defending yourself, and your family, from other desperate folks in full-on survival mode too, who are putting the hairy eyeball on your precious supplies.  

This is grim stuff. But the whole “physical versus paper” gold argument is intensely grim in the first place. For the premise to apply, the scenario presupposes a near-total breakdown of functional civilization.

Let’s keep playing that movie in our heads for a minute.

Say that the normal functions of society break down, and somehow the banks and exchanges are defunct or non-operational, and people are trying to regroup.

You are in decent shape, thanks to your stockpile — but now you need to make some purchases, because you only have six weeks’ worth of supplies.

What are you going to buy your additional supplies with? Gold bars or coins? How will that work?

The problem with physical gold, in the context of a Mad Max use-case scenario, is how non-divisible it is.

If a gold coin worth, say, $10,000 is your smallest unit of exchange, it will be hard to buy vegetables at an underground farmer’s market, or to purchase a spare can of gasoline, or to otherwise make a trade for anything worth substantially less than $10,000.

For gold bars, the problem is magnified even more. In a true apocalypse scenario, what would you buy with a gold bar? A mansion with a compound? An entire grain silo?

Physical gold would also be fraught with security issues in a Mad Max landscape.

Let’s say you have an emergency gold stash worth $5 million at post-apocalypse unit-of-exchange values. Are you going to travel with that metal? Will you take it through checkpoints and defend it from bandits? Will you store it in trunks and lug it around?

Then, too, let’s say you had assets or surplus materials you were willing to sell or barter with someone else. Would you willingly take gold in exchange? What kind of gold would you take? Coins only? Bars only? How would you verify the payment was real and not counterfeit?

Now imagine that, instead of gold in this apocalypse scenario, you have Bitcoin.

  • Bitcoin is almost infinitely divisible — there are 100 million satoshis per coin — which means you could use bitcoins to buy anything from a case of bottled water to a fully stocked armory, and always size your payment appropriately to the exchange.
  • Because Bitcoin is digital, you could transact electronically via access to the internet. (There is a legitimate question as to what it would take to get the internet back on, but humans have a lot of ingenuity, and if there is nothing left at all — not even the dark web — we are truly done for.)
  • Because Bitcoin is non-physical, it isn’t a travel risk. You couldn’t be searched for Bitcoin at a border checkpoint, and your Bitcoin stash couldn’t be pick-pocketed or seized. You could even memorize your private key and store it in your head.
  • Because Bitcoin is verified by its own blockchain, with ledger copies distributed all over the planet, the use of Bitcoin would sidestep counterfeiting risk (a big potential problem for gold). With Bitcoin, your counterparty could know your method of payment is genuine — and you could know the same in reverse when selling to someone else.

This is not an anti-gold argument. Gold is wonderful for a lot of things, and is set to do incredibly well over the next few years. Of course, if the gold price triples, we see Bitcoin doing 10 to 30 times that (at least) — but nonetheless, we are happily long gold and gold stocks in TradeSmith Decoder (as well as Bitcoin) and see good things ahead.

The purpose of the apocalypse food-for-thought exercise is mostly to clarify Bitcoin’s advantages — some of them extremely powerful — in terms of it behaving like a digital asset rather than a physical one, while still maintaining scarcity and desirability.

In an apocalyptic landscape, Bitcoin would be easier to transact with, easier to transport, easier to hold large amounts of, easier to conceal evidence of, and impossible to counterfeit (versus high counterfeit risk for bars or coins). Those are all prime features when life-and-death survival conditions are at hand.

There is no rule that says you can’t have both — Bitcoin and physical gold alike — as double insurance against a seriously rainy day.

And yet, if it came down to one versus the other, we know the one we’d choose.