Key Takeaways

• Hedging a $200 billion stablecoin with Bitcoin is impractical due to significant counterparty risk.
• The perception of risk in the economy affects the value of assets like gold.
• Gold is likely to reach $10,000 within two years due to its scarcity and historical role as a store of value.
• Gold is the neutral reserve asset of the world, outperforming Bitcoin in terms of liquidity and market size.
• Bitcoin has shifted from being viewed as digital cash to a store of value, affecting its adoption and volatility.
• In times of crisis, central banks will prefer gold over Bitcoin, impacting Bitcoin’s value.
• Investing large amounts in crypto can be dangerous due to market volatility.
• The best use case for crypto is settling payments outside the banking system.
• The reserve asset for the world will be gold.
• A gold-backed stablecoin with a rewards program for users is being developed.
• The market cap of Bitcoin is too small to support the issuance of the world’s biggest stablecoin.
• Holding both Bitcoin and gold serves different purposes in a diversified portfolio.
• Silver is overheated right now and should not dominate an investment portfolio.
• Integrating privacy features into Bitcoin could lead to government backlash and hinder its adoption.
• Fiscal dominance occurs when excessive government debt undermines the effectiveness of central banks.

Guest intro

Vinny Lingham is Co-founder and President of Xash. He previously co-founded Civic, a blockchain-based identity verification platform, and launched Gyft, an early Bitcoin-accepting gift card platform acquired by First Data. He designed USDX, a gold-backed, reward-bearing stablecoin, to address Bitcoin’s liquidity and adoption gaps relative to gold.

Why Bitcoin is not the ideal stablecoin backing

• “Hedging a $200 billion stablecoin with Bitcoin is impractical due to counterparty risk.” – Vinny Lingham
• Bitcoin’s market cap is too small to support large stablecoin issuance.
• “You cannot hedge $200 billion in Bitcoin right now without a ridiculous amount of counterparty risk.” – Vinny Lingham
• Gold is a more viable option for backing a large stablecoin due to its market size and lower counterparty risk.
• “You can hedge $200 billion in gold… the counterparty risk disappears.” – Vinny Lingham
• Bitcoin’s liquidity and market size are not sufficient for it to be a global reserve asset.
• “Bitcoin has not reached the levels of liquidity required for it to be a global reserve asset.” – Vinny Lingham
• The limitations of Bitcoin as a backing asset highlight the need for alternative solutions like gold-backed stablecoins.

The evolving role of gold in the global economy

• Gold is likely to reach $10,000 within two years due to its scarcity and historical role as a store of value.
• “There’s only eight million ounces of gold in the world… it’s a scarcity thing.” – Vinny Lingham
• Gold is the neutral reserve asset of the world, outperforming Bitcoin in terms of liquidity and market size.
• “Gold is effectively the neutral reserve asset of the world.” – Vinny Lingham
• In times of crisis, central banks will prefer gold over Bitcoin.
• “Central banks in crisis buy gold, not Bitcoin.” – Vinny Lingham
• The reserve asset for the world will be gold.
• “I think the reserve asset for the world is gonna be gold.” – Vinny Lingham
• A gold-backed stablecoin with a rewards program for users is being developed.
• “We’ll be the first gold-backed stablecoin with a rewards program for users.” – Vinny Lingham

Bitcoin’s shifting narrative and its implications

• Bitcoin has shifted from being viewed as digital cash to a store of value, affecting its adoption and volatility.
• “The narrative was changed from digital cash to a store of value and digital gold.” – Vinny Lingham
• Bitcoin has failed to meet the expectations set for it as digital gold over the past nine years.
• “Bitcoin has failed to live up to the promise of what digital gold was supposed to be.” – Vinny Lingham
• Integrating privacy features into Bitcoin could lead to government backlash and hinder its adoption.
• “Adding an anonymity layer to Bitcoin is not healthy and kind of dangerous.” – Vinny Lingham
• Bitcoin was intentionally designed to be pseudonymous rather than anonymous.
• “The whole point of Bitcoin was… they made it pseudonymous for a bunch of reasons.” – Vinny Lingham

Investment strategies in a volatile market

• Investing large amounts in crypto can be dangerous due to market volatility.
• “When you put in large amounts of money to crypto, it’s kind of dangerous.” – Vinny Lingham
• Holding both Bitcoin and gold serves different purposes in a diversified portfolio.
• “Holding both Bitcoin and gold definitely has different purposes in your portfolio.” – Vinny Lingham
• Gold should not be the sole focus of an investment strategy.
• “Being all in on Bitcoin is risky, and so is being super exposed to gold.” – Vinny Lingham
• A diversified portfolio helps manage market volatility.
• “When you have a well-balanced portfolio, you should do okay over the long term.” – Vinny Lingham

The impact of economic conditions on asset valuation

• The perception of risk in the economy affects the value of assets like gold.
• “The rest of the world is losing faith in the US economy’s ability to maintain moderated spending.” – Vinny Lingham
• Central banks maintaining lower real interest rates can lead to varying inflation rates and currency depreciation.
• “Central banks maintaining lower real interest rates lead to higher inflation in some countries.” – Vinny Lingham
• Fiscal dominance occurs when excessive government debt undermines the effectiveness of central banks.
• “Fiscal dominance means central banks lose traction because hiking interest rates bankrupts the government.” – Vinny Lingham
• The experience of currency devaluation highlights that the perceived value of assets can be misleading.
• “Currencies can go to zero… it’s the floor you’re standing on going down.” – Vinny Lingham

The geopolitical influence on crypto and gold

• Geopolitics is the core of demand for crypto and central bank actions.
• “Geopolitics is the core of demand… central banks’ demand is driven by sanctions.” – Vinny Lingham
• The future will see the emergence of regional blocks as a response to geopolitical tensions.
• “The natural endpoint is blocks, regional blocks.” – Vinny Lingham
• China’s currency is likely to appreciate, impacting global economic relationships.
• “China’s rise… CNY is clearly gonna be appreciating.” – Vinny Lingham
• The development of economic blocks is crucial for the future of crypto and gold.
• “China and the development of blocks is really important for crypto and gold.” – Vinny Lingham

The future of global reserve currencies

• The dollar will not lose its status as a reserve currency but will share it with others over time.
• “The dollar will not lose its status, it’ll share its status over time.” – Vinny Lingham
• Humans often prefer a single dominant currency, complicating the acceptance of multiple reserve currencies.
• “Humans like one king’s picture… they don’t like multiple reserve currencies.” – Vinny Lingham
• Economic historians will likely highlight a significant decline of the dollar against gold by 2025.
• “Economic historians will say the dollar went down 50% against gold.” – Vinny Lingham
• The US has fewer fundamental problems compared to the Eurozone and Japan.
• “UK, Japan, Eurozone have far worse and more fundamental problems than the US.” – Vinny Lingham

The challenges of monetary policy and economic stability

• The calculation of M0 varies by country, complicating the creation of a global M0 metric.
• “M0 is calculated differently by different countries, complicating global metrics.” – Vinny Lingham
• The gold equalizing price for M0 can yield significantly different values based on methodologies.
• “The gold equalizing price for M0 is $34,000 an ounce, for M2 it’s $189,000 an ounce.” – Vinny Lingham
• High real interest rates can stabilize economies even during recessions.
• “High real interest rates can stabilize economies, even if it creates a recession.” – Vinny Lingham
• Emerging markets have learned from past economic crises and are implementing better fiscal policies.
• “Emerging markets are our best students… they created independent central banks and fixed structural problems.” – Vinny Lingham