Fidelity’s comparison of bitcoin, gold and cash: Bitcoin scores 6/7, Cash only 2/7

A recent report by global financial services provider Fidelity Investment has rated bitcoin against gold and cash, and bitcoin has scored in 6/7 features, followed by gold scoring in four and fiat currency in only two features. The report, “Bitcoin First: Why investors need to consider bitcoin separately from other digital assets”, was released in January 2022.

Bitcoin is “better” than gold or cash if these seven criteria were considered:

  • Durability: Not physical durability, but the continuity of purchasing power
  • Divisibility: How far can the medium of payment be divided
  • Fungibility: One token or piece or unit can stand for ore replace another
  • Portability: Ease of carrying and transportation
  • Verifiability: Detection of counterfeit money
  • Scarcity: Total number of units or tokens that can be made available
  • Track record or history of use

Here is the complete scorecard:

fidelity report

A lopsided view

The report gives ‘+’ or ‘-‘ rating against each criteria for the three chosen modes of payment. This tends to swing the scales a lot in favor of bitcoin.

Scarcity is a well known feature of money. In case of bitcoin, only 21 million can possibly exist, which is far lower than either gold or cash. Currency is obviously a function of how much of it is being printed and put into circulation. So a stark negative looks inaccurate.

The report considers cash as non-fungible, but only in comparison to other currencies. For e.g., the US dollar can’t be replaced with Canadian dollar. Not very fair if we stick to where the currency is used.

In the case of verifiability, cash gets a negative ranking. It is not clear, however, how bitcoin could be “verified”. Afterall, it is the transaction sent that carries bitcoin that gets verified, not “bitcoin” as such.

On track record or history of usage, cash currency gets a negative ranking again, but it is certainly much older than bitcoin. So a stark negative isn’t very accurate.

Read the full report here:

https://www.fidelitydigitalassets.com/bin-public/060_www_fidelity_com/documents/FDAS/bitcoin-first.pdf

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