Uganda’s gold discovery: What it could mean for crypto
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Is gold becoming inflationary? Can Bitcoin replace it as a store of value due to its scarcity and reliability? Are Uganda’s numbers implausible? Questions arise.
These are fraught times for the cryptocurrency and blockchain sector, so it isn’t surprising that industry proponents might seize upon any promising news to help charge flagging markets. A Reuters report out of Uganda last week about a massive gold ore discovery supplied just this kind of fuel.
What does the state of gold mining in Africa have to do with the price of global Bitcoin (BTC)? Quite a bit, potentially.
Bitcoin has periodically laid claim to being digital gold largely on the strength of its strict 21 million supply limit, which makes it non-inflationary and a good store of value — in theory. Gold, of course, is the store of value par excellence, with a limited supply and a solid track record that goes back millennia.
But, if Uganda is sitting on 31 million metric tons of gold ore, as the government declared, might not that substantially boost the world’s gold supply? That in turn could lower the price of gold — and make it a less secure “store of value” generally. Gold’s loss could be the cryptocurrency’s gain.
Some drew encouragement from this notion. Microstrategies CEO Michael Saylor, for instance, posted a video on Twitter about the Ugandan discovery of “huge gold deposits” which might net 320,158 metric tons of refined gold “valued at $12.8 trillion.” As Saylor noted on June 17: “#Gold is plentiful. #Bitcoin is scarce," further telling CNBC:
“Every commodity in the world has looked good in a hyperinflationary environment, but the dirty secret is you can make more oil, you can make more silver, you can make more gold […] Bitcoin’s the only thing that looks like a commodity that is scarce and capped.”
But, perhaps there is less here than meets the eye. The 320,158 metric tons of refined gold that the Ugandan mining ministry spokesman said could be produced from the new deposits in the country’s northeastern corner would far exceed the 200,000 metric tons in above-ground gold that exist in the entire world today. One gold mining trade publication went so far as to suggest the Ugandan government may have been confusing metric tons with ounces in its projections.
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