Money is gold, and nothing else.
- J.P. Morgan
Gold is in other words the ultimate settler of debt. Nothing else has this quality in quite the same measure.
Debt can of course be settled in other ways than by gold. Silver is fine too. A house can be handed over to a creditor. Labour can be used: Sexual favours, services of all sorts. Any tangible asset or service can be used to settle debt. However, none is quite as liquid and universally appreciated as gold.
Money is by definition the most widely appreciated and accepted settler of debt. It is therefore gold. Anything else is something less as far as currency is concerned.
This simple fact has been all but forgotten by most people today. Currency is widely confused with money. However, modern fiat currencies are in fact debt. They are claims on future production.
Crypto-currencies are claims on dollars and other fiat. They are derivatives created by the use of energy and artificial scarcity. They are fiat derivatives.
The claim that Bitcoin is virtual gold is therefore correct. It is not money, but something akin to the sort of gold found in video games.
Virtual gold cannot be used in the production of anything useful. It cannot be turned into jewellery. It cannot be used in the production of dental crowns or electronics. It can only be used as a claim on somebody else's assets.
Virtual gold is credit. It is only worth something as long as people are willing to part with their assets in exchange for it.
Real gold on the other hand is money. It can be used as jewellery. It can be enjoyed in the here and now.
The consequence of this is that virtual gold is in no way in competition with real gold. It is in competition to government fiat. Should it one day replace fiat, it will be used to buy gold, just like fiat is used to buy gold today. The price of gold in terms of purchasing power will not be much affected. People will still be willing to spend a day or a week of their lives in order to buy a gold ring. A nice little house will still be available at the cost of anything from a kilogram to ten kilogram.
Money is still gold. It is under-appreciated at the moment. People are evidently not in any hurry to settle their claims. However, when they do, gold will again shine, and the current confusion about what money is will be cleared up. No-one will want to hold virtual money when there is real money to be had.
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