As Bitcoin and gold hit 2020 highs, Uphold unveils a revolutionary new product redefining “store of value” for a panicked age.
It’s physical gold. It’s crypto. It’s government-backed. It’s a new product from a Silicon Valley company mutating gold and crypto into a single unit. And it’s as deeply fear-soaked as anything since, well, 2020.
Today Uphold, a digital investment platform based in San Francisco, announced what it calls “a better form of gold”: Universal Gold. Users can buy the gold crypto UPXAU — a token verifiable on the Ethereum blockchain and audited by the security firm CertiK — and Uphold instantly contracts to buy physical gold from the Government of Western Australian.
From that moment, the investor owns the gold. She can spend parts of it using her Uphold credit card, or take physical delivery: Uphold will send the FedEx
guy with the click of a mouse.
UPXAU is to crypto finance what “clicks and mortar” was to e-commerce, a simultaneous merger of the digital and the physical.
It all started back in March, when one of Uphold’s investors, a dyed-in-the-wool gold bug, stumbled upon GoldPass, an Australian government program issuing certificates that guaranteed physical delivery of gold. He immediately called Uphold CEO J.P. Thieriot who used the program to create the Universal Gold token.
“The gold is held with the Perth Mint, the largest refiner of new gold in the world,” says Thieriot. “The mint issues a gold certificate, one token equals one certificate which equals one ounce. One-to-one-to-one. When you buy the token, you’re buying gold. It’s not hypothecated, it’s not fractional. You’re buying gold.”
Thieriot hopes this appeals to paranoid gold bugs who have long wrestled with the problem that buying physical gold is hard to do. It’s expensive to store, often incurring monthly custody fees of around 0.4%, and has traditionally been expensive to liquidate and turn into cash.
To be sure, there are other products on the market similar to UPXAU (which I’ve decided should be pronounced “UP-zow.”) There are institutional futures contracts from the CME Group
). There are Exchange Traded Funds like SPDR Gold Trust (GLD: NYSE) and the iShares Gold Trust (IAU: NYSE), wildly popular despite annual storage and management fees 0.12% to 0.40%. But they’re not blockchain.
There are blockchain comps, digital assets like PAX Gold (PAXG) or Digx Gold (DGX), but they charge on-chain fees of 0.02% and 0.13%, respectively. There’s Tether Gold (XAUt), which charges some users 0.25% when they buy the product and another 0.25% when they sell it.
“I can’t even believe there is a Tether gold product,” says Therot, dismissively. “I think family offices would give a very wide berth there.” (At press time, Tether had not responded to a request for comment.)
Uphold is part of the broader trend towards zero-fees, dragging along competitors as Robinhood inspired its competitors to eliminate fees in the stock brokerage business.
Still, it’s not for everyone. I’m a huge fan of some gold bugs. But I gave up on “store of value” investments after reading Warren Buffet’s 2011 letter to Berkshire Hathaway (BRK.A: NYSE)
BRK.B shareholders.* That was the only other time gold traded over $1,700 and Buffett pointed out that all the world’s gold “would form a cube of about 68 feet per side. (Picture it fitting comfortably within a baseball infield.)” The value of that unproductive asset — a big-ass box of metal — was then equal to one trillion-dollars, all the farmland in the United States and 16 Exxon Mobil
’s. Since that letter gold is up about 20% and the S&P 500 is up more than 250%.
But in that same letter, Buffett wrote: “What motivates most gold purchasers is their belief that the ranks of the fearful will grow.”
During 2020, the ranks of the fearful have grown. And have you read a newspaper lately? Those ranks are surely still growing. No surprise gold is up 26% this year and Bitcoin has risen 55%.
Gold might be the exception to the rule that, in the end, the purpose of a tool is to be useful. In the end, it may be that the value of Bitcoin, Ethereum, XRP and others will lie in their functionality — not just the idea that some other moron will show up and pay more for it.
But for investors right now, liquid assets with limited supply are all the rage, be they Bitcoin or gold. Or, today, Ultimate Gold.
“One isn’t a replacement for another,” says Therot. “I think there’s room for all of that. Gold is like Bitcoin’s big brother. Recent events are probably the giant tailwind for both.”
* Disclosure: at the time of this writing I own Berkshire Hathaway shares.