A Brief History on the California Gold Rush
The California Gold Rush began on January 24, 1848, when gold was discovered at Sutter’s Mill in Coloma, CA. The news of the discovery spread rapidly, and people worldwide migrated to CA in search of the shiny yellow metal.
It may seem obvious, but why did the Gold Rush occur? Scarcity.
By the mid-1800s, precious silver and gold metals had been used as money for thousands of years. The monetary properties of gold led to its adoption as money – a medium of exchange, store of value, and unit of account. Chief among these properties is gold’s scarcity, unrivaled among monetary metals.
So, of course, when stories of gold deposits in California began making their rounds, there was excitement but also much skepticism – it’s a rare metal. Californians were first to hear of the discovery. It’s said that when the news broke in San Francisco, many didn’t believe it at first. It took American settler, businessman, and journalist Samuel Brannan walking through town with a vial of gold to convince the people of the discovery – not long after, stores were empty as people flocked to the mines in search of the shiny metal.
The news then made its way to Mexico, South America, and the Pacific Northwest. It wasn’t until summer, 6 months later, that the news made it to the East Coast of the United States. Again, there was a high degree of skepticism, and it wasn’t until President Polk shared Colonel Richard B. Mason’s report of the gold discoveries at his State of the Union address in December 1848 that America was convinced there was gold in them there hills.
In 1849, the non-native population in California boomed to 100,000, a 10x increase from a few years prior. Few things were more compelling than staking a claim and striking it rich.
The earliest prospectors gained the most during the 1848-52 California Gold Rush. As time progressed and more dreamers arrived, it became more challenging to find deposits, and speculators moved to other regions of the US, such as the Rockies.
Over a few years, billions of dollars were pulled out of the ground (in today’s dollars) – a truly rare opportunity for generational wealth creation for those daring enough.
And I believe an even more compelling opportunity is on the horizon.
Understanding the Case for Digital Gold
It’s not often that these circumstances present themselves – a chance for life-changing wealth to be secured on a new frontier, yet bitcoin presents that exact opportunity for all of us.
What is bitcoin? It’s complicated, but to keep it simple, it’s best to think of it as digital gold.
Using the digital gold lens to assess bitcoin is effective, as we all innately understand the value of gold derives from its scarcity. Thousands of years of history give us confidence in the value of gold and its ability to store wealth for the long term despite economic turmoil, currency devaluation, war, and social upheaval.
If we apply that same framework to bitcoin, we can make a strong case for it as a savings technology or as an allocation in a broader investment portfolio.
So what makes bitcoin “digital gold?”
First and foremost, similar to gold, bitcoin’s value derives from its scarcity. You’ve likely heard that there’s a hard-capped supply of bitcoin of 21 million. To achieve the 21 million bitcoin, bitcoin is mined (issued) at a predetermined rate. At the time of this writing, 19.4 million bitcoin have been mined.
Due to gold’s relative scarcity, it’s been a great asset to own for decades and even generations to preserve purchasing power against devaluing paper currencies. The total amount of above-ground gold has grown at 1.5-2% annually for the last 200 years. That’s pretty good – relatively scarce.
Gold’s relative scarcity should be compared to bitcoin’s absolute scarcity, achieved by the finite supply.
