BTC in the PP

[gaddyslapper007]

Maybe I was vague originally…..yes “time value of money” is a human preference weighted in time / opportunity cost. What I should have stated is that the “rule” of a dollar today is worth more than a dollar tomorrow is a symptom of a fiat economy. (Not a law of nature / applicable to all forms of money). That logic does not hold true if denominated in deflationary currency obviously. (Which btc aims to do over the long term)

Yes, there is no reason to lend (take risk) if you aren’t rewarded. (Whatever the interest rate works out to be). Lending at 0% or negative rates might actual be profitable in a deflationary based economy. But as an investor….there is no profitable / logical reason to lend at 0% or negative rates in an inflationary based currency / economy. ( from a government standpoint it works to artificially boost velocity of money knowing more is coming from the printing press)

[bitcoininthevp]

Time value of money is a fiat concept. It does not exist as a law of nature….only in a fiat economy.

In all honesty I’m not against the fiat economy….to me, hold debt in fiat and wealth in BTC. It’s the perfect recipe!

Time value of money is a human fact and has nothing to do with fiat, its directly tied to time preference. The discount of time value due to inflation is due to fiat inflation, among other things, but money now is worth more than money later because you have to deduct opportunity costs & potential interest earnings.

thinking this through…..help me. If given the choice of a loan denominated in $50,000usd amortized 30yrs…..or 1BTC (~$50k) same amortization….and by your definition opportunity cost lies within time frame preferences (not inherently to fiat)……(time / opportunity cost is equal here no?). why would you EVER take a loan denominated and accrued in BTC knowing it will be harder and harder over time to accumulate and repay? Since humans assign value collectively….I believe time value of money is inherent to the form of money. (It obviously makes a difference when time / opportunity costs are Equal)

Check out this article "Speculative Attack"
https://nakamotoinstitute.org/mempool/s ... ve-attack/

[bitcoininthevp]

I’m tired of people saying gold or bitcoin is money. What is the point of using the term money anyway given that everything we use is just a proxy for a theoretical concept.

Words are hard sometimes but they are all we got. What would you like to call things like gold and bitcoin? Just assets? Its fine but Im not sure it helps with any of the discussion.

Like mentioned many times before, hard money is not money and the world has been there and done that and it doesn’t work.

Just because you declare it on the forum a few times means that its true?

Gold is hard money and served as the worlds money for 1000s of years. It was also money during the most recent prosperous modern period (even when it backed paper "money"). Its only in the last 100 years or so that freely floating fiat currencies been the dominant "money" (if you could even call fiat currencies money?). And its actually been quite terrible in many regards. https://wtfhappenedin1971.com/ has some thoughts on that, especially regarding the 1971 breaking of USD to gold.

"world has been there and done that and it doesn’t work" its worked really well actually. Golds biggest flaw is that its physical and thus easier for governments to seize/control/etc.

But its weakness there was its physical-ness. Not its hard-ness.

What is wrong with bitcoin and gold simply being stores of value? I can ask my 3 year old what money is and she’ll be able to tell you and it’s definitely not gold or bitcoin.

I think gold and bitcoin are stores of value. I dont think anyone really uses them for unit of account currently. But clearly there is something more money-like about gold and bitcoin vs other stores of values like real estate or whatever. Does "monetary-like assets" put a better label on it? Or you basically only going to accept government issued currencies, a unit of account focus, as "money" (the 3 year olds understanding of money)?

[seajay]

I think gold and bitcoin are stores of value.

Gold, paintings by a favored dead artist, etc. are finite/scarce and as such tend to store value. When one is selling to raise cash/money another with surplus capital looks to buy. Bit coin scarcity is virtual/manufactured, could vanish overnight. Bit coin is more a Ponzi, greater fool, its price reflects only speculation on its future value.

[glennds]

I think gold and bitcoin are stores of value.

A few random thoughts -
I agree, they are both stores of value, but there are big differences. A store of value is only a store of value to the degree that there is a ready buyer or market of buyers willing to recognize the value i.e. pay for it i.e. allow you to realize the value when you want.
Gold has proven its market for millenia and as such its value is relatively stable. Gold is too mature to be subject to big swings in value over short periods of time, and as such it is not an attractive target for speculation. Gold cannot be accused of having any new fad value.

Bitcoin definitely looks to be a store of value, but the issue is clouded by the novelty, and the big swings in value of short periods is a magnet for speculation. So I might postulate that Bitcoin is both a store of value AND a vehicle for speculation and it is difficult to tell how much of each feature is built into its pricing. Just the fact that Bitcoin saw a 50% drop in value over a short period this year speaks to it's speculative element.
A stable store of value moves mostly sideways or up in modest, methodical movement. If it ever moves down, it is very limited movement but over a long time span, the chart is low incline upward.
Once Bitcoin reaches maturity, presumably the volatility will level and the speculation value will also level. At that point it will be a much clearer store of value. There are other issues too, such as sensitivity to regulation or even threatened regulation.

A feature of both gold and Bitcoin is fungibility. Elsewhere in this thread people have mentioned art and real estate, both of which are physical assets that store value, but neither are very liquid or fungible.

Of course for practical purposes both of these assets are denominated in US dollars, and it is important to think about whether change in Bitcoin or Gold value is more rooted in change in US dollar value than change in either of the two assets. Right now this is something to consider given the loose monetary policy in response to the pandemic.

Personally I'm a fan of both, but I try to stay cognizant of the differences in their features. So I haven't been willing to leave one in favor of the other, rather I maintain exposure to both.


[/quote]

[glennds]

Does a store of value have to be stable in the short term?

Initially I might have answered with a resounding yes. But upon reflection, maybe the answer is a personal to the individual investor depending upon their circumstances. By that I mean if a store of value is volatile in the short term, and a given investor needed to access his/her capital when it was down materially, then it wasn't a very good store of value for that person.

Based on this discussion, I am mentally distinguishing between high beta and low beta stores of value. An argument could be made about one being "better" than another, but an argument could also be made that "better" is in part a function of the investor's time horizon, as we would do when constructing a traditional portfolio. Over a 5 year period Bitcoin has been phenomenal. Over a two month period starting in May 2021, not so much.

So take a PP, where we should be rebalancing under defined conditions. If our store of value component is diversified between gold and Bitcoin, and if timing is not optimal for selling the Bitcoin due to it's own unique volatility, then sell the gold.

[glennds]

Over a 5 year period Bitcoin has been phenomenal. Over a two month period starting in May 2021, not so much.

I would add that over the next 10 years (could be much shorter) gold is likely to not be such a good store of value relative to bitcoin and then sometime after both gold and bitcoin will stabilize and both will be good long term stores of value again.

That's a reasonable prognosis. However that case you make rests upon the premise that there is a material overlap in the respective markets for the two assets. And a secondary premise that we are in a period of movement from gold and into Bitcoin. This may be the case, but I have found it very difficult, maybe impossible to ascertain.

In my quest for the answer I have found a lot of opinion, but no real empirical data.

[glennds]

How about the price trend for gold since 2020 when BTC started its current bull run?

Plot the trends on a graph and see if you can spot the 4-5% annual decline in the largest structures.

I can see the correlation but is there a way to prove causation?
How do we know the gold price decline is because gold investors are switching to Bitcoin?

[glennds]

They don't have to, but investors who would have stored value into gold historically may be moving those funds into bitcoin.

The concept behind the PP is a theoretical one, the concept of a store of value is also theoretical, so you just have to go with theory. In 10 years you can backtest and "prove" whether this was correct or not.

I'm not questioning the PP theory or the store of value concept. I'm a Bitcoin believer.

What is unclear to me is the relationship between Bitcoin and gold, specifically the assumption that one is eroding the other. As you say, an investor "may" move funds from gold to bitcoin as a store of value play, but it is just not possible to say the degree to which that is happening. Because the universe of bitcoin investors is not limited to gold investors. So to forecast bitcoin's growth in market cap as a transfer of gold's market cap may not be sound. To use your term, the correlation is theoretical at this point and can only be proven through backtest some time in the future.

Personally, I think there is probably some competition between gold and bitcoin going on, but I also believe the majority of bitcoin investment is completely independent of the gold market despite the natural tendency to compare the two assets as non-fiat stores of value and inflation hedges.

[glennds]

You have to make your own decision at the end of the day.

For me, the reason I know it will be that way is because I believe that the total value stored in these stores of value is distributed between all property that can act as a store of value. If one rises then it must erode from the others what would have otherwise flowed to them. Throughout history it was only gold that was the best proxy for this long term store of value and since you do not disagree that bitcoin is a store of value then they must share the same pie.

Not necessarily. What if a material % of Bitcoin investors are not there for store of value rather pure speculation? They are investing in Bitcoin in lieu of equities or any other asset class simply because they are betting Bitcoin will go up more. So in this way, the rise of Bitcoin may not involve an equivalent erosion of gold.
I know one guy who sold some residential land recently because it has run up in the hot RE market, and he threw the money into Bitcoin on the belief that it has more upside potential. This guy never would have considered gold. What about the techie base of Bitcoin aficionados? They're attracted to the technology, definitely would not otherwise put money into something as antiquated as gold.

I have a foot in each camp, I'm probably 75% long under store of value theory, and 25% trading the volatility as a shameless speculator.

Not trying to be argumentative, I'm enjoying the discussion, and you've already made me look at a few things differently. Thx

[bitcoininthevp]

I think gold and bitcoin are stores of value.

Gold, paintings by a favored dead artist, etc. are finite/scarce and as such tend to store value. When one is selling to raise cash/money another with surplus capital looks to buy. Bit coin scarcity is virtual/manufactured, could vanish overnight. Bit coin is more a Ponzi, greater fool, its price reflects only speculation on its future value.

You cant really just wave hands and say Bitcoin's scarcity is fake and can vanish overnight. There are very specific things keeping the 21 million bitcoin cap in place. At least attack one of those!

Bitcoin holds almost none of the characteristics of a ponzi scheme.

The more towards the monetary asset side that an asset is the more purely "greater fool" it is. The only reason gold isnt pure great fool is that it has non-monetary uses. Which, as Ive pointed out is a bad thing. Its the same reason the by gold is better money than silver, it has a higher monetary premium. Harry talks about this topic.

[bitcoininthevp]

Does "monetary-like assets" put a better label on it? Or you basically only going to accept government issued currencies, a unit of account focus, as "money" (the 3 year olds understanding of money)?

I think it’s actually very helpful to start referring to them as monetary assets. This differentiates bitcoin and gold from property that are obviously not monetary or even valuable assets.

Because “true” money is inherently valuable, when someone states something is money then I think they are trying to say the same about that thing. Whereas if someone were to simply say that gold or bitcoin are monetary assets, I think they are only saying they have properties that can be used as money (potential money). That doesn’t make those things necessarily money or inherently valuable and shouldn’t be controversial because they are facts given agreement on what a monetary asset is.

"Because “true” money is inherently valuable" - not sure what true or inherently is here. All value is subjective remember.

"I think they are only saying they have properties that can be used as money (potential money)" - agreed here. And there are a series of properties that humans value in their money (not necessarily "currency").

"It performs none of the functions expected of gold."
I assume you mean gold's functions as money. Here are some valuable characteristics of money:

Durability: bitcoin and gold both strong here.
Portability: bitcoin is digital thus much more portable than gold.
Divisibility: A single bitcoin can be subdivided into 100,000 sub units. Gold much hard to pay with shavings.
Uniformity/Fungibility: gold strong here (verifiability of such uniformity later). I think bitcoin is a bit weaker currently due to transactions being public. Improvements hopefully to come there.
Limited supply: bitcoin has a mathematic max of 21m coins. Gold is scarce as well but more susceptible to increases in supply with price rises (stock to flow). I think the mining asteroids argument is far off.
Acceptability: bitcoin is bad here. Gold has history and global awareness. This will be the last domino to fall on bitcoin's monetization.
Censorship Resistance: gold pretty good. Bitcoin better due to digital nature.
Security: Much easier to store bitcoin (paper, brain) than bulky gold.
Verifiability: bitcoin can be verified with free software. Gold you need contraptions for coins which are cheap. But hard for bars (see recent scandals on fake gold)
Seizure resistance: bitcoin wins as there isnt anything in the physical world that you really need to own it. Plausible deniability. Gold can be searched and found

[bitcoininthevp]

I have a foot in each camp, I'm probably 75% long under store of value theory, and 25% trading the volatility as a shameless speculator.

People are speculating on Bitcoin's store of value (and resulting monetization).

[gaddyslapper007]

life hack: Bitcoin is the ultimate PP. (replace gold, replace fiat, replace stonks, replace government debt, no rebalance needed!).

Note: this post submitted 8-10 years in the future…..where it’s glaringly obvious.

[seajay]

Durability: Gold - millennia, bitcoin just a decade and that could be replaced at any time.

Portability: Don't transport gold across borders, liquidate it, electronic transfer the capital, repurchase at the target destination.

Divisibility: Again gold can be liquidated and sub-divided

Uniformity/Fungibility: gold strong here.

Limited supply: bitcoin has a conceptual mathematic max of 21m coins - but that could be extended or replaced. It's not a physical limit but a virtual/synthetic limit.

Acceptability: Gold has history and great breadth/depth here. Try bribing your way into a airport as a new regime takes control and guards are more inclined to accept a bag of gold coins than they are bit coins.

Censorship Resistance: gold excellent. Can literally be buried away or moved. Digital is difficult to avoid censorship as such tracking is mandated in being potentially illicit activity. US banned investment gold trading from the 1930's up the the mid 1970's. Other countries gold trading continued. Gold as a PM can be swapped out for perhaps silver to equal value/effect. Swapping bitcoins from one to another is more inclined to see distinctly different characteristics.

Security: Bitcoin involves counter-parties whereas gold does not.

Verifiability: Good dealers are competent at verification of gold

Seizure resistance: Recent theft by hackers of millions of bitcoin $$$ value. Gold stored in trusted regions can have Plausible Deniability/paper trails established relatively easily.

Fundamentally bit coin is a pretend scarcity, no different to clackers, only remain scarce until circumstances direct towards expansion of numbers. With a physical finite scarce object/item there are physical limits on expansion.

Stablility: In being unregulated, the likes of Elon Musk can ramp and plunge the price ahead of their intended trades. For bit coin to become stable it will endure regulation/controls. Existing versions will be replaced at a unknown exchange rate, possibly $0. Yes there is a great push for recognition and acceptance, which involves regulatory compliance. Once established its more inclined to be pegged to the US$ rather than moving counter direction to the US$. Its diversification benefits will be lost, become comparable to cash.

[bitcoininthevp]

I disagree that value is subjective.

Something could be valuable to you but to no one else

[bitcoininthevp]

Security: Bitcoin involves counter-parties whereas gold does not.

No.

Seizure resistance: Recent theft by hackers of millions of bitcoin $$$ value. Gold stored in trusted regions can have Plausible Deniability/paper trails established relatively easily.

This is like saying gold isnt seizure resistant because someone broke into your safe.

Fundamentally bit coin is a pretend scarcity, no different to clackers, only remain scarce until circumstances direct towards expansion of numbers. With a physical finite scarce object/item there are physical limits on expansion.

This is "pretend scarcity" hand waving again. Please make a specific argument against the scarcity at least.

There is a lot of talk of gold in space.

Im not anti gold. To be clear, Im contrasting gold and bitcoin and think bitcoin "wins" in many regards. Gold also wins in some aspects. Im willing to admit this. Are you?

[gaddyslapper007]

“you get Bitcoin at the price you deserve”. …meaning: you will be punished monetarily if you fall for high intellect catch phrases and ideals ……

Cure: drop everything you “know” and follow the fabric of instinctual knowledge. (Ignore galaxy brain high IQ intelligence….it’s a scam!)

[bitcoininthevp]

I think bitcoininthevp makes a great point that all stores of value are actually greater fool assets. All stores of value can be overvalued at a given point in time only knowable in hindsight so I think it goes back to time preference. Paying 30% more for gold 100 years ago doesn't seem like such a big deal if you held onto all of it today. The trick is to ignore volatility and hold greater fool assets long enough that their cost is now below its true value and then from that point on they can expect it to act as a long term store of value.

To put a finer point on it, and brainstorming here: All else equal, the less uses that a monetary-like asset has, thus more monetary premium, the more the greater fool theory seems to apply to it. And this may in fact be a good determining factor of the best money (NOT currency).

[seajay]

There is a lot of talk of gold in space.

When investment gold trading was outlawed in the US between the 1930's and 1970's investors could have held silver to similar/equal effect. If a solid gold asteroid was mined the gold price would plummet and other rarer metals would become more preferred as stores of value. Paintings by favoured dead artists cannot have more created and as such are valued by those with surplus capital, in the hope/expectation that if/when they need to liquidate others with surplus capital would look to buy. Generally that rule of thumb has sustained across many generations. Indeed the expansion of numbers with surplus capital has seen prices generally rise ahead of inflation (increased demand). Gold fits into that category, a computer algorithm (bit coin) does not.

[bitcoininthevp]

Gold fits into that category, a computer algorithm (bit coin) does not.

Can you explain why not?

Also, when gold price goes up, MORE gold is produced. When bitcoins price goes up, no more can be produced.

[Jack Jones]

Stocks: 25%
Bonds: 20%
Gold: 20%
Cash: 20%
Bitcoin: 15%

I created a portfolio on Yahoo Finance to track this. +4.17% since thread inception. BTC-USD has risen 22% since then.

[seajay]

Gold fits into that category, a computer algorithm (bit coin) does not.

Can you explain why not?

Also, when gold price goes up, MORE gold is produced. When bitcoins price goes up, no more can be produced.

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[gaddyslapper007]

https://twitter.com/plebmusic/status/14 ... 44480?s=21

[Arthur Boe Nansa]

Security: Bitcoin involves counter-parties whereas gold does not.

No.

Fundamentally bit coin is a pretend scarcity, no different to clackers, only remain scarce until circumstances direct towards expansion of numbers. With a physical finite scarce object/item there are physical limits on expansion.

This is "pretend scarcity" hand waving again. Please make a specific argument against the scarcity at least.

There is a lot of talk of gold in space.

Im not anti gold. To be clear, Im contrasting gold and bitcoin and think bitcoin "wins" in many regards. Gold also wins in some aspects. Im willing to admit this. Are you?

From a superficial sense BTC has no counterparties, but in a philosophical sense miners are the ultimate counterparty. They control the network. I love the "well I can always spin up a node" argument. If you're not proving work, you're irrelevant. Most people making this argument aren't proving work and also probably wouldn't even when push comes to shove. Also, despite how slim the chances are, a cataclysmic scenario makes the network useless. If computers aren't running then bits aren't moving. Gold is physical.

What more could be said about pretend scarcity? In general when something is made up, it's hard to prove it isn't made up...
The point is that for the same reason BTC maximalists believe BTC has value, every other crypto project has value- namely that scarcity exists and demand will drive its price up. In a funny money world this feels like it makes sense. But at the end of the day, value comes from the utility of something. BTC isn't special. It's network effect is special. As far as a 21M supply cap is concerned, why would that be better then a BTC ver. 2 with only 20M coins? Isn't that more scarce?

The real thesis of BTC is its memetics. As far as tech, there are better projects. Supply? Better projects. Utility? Better projects.

BTC is currently displaying the power of first mover advantage. Whether it holds it or not, I guess we'll see...