Did Bitcoin Kill Gold’s Monetary Utility?

Discussion of the Gold portion of the Permanent Portfolio

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gizmo_rat
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Did Bitcoin Kill Gold’s Monetary Utility?

Post by gizmo_rat » Wed Oct 20, 2021 2:34 am

Some musings from Cullen Roche about how gold has failed to respond to the $6T the US gov pushed into the US economy, unlike bitcoin (maybe).
PP allocation gets mentioned heavily.

https://www.pragcap.com/did-bitcoin-kil ... y-utility/

Personally I still don't get cryptos, but I guess Marc filled his garage with Lambos back in the day, so what do I know?
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Re: Did Bitcoin Kill Gold’s Monetary Utility?

Post by Kevin K. » Wed Oct 20, 2021 10:09 am

Thanks for posting this link!

I went pretty far down the rabbit hole on Cullen's site after reading this. His Disciplined Fund ETF is fascinating.

Getting back to the post in question, I think the questions he raises about crypto possibly siphoning off a lot of the interest in, and usurping the role of, gold in portfolio construction deserves to be much more broadly discussed on these forums.
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Re: Did Bitcoin Kill Gold’s Monetary Utility?

Post by bitcoininthevp » Wed Oct 20, 2021 11:09 am

Here is a related thread:
viewtopic.php?f=5&t=11753

Also, not crypto, Bitcoin.

Here are some of my thoughts on Gold v Bitcoin
bitcoininthevp wrote:
Fri Jul 03, 2020 2:05 pm
"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
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Re: Did Bitcoin Kill Gold’s Monetary Utility?

Post by I Shrugged » Wed Oct 20, 2021 11:19 am

Yet while $6T was pumped into the US economy, nominal interest rates have remained very low, and real interest rates have remained very negative. That's a wildcard to me, when it comes to looking at gold prices. Gold doesn't have to go up to remain competitive with fiat cash.
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Re: Did Bitcoin Kill Gold’s Monetary Utility?

Post by bitcoininthevp » Wed Oct 20, 2021 11:24 am

I Shrugged wrote:
Wed Oct 20, 2021 11:19 am
Yet while $6T was pumped into the US economy, nominal interest rates have remained very low, and real interest rates have remained very negative. That's a wildcard to me, when it comes to looking at gold prices. Gold doesn't have to go up to remain competitive with fiat cash.
Agreed.

Big moneys in bonds and gold essentially dont seem to believe the (long term) inflation narrative. Ill be honest, Im not sure I do either.

Bitcoin is still so small/new/etc that I think it can move on its own cycles and doesn’t necessarily mean BTC mooning means there is going to be inflation for the entirety of the 2020s.
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Re: Did Bitcoin Kill Gold’s Monetary Utility?

Post by Kevin K. » Wed Nov 10, 2021 9:40 am

Worthwhile video on ETF Edge the other day that IMO makes a pretty convincing case for gold and crypto as very different yet in some ways complimentary plays:

https://www.cnbc.com/video/2021/11/08/t ... agers.html
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Re: Did Bitcoin Kill Gold’s Monetary Utility?

Post by whatchamacallit » Wed Nov 10, 2021 3:52 pm

Kevin K. wrote:
Wed Nov 10, 2021 9:40 am
Worthwhile video on ETF Edge the other day that IMO makes a pretty convincing case for gold and crypto as very different yet in some ways complimentary plays:

https://www.cnbc.com/video/2021/11/08/t ... agers.html

Is that link still good? It went to video with this title


"Tracking global gold demand with two top gold ETF managers"

I didn't catch the part about crypto but that video did have someone stating gold has 28% minimum tax rate. Disappointed to hear that myth still being said by "experts".

Sorry off topic.
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Re: Did Bitcoin Kill Gold’s Monetary Utility?

Post by Kevin K. » Wed Nov 10, 2021 4:00 pm

whatchamacallit wrote:
Wed Nov 10, 2021 3:52 pm
Kevin K. wrote:
Wed Nov 10, 2021 9:40 am
Worthwhile video on ETF Edge the other day that IMO makes a pretty convincing case for gold and crypto as very different yet in some ways complimentary plays:

https://www.cnbc.com/video/2021/11/08/t ... agers.html

Is that link still good? It went to video with this title


"Tracking global gold demand with two top gold ETF managers"

I didn't catch the part about crypto but that video did have someone stating gold has 28% minimum tax rate. Disappointed to hear that myth still being said by "experts".

Sorry off topic.
Yeah there are actually two parts to the video. The first one is great for making it clear just who owns gold and for what purposes globally (for example, investors only own 15% yet they are the ones that have the most influence on price movements, rather than say, jewelry demand that accounts for a full 50% of the gold market).

The other video part that features the same two guys talking about crypto vs. gold is here:

https://www.cnbc.com/2021/11/09/bitcoin ... attle.html

As for the 28% tax thing I agree with you: if you're going to talk about it you need to say gold it taxed at UP TO 28% vs. lower LT capital gains rates for stocks and bonds.
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Re: Did Bitcoin Kill Gold’s Monetary Utility?

Post by seajay » Thu Nov 11, 2021 6:11 am

gizmo_rat wrote:
Wed Oct 20, 2021 2:34 am
Personally I still don't get ...
Would you rather own the Mona Lisa painting, or the private keys of a "limited" edition range of encrypted digital copies of the Mona Lisa?
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Re: Did Bitcoin Kill Gold’s Monetary Utility?

Post by dualstow » Thu Nov 11, 2021 9:32 am

The painting!
RIP Marcello Gandini
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Re: Did Bitcoin Kill Gold’s Monetary Utility?

Post by seajay » Thu Nov 11, 2021 6:21 pm

dualstow wrote:
Thu Nov 11, 2021 9:32 am
The painting!
Me to. Such arguments as

Portability: digital is much more portable than a painting.
Divisibility: A single digital art can be subdivided into 100,000 sub units. But I guess the painting could be sub-divided into part ownership shares.
Acceptability: digital art is bad here. The painting has history and global awareness.
Censorship Resistance: The painting is pretty good. Digital art is better due to its digital nature.
Security: Much easier to store digital art (paper, brain) than a bulky painting.
Verifiability: Digital art could be verified with free software. Paintings need contraptions and expertise to avoid potential fakes.
Seizure resistance: digital art wins as there isn't anything in the physical world that you really need to own it. Plausible deniability. A painting can be searched and found

just doesn't swing it for me. I'd rather own the physical painting than sell it to buy the private keys of worthless encrypted digital copies that are purely highly valued due to Tulip bulb mania type greed. Entertaining however, pop open a box of popcorn to watch the likes of Elon Musk repeatedly pump and dump it without any of the more usual regulatory controls to restrict such practices. Reminds one of the lead up to the Wall Street Crash years.
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Re: Did Bitcoin Kill Gold’s Monetary Utility?

Post by ppnewbie » Fri Nov 12, 2021 11:51 pm

bitcoininthevp wrote:
Wed Oct 20, 2021 11:09 am
Here is a related thread:
viewtopic.php?f=5&t=11753

Also, not crypto, Bitcoin.

Here are some of my thoughts on Gold v Bitcoin
bitcoininthevp wrote:
Fri Jul 03, 2020 2:05 pm
"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
I pretty much agree with everything here. I have been thinking about bitcoin in relation to gold for a while now. Its scarce, fungible....all that stuff you said and two more things, it's hard to create which differentiates it from many of the alt coins. And one major factor I think BTC has is its portability. As long as you have your private key, it's with you nearly anywhere you go in the world. It's pretty interesting to think that in a refugee situation, if you had a large BTC stash, you could hop on a plane enter a country on a visitors visa and...viola your rich in that country (if you could spend in BTC or do some exchange tricks to get local currency).
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Re: Did Bitcoin Kill Gold’s Monetary Utility?

Post by seajay » Mon Nov 15, 2021 6:30 pm

Will be interesting to see the consequences of if Btc is permitted to grow enough to stabalize and undermine the financial system. Where money is pulled from commercial banks causing a runaway bank-run. I very much suspect however that major central banks will prevent things from getting that far.
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Re: Did Bitcoin Kill Gold’s Monetary Utility?

Post by Kbg » Tue Nov 16, 2021 8:55 am

seajay wrote:
Mon Nov 15, 2021 6:30 pm
I very much suspect however that major central banks will prevent things from getting that far.
You can bank on it (pun intended, but serious as well)
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Re: Did Bitcoin Kill Gold’s Monetary Utility?

Post by bitcoininthevp » Tue Nov 16, 2021 11:14 am

seajay wrote:
Mon Nov 15, 2021 6:30 pm
Will be interesting to see the consequences of if Btc is permitted to grow enough to stabalize and undermine the financial system. Where money is pulled from commercial banks causing a runaway bank-run. I very much suspect however that major central banks will prevent things from getting that far.
CBDCs vs Bitcoin is probably the main event.
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Re: Did Bitcoin Kill Gold’s Monetary Utility?

Post by seajay » Thu Nov 18, 2021 5:00 pm

bitcoininthevp wrote:
Tue Nov 16, 2021 11:14 am
seajay wrote:
Mon Nov 15, 2021 6:30 pm
Will be interesting to see the consequences of if Btc is permitted to grow enough to stabalize and undermine the financial system. Where money is pulled from commercial banks causing a runaway bank-run. I very much suspect however that major central banks will prevent things from getting that far.
CBDCs vs Bitcoin is probably the main event.
A dull event, a rigged match where the outcome is all to obvious as the referee is biased. So many are speculating on how far Btc prices might rise before collapsing to zero! Btc as a alternative store of value - nope! No more than the selling of a digital key for a "limited edition" encrypted digital copy of the Mona Lisa.

A good testing ground however for pre CBDC, let others take the risk of ironing out security flaws before adoption/rollout of their own version.
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Re: Did Bitcoin Kill Gold’s Monetary Utility?

Post by bitcoininthevp » Fri Nov 19, 2021 8:47 am

seajay wrote:
Thu Nov 18, 2021 5:00 pm
A good testing ground however for pre CBDC, let others take the risk of ironing out security flaws before adoption/rollout of their own version.
What do you see in common regarding the code/tech/features/incentives/game theory/goals between BTC and some USD-CBDC? AKA: what is there that could be reused from Bitcoin to CBDC?

To me it seems there is no overlap. CBDC is about centralized control by gov bureaucrats over money, including its supply, surveillance, censoring, etc. Everything about a system like that would be different from Bitcoin's finite supply, pseudonymity, censorship resistance, etc. As a result, the architecture, design, governance, everything would be completely different as a result.

Maybe Bitcoin greases the wheels a bit on the populace being more familiar with the concept of "digital assets", but that seems about it.
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Re: Did Bitcoin Kill Gold’s Monetary Utility?

Post by var » Fri Dec 24, 2021 3:28 pm

gizmo_rat wrote:
Wed Oct 20, 2021 2:34 am
Some musings from Cullen Roche about how gold has failed to respond to the $6T the US gov pushed into the US economy, unlike bitcoin (maybe).
PP allocation gets mentioned heavily.

https://www.pragcap.com/did-bitcoin-kil ... y-utility/

Personally I still don't get cryptos, but I guess Marc filled his garage with Lambos back in the day, so what do I know?
Haven't been here in a while. However, as someone in the tech industry who didn't believe in BTC. I flipped in 2021. I spent 100+ hours studying crypto and BTC. My 2 cents is money that should go to Gold has gone to Crypto. You can see it in the 2020-2021 charts.

However, if you're going to buy something I suggest starting with BTC first like 5% allocation.

DYOR.
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Re: Did Bitcoin Kill Gold’s Monetary Utility?

Post by Don » Fri Dec 24, 2021 5:50 pm

I spent 100+ hours trying to recover my BTC that was forever lost after losing my private key. All for naught.
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Re: Did Bitcoin Kill Gold’s Monetary Utility?

Post by mathjak107 » Sat Dec 25, 2021 5:49 am

var wrote:
Fri Dec 24, 2021 3:28 pm
gizmo_rat wrote:
Wed Oct 20, 2021 2:34 am
Some musings from Cullen Roche about how gold has failed to respond to the $6T the US gov pushed into the US economy, unlike bitcoin (maybe).
PP allocation gets mentioned heavily.

https://www.pragcap.com/did-bitcoin-kil ... y-utility/

Personally I still don't get cryptos, but I guess Marc filled his garage with Lambos back in the day, so what do I know?
Haven't been here in a while. However, as someone in the tech industry who didn't believe in BTC. I flipped in 2021. I spent 100+ hours studying crypto and BTC. My 2 cents is money that should go to Gold has gone to Crypto. You can see it in the 2020-2021 charts.

However, if you're going to buy something I suggest starting with BTC first like 5% allocation.

DYOR.
I am not a pp user but I did take 25% of my rather conservative portfolio and put 5% each in gold , bitcoin through gbtc and dbc commodities as my inflation hedge along with 10% in a strategic real return fund .

The other 75% is in my normal 30-35% equity / bond/ cash portfolio…

Personally I don’t see gold as a good inflation hedge as long as other assets are doing okay and I like the diversification on the gold side into so many other types of assets
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Re: Did Bitcoin Kill Gold’s Monetary Utility?

Post by var » Sat Dec 25, 2021 11:48 am

Don wrote:
Fri Dec 24, 2021 5:50 pm
I spent 100+ hours trying to recover my BTC that was forever lost after losing my private key. All for naught.
actually there only finite amount BTC ever to be mined.

20% will be lost... people forget the keys or throwing away the old computer,etc.


I did the same with ETH took me 50+ hours to recover some ETH I forgot about in one computer.

However, everything is easier now with the newer smartphone wallet apps like exodus.

just write down the seed phrase and stick it in the bank lockbox.

Gold was so much more difficult to buy. Are the spreads high, is it real? storing it. as compared to Bitcoin.
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Re: Did Bitcoin Kill Gold’s Monetary Utility?

Post by seajay » Sat Dec 25, 2021 1:08 pm

Don wrote:
Fri Dec 24, 2021 5:50 pm
I spent 100+ hours trying to recover my BTC that was forever lost after losing my private key. All for naught.
The distributed ledger blockchain is akin to a voting system, a adversary would require a little over the combined mining power of all of the miners to gain control of (or corrupt the) ledger (creation of blocks). Updates of the ledger require proof of work (pow), however interestingly there are attack vectors that can make it unprofitable for miners and without having to expend pow such that ledger control might be secured with far less resources being required simply by distributing unverified block headers that induce other miners to move on (infers they'd lost that race) to levels where miners were more inclined to target other races, or simply not play.

Indications are that rather than having to have 51% of the total mining computational power that 15% or lower levels might suffice, and with that reducing over time. Well within state sponsored attack potential or to some botnets.

If/when such a attack is deployed, I envisage it would be a more creepage based attack, little corruptions here/there that accumulate over time to a massive overall corruption, with no simple rollback and where in effect many had lost their private keys.
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Re: Did Bitcoin Kill Gold’s Monetary Utility?

Post by Don » Sat Dec 25, 2021 2:52 pm

var wrote:
Sat Dec 25, 2021 11:48 am
Don wrote:
Fri Dec 24, 2021 5:50 pm
I spent 100+ hours trying to recover my BTC that was forever lost after losing my private key. All for naught.
actually there only finite amount BTC ever to be mined.

Wait. If I still have my old computer is my bitcoin salvageable without my private key?

20% will be lost... people forget the keys or throwing away the old computer,etc.


I did the same with ETH took me 50+ hours to recover some ETH I forgot about in one computer.

However, everything is easier now with the newer smartphone wallet apps like exodus.

just write down the seed phrase and stick it in the bank lockbox.

Gold was so much more difficult to buy. Are the spreads high, is it real? storing it. as compared to Bitcoin.
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Re: Did Bitcoin Kill Gold’s Monetary Utility?

Post by Ugly_Bird » Mon Dec 27, 2021 7:55 am

var wrote:
Fri Dec 24, 2021 3:28 pm
However, if you're going to buy something I suggest starting with BTC first like 5% allocation.
And now the question is when to rebalance out of crypto. What would be the rebalancing bands?
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Re: Did Bitcoin Kill Gold’s Monetary Utility?

Post by var » Tue Dec 28, 2021 9:49 am

Ugly_Bird wrote:
Mon Dec 27, 2021 7:55 am
var wrote:
Fri Dec 24, 2021 3:28 pm
However, if you're going to buy something I suggest starting with BTC first like 5% allocation.
And now the question is when to rebalance out of crypto. What would be the rebalancing bands?
Good Question!

Rough guess 5%-10% higher than normal PP.
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