Gold is Losing Buyers to Bitcoin

Discussion of the Gold portion of the Permanent Portfolio

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dualstow
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Gold is Losing Buyers to Bitcoin

Post by dualstow » Wed Nov 01, 2017 8:28 am

This is a fact, not a perception or opinion.

WSJ headline: “Gold Bugs Embrace Bitcoin, Upending Retail Sellers
A weak dollar and geopolitical tensions have meant gains for gold futures in 2017, but retail sales of gold are at their lowest levels in a decade” (I’ll link if anyone wants it).

Obviously, bitcoin could implode and that would send gold skyward. But what if it doesn’t? What if it takes ten more years?

In the meantime, do you think it will affect the spread? I mean, by affecting volume?
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Kbg
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Re: Gold is Losing Buyers to Bitcoin

Post by Kbg » Wed Nov 01, 2017 8:48 am

I think it is really hard to say what will happen going forward. I'm relatively certain Bitcoin specifically is "the" bubble of this decade and will not end well. However, CME (I think) said they were rolling out futures which is a sure sign of them seeing potential scale sufficient to become a futures market. By all my readings, the technology is here to stay and will likely be a significant part of our commerce going forward. And there is zero doubt that Bitcoin is becoming an "alt currency" which means it is now in competition for that aspect of what gold represents (gold represents a bunch of other things too). The main difference is gold is physical and Bitcoin never will be so there will continue to be a theoretical SHTF advantage for gold.

Things to watch going forward...

1. Competitors...most analysts looking at this from a technology vs. financial perspective don't think the technology race is over yet and it is anyone's guess what the market will settle on.

2. Government reaction...it would not be difficult for governments to completely take over the medium of exchange/currency aspect of Bitcoin and almost all central banks are discussing the technology and what to do about it. Also, just like gold, governments can make Bitcoin quite useless if they chose to. (Side note: China is clearly cracking down on it.)

3. Commercial use...much discussion on what is and is not valuable about the technology.

Bottom line...consensus is something "big" is underway but everyone is still trying to figure it out. If you can pick a good horse or two it is one of those times that being a good evaluator of horse flesh could make you very wealthy.
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Re: Gold is Losing Buyers to Bitcoin

Post by dualstow » Wed Nov 01, 2017 8:52 am

That’s a thoughtful response. Thank you!
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Re: Gold is Losing Buyers to Bitcoin

Post by whatchamacallit » Wed Nov 01, 2017 9:18 am

I am no doubt envious of people's gains from bitcoin and continue to watch the price climb from the sidelines.

I still just cannot take it seriously. It still feels like a ponzi scheme and if I was king I would prosecute promoters as such.
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Re: Gold is Losing Buyers to Bitcoin

Post by dualstow » Wed Nov 01, 2017 9:27 am

It does feel very Ponzi, doesn’t it. If I could use bitcoins like cash or credit cards, including small purchases down the street, I’d jump right in.

I’m sticking with gold.
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Re: Gold is Losing Buyers to Bitcoin

Post by doodle » Wed Nov 01, 2017 11:14 am

What are the advantages of Bitcoin to Gold? The only one that I can think of is divisibility.. If someone created a gold backed redeemable internet currency that gave people the ease of transport and divisibility that bitcoin provides this seems like it would be the best of all worlds. I too think bitcoin is looking highly speculative at the moment and very frothy. I don't think it will take much to rattle people out of it...nearly a 50% fall in gold from highs didn't shake my confidence too much. A similar fall in bitcoin would sap all my confidence.
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Re: Gold is Losing Buyers to Bitcoin

Post by dualstow » Wed Nov 01, 2017 11:24 am

doodle wrote:What are the advantages of Bitcoin to Gold? The only one that I can think of is divisibility.
Is that really all you can think of? I know very little about blockchain, but off the top of my head:
*With bitcoin you only need to keep your password safe, whereas your gold can be stolen. It's a bearer instrument.
*You can buy some things with bitcoin directly, while gold pretty much has to be converted to currency first.
*We may continue to find gold in the earth (or even off it; or synthesize it) but bitcoin really is finite by design. Of course, there is no limit to the number of alternate coins that will be created, and maybe bitcoin will lose out to ethereum (sp?) or something.
*I'm not sure how the fee compares with the markup- er, spread, for buying gold. I'll leave that to one of our resident experts.
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Re: Gold is Losing Buyers to Bitcoin

Post by Kbg » Wed Nov 01, 2017 1:39 pm

doodle wrote:What are the advantages of Bitcoin to Gold? The only one that I can think of is divisibility.. If someone created a gold backed redeemable internet currency that gave people the ease of transport and divisibility that bitcoin provides this seems like it would be the best of all worlds. I too think bitcoin is looking highly speculative at the moment and very frothy. I don't think it will take much to rattle people out of it...nearly a 50% fall in gold from highs didn't shake my confidence too much. A similar fall in bitcoin would sap all my confidence.
My guess is that, today, one could do exactly that. The first part already exists and is known as an ETF. Combine an ETF with unique blockchains for each share (oz.) and there you have it.

I would caution not to mix frothy and utility. Anything computer/internet related in the late 1990s was frothy...and that stuff is still quite useful and has tangible and intangible value. Blockchain is likely to be in the same category...as are trains (1800s bubble)...as are REITS (1700s bubble).

As far as your wealth, a 50% decline is a 50% decline regardless of asset class and is always measured in your home country's currency.
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Re: Gold is Losing Buyers to Bitcoin

Post by buddtholomew » Wed Nov 01, 2017 3:47 pm

Since when does Gold underperform silver by 2%?
Gold, what a disaster...
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Re: Gold is Losing Buyers to Bitcoin

Post by dualstow » Wed Nov 01, 2017 4:05 pm

buddtholomew wrote:Since when does Gold underperform silver by 2%?
Gold, what a disaster...
I just hope we look back on this as a sale.
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Re: Gold is Losing Buyers to Bitcoin

Post by jhogue » Wed Nov 01, 2017 4:53 pm

Perhaps I am missing something, but consider the following:

An absolutely critical difference between gold and bitcoin is that bitcoin is created, but gold cannot be created—at least under present conditions.

Alchemists tried for centuries to create gold, but in the end they always failed. As a recent thread pointed out, astronomers think they have recently observed the creation of gold at the sub-atomic level as a byproduct of the collision of neutron stars. This process has not been duplicated under laboratory conditions, nor is it likely to happen any time soon.

On Earth, gold is mined by various extraction techniques, which are expensive and serve to limit the growth rate in the supply of available gold. Repeated gold rushes in the past (California, South Africa, the Yukon, etc.,) were triggered by the mistaken but widespread perception that the valuable metal could be cheaply extracted in specific localities. Clearly, the expense of extraction, along with its scarcity and durability, have historically supported gold’s low volatility and high price relative to other commodities.

Unlike gold, bitcoin was first created in 2008. Since then, bitcoin bugs have loved to use the term “mining” to describe how this cryptocurrency is created. I wonder if this favored term-- “mining” --has been intentionally used to mislead potential buyers of the stuff and deflect attention from the indisputable fact that bitcoin is created by human technology and only human technology. If bitcoin is created by human technology, what prevents it from being created and/or destroyed by other human technologies? Isn’t the existing supply of bitcoin vulnerable to a radical expansion by the efforts of sophisticated counterfeiters on the one hand, or mass destruction via computer viruses on the other?

Before I could accept bitcoin as a substitute for gold, those questions would have to be satisfactorily addressed. In the meantime, I have heard you can get a great deal on old Dutch tulips—get ‘em while they are hot!
“Groucho Marx wrote:
A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"
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Re: Gold is Losing Buyers to Bitcoin

Post by dualstow » Wed Nov 01, 2017 4:57 pm

Isn’t the existing supply of bitcoin vulnerable to a radical expansion by the efforts of sophisticated counterfeiters on the one hand, or mass destruction via computer viruses on the other?
No, I think you are indeed missing something, j.

However, any number of alt-currencies, cousins of bitcoin, can be created.
RIP Charlie Daniels
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