Community Discussion - Bitcoin and gold
Before you fall off your high horse, you crypto cowboys - I have been in Bitcoin since 2011. I'm one of the lucky ones, this post isn't a "Bash at crypto" it's about giving you some insights, some logic and something to consider when making an argument for both the pros and cons.
So to start with; one topic that I feel many newer retail traders and social influencers are confused about, is the definition of store of value. There's a debate about bitcoin being one or not - there is also a question as to will Bitcoin become a digital gold or is it more likely a payment system (think Swift or visa).
When defining a store of value we can simply say - it's social construction, if enough people agree it will have an intrinsic future value then it could be deemed as a store of value. The argument often goes something like "But it only has 21m coins - EVER" That is not enough of an argument to justify why we can warrant and justify 100k a coin, 1million a coin.
In gold terms - Gold was used as a form of "transfer" during the Egyptian, Samarians and Incan era's. However, gold wouldn't be used as widespread money until 2,500 years later, back to Egypt where they did use gold bars in set weights for exchanges, although the most common method of exchange was mass commodity bartering for a long, long time.
The social construction meant that it was a rare earth material that could be easily divisible, weighed and therefore transferable.
I often see arguments online about "how do you carry all this gold" Bitcoin can fit in my pocket, "ah send gold to Ukraine, ah what if the boat is sunk?" This is small mindedness and the argument is only to justify, re-enforce even - one's own beliefs. You can easily say what if you lose a private key - there's a fellow Welshman who's 50,000 Bitcoin is currently sat in a landfill site.
Both can be lost, stolen and confiscated - so don't be fooled, yes you might own a strong of words that constitute as a private key but with the KYC & AML - governments will end up with more control and traceability when it comes to crypto. Like it or not, its fact.
So the upside;
Knowing the difference between money and currency;
As I noted, in France - they seem to call crypto "Crypto-Money" I found it interesting when I first heard this with my broken French. But logically it makes sense.
But what does it matter? Well, it matters really as to crypto/Bitcoin becoming a digital store of value or a payment exchange mechanism. You Maxies will say "it's both" again, this can't be. For one simple, obvious reason - RISK ON vs RISK OFF.
Another well used argument for orange pilling retail is "Bitcoin is a hedge against inflation" then this argument turns into, well look at what it did back last year. Which is no different than me saying I could run the 100m in 11 seconds flat at 16. Now at 37, I'd be lucky to do it in 20 ;-)
What you need to think about is not the small picture, but the long term adoption. What will drive it to become a standard. A dream and the desire to own a Lambo one day is not enough. Which then comes back full circle, how do we socially engineer - with a compelling argument that Bitcoin can be, either a payment system infrastructure for things like taxation, loans, salaries, ease of audit for the governments. Or a store of value - digital gold?
----------------------------------------------------------------------------------------------------------------------------------
Dig a little deeper;
The first official declaration of gold as money came around 600 BC, where King Alyattes of Lydia, an ancient kingdom in modern-day Turkey, oversaw the first recorded mint. An alloy of silver and gold known as electrum was used to create coins, which were stamped with pictures that denoted denominations. Other civilisations soon followed suit, with Darius I of Persia introducing a 95.83% pure 8.4g gold coin, which was worth 20 silver coins. Much like the centralised monetary systems of today, Darius saw the minting of coin as a royal prerogative and gave the death penalty to Persian governors who tried to mint their own coins.
Fast foreword from there - President Ulysses S. Grant, drafted a policy to sell Treasury gold at weekly intervals to pay off the national debt, stabilize the dollar, and boost the economy. What this means is that the value of each dollar could be measured using the weight of gold (rare earth material) this is what I believe we are lacking for true Bitcoin adoption - the truest form of stability. To beat a 7%+ inflation rate, you can't be buying Bitcoin at 69k and be happy as an inflation beater at it's current 39k levels.
Jump foreword again;
President Richard Nixon announced a bold economic plan, severing of the U.S. dollar's ties to gold.
This was a critical point in time - The US had a large gold reserve, they in essence become a type of banker for the world. Other countries would exchange gold for dollars meaning the US where in fact exporting their own paper in exchange for rare earth materials. Other countries would use this paper system to exchange everything from chocolate, to crude oil. When Nixon changed this, countries become fearful that the dollar had less spending power, driving less security (creating risk on) most countries then started returning the dollar in exchange for their gold back. (dollars where now just an IOU).
In modern day terms this flows into the companies around the world, retail traders and of course the general public.
But one thing is very, very interesting.
When the stock market falls off - money flows out and back into gold.
Here's the Dow Jones 2007-2009 period:
And here's the gold chart same period:
The only reason I included this here, is that although it is obvious, it's not obvious to all. The point I'm making is that we need to consider that if all payments are made in bitcoin - no reason to cash out; what will happen to the risk on/risk off situation? So we buy a share in Amazon let's say and that's currently $2,910 - we have Bitcoin at $39,150. Now Amazon goes up 5% but Bitcoin drops 12% where do we run? Or do we just claim "diamond hands, buy the dip"
It's these types of discussions I would love to discuss and have a wide array of opinions and thoughts from the community. Gold has been a store of value for thousands of years, other currencies (actually 100%) of other currencies have all gone to zero value. Why will a new contender be any different?
Let's get the discussion started!
If you haven't seen my Bitcoin moves - see this below.
I compiled a post of the last year of publicly available posts and each swing/move as to why I was seeing the moves like this.
I've also covered a ton of lessons here in this post - click on the image to see them all.
Disclaimer
This idea does not constitute as financial advice. It is for educational purposes only, our principle trader has over 20 years’ experience in stocks, ETF’s, and Forex. Hence each trade setup might have different hold times, entry or exit conditions, and will vary from the post/idea shared here. You can use the information from this post to make your own trading plan for the instrument discussed. Trading carries a risk; a high percentage of retail traders lose money. Please keep this in mind when entering any trade. Stay safe.
So to start with; one topic that I feel many newer retail traders and social influencers are confused about, is the definition of store of value. There's a debate about bitcoin being one or not - there is also a question as to will Bitcoin become a digital gold or is it more likely a payment system (think Swift or visa).
When defining a store of value we can simply say - it's social construction, if enough people agree it will have an intrinsic future value then it could be deemed as a store of value. The argument often goes something like "But it only has 21m coins - EVER" That is not enough of an argument to justify why we can warrant and justify 100k a coin, 1million a coin.
In gold terms - Gold was used as a form of "transfer" during the Egyptian, Samarians and Incan era's. However, gold wouldn't be used as widespread money until 2,500 years later, back to Egypt where they did use gold bars in set weights for exchanges, although the most common method of exchange was mass commodity bartering for a long, long time.
The social construction meant that it was a rare earth material that could be easily divisible, weighed and therefore transferable.
I often see arguments online about "how do you carry all this gold" Bitcoin can fit in my pocket, "ah send gold to Ukraine, ah what if the boat is sunk?" This is small mindedness and the argument is only to justify, re-enforce even - one's own beliefs. You can easily say what if you lose a private key - there's a fellow Welshman who's 50,000 Bitcoin is currently sat in a landfill site.
Both can be lost, stolen and confiscated - so don't be fooled, yes you might own a strong of words that constitute as a private key but with the KYC & AML - governments will end up with more control and traceability when it comes to crypto. Like it or not, its fact.
So the upside;
Knowing the difference between money and currency;
As I noted, in France - they seem to call crypto "Crypto-Money" I found it interesting when I first heard this with my broken French. But logically it makes sense.
But what does it matter? Well, it matters really as to crypto/Bitcoin becoming a digital store of value or a payment exchange mechanism. You Maxies will say "it's both" again, this can't be. For one simple, obvious reason - RISK ON vs RISK OFF.
Another well used argument for orange pilling retail is "Bitcoin is a hedge against inflation" then this argument turns into, well look at what it did back last year. Which is no different than me saying I could run the 100m in 11 seconds flat at 16. Now at 37, I'd be lucky to do it in 20 ;-)
What you need to think about is not the small picture, but the long term adoption. What will drive it to become a standard. A dream and the desire to own a Lambo one day is not enough. Which then comes back full circle, how do we socially engineer - with a compelling argument that Bitcoin can be, either a payment system infrastructure for things like taxation, loans, salaries, ease of audit for the governments. Or a store of value - digital gold?
----------------------------------------------------------------------------------------------------------------------------------
Dig a little deeper;
The first official declaration of gold as money came around 600 BC, where King Alyattes of Lydia, an ancient kingdom in modern-day Turkey, oversaw the first recorded mint. An alloy of silver and gold known as electrum was used to create coins, which were stamped with pictures that denoted denominations. Other civilisations soon followed suit, with Darius I of Persia introducing a 95.83% pure 8.4g gold coin, which was worth 20 silver coins. Much like the centralised monetary systems of today, Darius saw the minting of coin as a royal prerogative and gave the death penalty to Persian governors who tried to mint their own coins.
Fast foreword from there - President Ulysses S. Grant, drafted a policy to sell Treasury gold at weekly intervals to pay off the national debt, stabilize the dollar, and boost the economy. What this means is that the value of each dollar could be measured using the weight of gold (rare earth material) this is what I believe we are lacking for true Bitcoin adoption - the truest form of stability. To beat a 7%+ inflation rate, you can't be buying Bitcoin at 69k and be happy as an inflation beater at it's current 39k levels.
Jump foreword again;
President Richard Nixon announced a bold economic plan, severing of the U.S. dollar's ties to gold.
This was a critical point in time - The US had a large gold reserve, they in essence become a type of banker for the world. Other countries would exchange gold for dollars meaning the US where in fact exporting their own paper in exchange for rare earth materials. Other countries would use this paper system to exchange everything from chocolate, to crude oil. When Nixon changed this, countries become fearful that the dollar had less spending power, driving less security (creating risk on) most countries then started returning the dollar in exchange for their gold back. (dollars where now just an IOU).
In modern day terms this flows into the companies around the world, retail traders and of course the general public.
But one thing is very, very interesting.
When the stock market falls off - money flows out and back into gold.
Here's the Dow Jones 2007-2009 period:
And here's the gold chart same period:
The only reason I included this here, is that although it is obvious, it's not obvious to all. The point I'm making is that we need to consider that if all payments are made in bitcoin - no reason to cash out; what will happen to the risk on/risk off situation? So we buy a share in Amazon let's say and that's currently $2,910 - we have Bitcoin at $39,150. Now Amazon goes up 5% but Bitcoin drops 12% where do we run? Or do we just claim "diamond hands, buy the dip"
It's these types of discussions I would love to discuss and have a wide array of opinions and thoughts from the community. Gold has been a store of value for thousands of years, other currencies (actually 100%) of other currencies have all gone to zero value. Why will a new contender be any different?
Let's get the discussion started!
If you haven't seen my Bitcoin moves - see this below.
I compiled a post of the last year of publicly available posts and each swing/move as to why I was seeing the moves like this.
I've also covered a ton of lessons here in this post - click on the image to see them all.
Disclaimer
This idea does not constitute as financial advice. It is for educational purposes only, our principle trader has over 20 years’ experience in stocks, ETF’s, and Forex. Hence each trade setup might have different hold times, entry or exit conditions, and will vary from the post/idea shared here. You can use the information from this post to make your own trading plan for the instrument discussed. Trading carries a risk; a high percentage of retail traders lose money. Please keep this in mind when entering any trade. Stay safe.
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