Bitcoin Is Better Than Gold For One Simple Reason

Sprout · Nov 9, 2019

johnarb said:
https://www.forbes.com/sites/invest...than-gold-for-one-simple-reason/#41b62cf6176b

Gold has always been considered a haven for capital. The obvious proof is that governments keep a reserve of gold. They do so because in war the only money the losing side can use to buy things is gold, because in extreme situations government promises are worthless and only gold is acceptable for payments.

Many gold buyers hold a similar position. They do not trust any promise made in paper and are happy to swap their paper and electronic money for a metal that is hard to fake.

Gold can be faked or diluted as a depositor of gold in the U.S. found when they were repaid in gold bars made from coins rather than allowed to redeem the pure gold bars they deposited. Yet skullduggery aside, an ounce of gold is an ounce of gold, or at least people feel that to be true.

There are a lot of awkward things about gold that makes it difficult to invest in and many come down to security, but fear of loss isn’t the only thing that makes gold hoarding tricky. Although most of my readers might consider it a quality problem to have, gold is worth about $60 million a ton and as such is an awkward asset to store significant wealth in. If you are trying to protect yourself from a major disaster, gold is not going to do a great job for a billionaire.

An asset weighing even 100 pounds is awkward if its purpose is to protect the owner from war or such other predation. Ideally a “haven” asset has little weight because when the chips are down, as they say in India, wealth is only what you can carry.

This is, of course, an extreme point of view, but the fans of gold are quite often the holders of extreme views and extreme times do come and go. Inflation is one such extremity that gold buyers use the metal to protect against. There again, as occurred in the U.S. in the 1930s, owning gold is not protection if the ownership of gold is outlawed and the stock of individuals is rounded up on pain of imprisonment.

Yet gold is not only bought as a haven, many fearing bad times ahead buy it because they think it is going to rise in value. Gold is an extremely popular speculative asset and many people buy it in the most uncommercially expensive manner, such as via jewelry, to expose themselves to this possibility. Be that as it may, gold is an investment and most people who buy it are hoping that it will appreciate. Few buy gold expecting it to fall in value.

Gold, however, has stubbornly failed to go up hugely whatever the global economy does. It has not lived up to the expectations of many of its advocates of rising many multiples; the best it seems to manage is to jump a hundred dollars or two if something nasty kicks off somewhere on the globe.

Now, to make matters worse, bitcoin and some sister cryptocurrencies have been invented and they dramatically encroach on key use cases of gold, like flight capital and safe haven investment.

This actually is not a negative for gold because if more people see the benefit of investing in haven assets by bitcoin they will also be attracted to alternatives assets that do the same. As the saying goes, what’s good for Levi’s is good for jeans.

However, there is a simple reason why safe haven investors have more upside when they invest in bitcoin than when they invest in gold and that is issuance.

Every year there is another 3,300 tons of gold produced–lets call it $200 billion of new gold that must be absorbed every year by buyers. Recycling of gold matches consumption, so the new mined gold is extra. It’s a good job that there are 8 billion people in the world and most love gold because it only takes about $20 a head per year to hoover up that supply. We can see that in the price. There is no apparent downward trend in the price of gold as a never-ending new supply is injected into the market. The global economy laps it up.

Let’s look at bitcoin. Every year at, let’s say $10,000 a coin, there is $6.5 billion dollars of new supply that needs to be hoovered up by new demand to maintain its prices. The is a tiny fraction of the issuance of new gold. What is more, next year that issuance will halve.

So the dynamic is, both $200 billion and $6.5 billion is not a vast amount of money to be absorbed by the global economy, clearly bitcoin will go up a lot further and faster than gold will if the demand for haven assets were to suddenly spike. Even without any change in the dynamic, while gold issuance by mining will likely increase a little next year, bitcoin’s will halve.

The supply of Gold and Bitcoin compared over time

CREDIT: ADVFN
As such, on this alone the relative upside for bitcoin is dramatically higher with the creation of coins halving every four years or so. This means the price of bitcoin should react like the price of gold would if half the mines in the world were closed every four years and that after 12 years gold output would slump nearly 90%.

From an investment perspective you simply have to decide whether bitcoin is financial hallucination doomed to fail or a new asset class destined to be part of the investment landscape. If you consider the latter a strong possibility then the prospects are hard to ignore. As I’m in the latter camp I continue to acquire.
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For further research into S2F valuation model:

Sprout · Nov 9, 2019

raVar said:
I'm confused, I thought that was the argument against Fiat Currencies ...
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Crypto as a class. Each new crypto vying for market share could be perceived as a dilution event for BTC.

Any particular crypto could software define it's total stock, but as altcoin speculators like to promote; any perceived weakness of BTC as an opportunity that their particular copy (and improvement) of BTC will solve.

With that taken into account, there will not be another crypto that will enjoy the same network effect and first mover status as BTC nor be as decentralized with the same equitable initial distribution.

As for innovation, despite the active mis-information campaign, all roads lead to Bitcoin.

johnarb · Nov 9, 2019

Overnight said:
A few errant EMPs, and all cryptos are lost forever. Gold will still be around though. Non-ferrous and shit.

P.S. Actually, that brings up an interesting thought. Let's say some EMPs wiped out all blockchain records. So there's no more cryptos anywhere.

Once everything is back up and running, would we be able to start mining again from ground zero? Like, would the BTC chain be reset to zero, and we'd be back on the hunt for the 21millionth bitcoin starting at number 1?
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You'll need more than a "few" or "some", and you'll have to crash all planes, trains and automobiles in the process, not to mention halt all bank/retail/stock markets that rely on computer systems, but hey, as long as you get your way and reset bitcoin, more power to you.

https://bitnodes.earn.com/#global-bitcoin-nodes-distribution

Illini Trader · Nov 9, 2019

Kryptotrajder said:
And what would you do with your bitcoin in case of war? When all your country power plants are destroyed, you have no access to internet?

You can always bury gold and wait for peacfull times to come.
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Kinda funny when you think about it. Spend a lot of money to dig gold out of the ground then sell it to people who bury it back into the ground.

Sprout · Nov 9, 2019

johnarb said:
You'll need more than a "few" or "some", and you'll have to crash all planes, trains and automobiles in the process, not to mention halt all bank/retail/stock markets that rely on computer systems, but hey, as long as you get your way and reset bitcoin, more power to you.

https://bitnodes.earn.com/#global-bitcoin-nodes-distribution
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Something that could use some clarifying with this graphic - it states that US has more BTC nodes than China when the sentiment is that China has most of the mining. Is there a graphic of nodes vs mining?

johnarb · Nov 9, 2019

Sprout said:
Something that could use some clarifying with this graphic - it states that US has more BTC nodes than China when the sentiment is that China has most of the mining. Is this a graphic of nodes vs mining?
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Full nodes. A full copy of the blockchain. I have a bitcoin node at home running 24/7/365 for a few years and I haven't mined since 2013. As they say, if you don't run a full node, you're relying on someone else.

Running a full bitcoin node, means you have a copy of the truth. Having said all of that, I run Electrum bitcoin light-wallet for most of my bitcoin transactions

Illini Trader · Nov 9, 2019

maxinger said:
The red line on the chart is drawn wrongly.
It should go up exponentially with time.

There are two things in this universe where supply is endless / unlimited.
and they are universe itself and crypto currency.

If demand for BTC LTC XRP ETH ... are soo strong, then go generate more crypto currencies.
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Those days have been over for some time now. It is now like trying to counterfeit US Currency.

Sprout · Nov 9, 2019

johnarb said:
Full nodes. A full copy of the blockchain. I have a bitcoin node at home running 24/7/365 for a few years and I haven't mined since 2013. As they say, if you don't run a full node, you're relying on someone else.

Running a full bitcoin node, means you have a copy of the truth. Having said all of that, I run Electrum bitcoin light-wallet for most of my bitcoin transactions
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I was thinking of spinning up a rpi based full node soon. Does having it run continuously consume a lot of bandwidth?

On a different topic, have you any experience with the lighting network atop BTC's base layer?

Illini Trader · Nov 9, 2019

Pekelo said:
Facts:

1. Because of forking Bitcoin doesn't have limited supply.
2. Bitcoin is still inflationary, 1800 new coins per day currently.
3. My shit is limited in supply and rare, yet those characteristics alone don't give it value.
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It obviously does not have any odor so that should give it great value

johnarb · Nov 9, 2019

Sprout said:
I was thinking of spinning up a rpi based full node soon. Does having it run continuously consume a lot of bandwidth?

On a different topic, have you any experience with the lighting network atop BTC's base layer?
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A full bitcoin node does consume a lot of bandwidth, although, can't say if a monero node consumes more based on observation. I run 3 nodes on my NUC, monero, bitcoin, Tezos (as I'm a baker - miner but PoS). I exceed 1TB of monthly data, good thing my internet is not capped.

Sorry, I have no interest in running lightning, as I'm not a bitcoin hodler myself. Also, not sure if an rpi is capable of running a full bitcoin node, bitcoin blockchain is 300GB right now and validating block updates does take a lot of computing, my NUC is core i5 with 16GB of RAM and SSD which is why I can run all 3 coin nodes.