And Bitcoin
Ref: http://www.wealthdaily.com/articles/eurozone-turning-to-bitc...
back
2 comments
> And Bitcoin
Given Bitcoin's "capitalisation" failed to hit even $10bn until well after the crisis [1], it's safe to say that more capital moved, in almost any single U.S. state, from stocks to corporate bonds, than from anything to Bitcoin. Being optimistic about the future of a technology is fine. Being delusional about its history is not.
Ignoring correlations to market downturns and ignoring the data is delusional https://www.google.com/search?site=&tbm=isch&source=hp&biw=1...
Bitcoin came into existence in 2009. Nobody was buying Bitcoin in 2008 because it did not exist in 2008. We don't have data to support the claim that people would rush Bitcoin amidst stock market crashes. We do have data supporting the claim that they rush into traditionally safe assets, i.e. insured bank deposits and Treasuries.
Regarding Cyprus, wealthy Cypriots--by and large--bought German and Greek government bonds, not Bitcoin.
The crash came into existence in 2008 and Bitcoin began to rise in 2009. https://www.washingtonpost.com/news/the-switch/wp/2014/01/03...
> Bitcoin began to rise in 2009
Bitcoin came into existence in January of 2009. What was it supposed to do? Start stealing its owners' money and go negative?
Also, everything rose in 2009. The S&P 500 was up 23%. Bonds were up, commodities were up...that's what happens after you scrape past a global financial meltdown. Sure, Bitcoin was up like five thousand percent, but that's the difference between a tens of millions and hundreds of billion in market capitalisation, things that are very volatile and things that are not, and venture versus mature.
Everything rose but not before everything crashed in 2009: https://www.google.com/finance/historical?cid=626307&startda...
Those who've hedged with crypto's as a trading vehicle are likely to win again during the next inevitable downturn.
AFAICT, the source you cited (dated 2013) quantifies the investors merely as 'many Spaniards', and from the grandparent's source, we know that the Bitcoin market cap around that time was around $1bn, which is not even rounding error on the scale of financial markets. You're not ignoring the data, you're imagining it.
The religiosity on the side of "traditional" assets is exactly why they missed the boat. Whenever traditional models are threatened, the pitch forks come out. The VC industry is having it's Uber-moment. The disrupters are being disrupted.
People are downvoting you, but you're not wrong. Bitcoin is legitimately seen as an alternative to gold. So it's not crazy to expect people to buy BTC when shit hits the fan in the fiat markets.
No it's not. The only people that view Bitcoin as an alternative to gold are the people buying/trading in Bitcoin. No one else is that delusional.
> Bitcoin is legitimately seen as an alternative to gold.
Bitcoin may be an alternative to gold but it is not the same.
1) Gold has intrinsic value.
2) Gold is a tangible asset.
Gold having intrinsic value is a straw man argument for it being different than Fiat currencies. Consider this thought experiment. You are going to live by yourself in the forest for a month. Would you rather have A) a weeks worth of food or B) 1 oz of gold. I think this highlights there is no intrinsic value or at least much lower than what people claim. Obviously, there is place for gold in electronics and circuitry, but aside from specialized applications, the need for gold is pretty low.
Now, I know that I've committed a straw man argument myself by using a contrived example. To that, I'll say that the only "value" one has by having gold in the real world is that other people will trade you for it. But this is exactly the opposite of intrinsic value. The value of gold being entirely fabricated by people's desire to hold it.
Gold's price is not supported by its instrinsic value, I'll give you that. But the "forest" test is absurd. By that definition computers, chemotherapy and candy have no instrinsic value.
Gold's value comes from its (a) millennia-long history of stably holding value across cultures and technological domains and (b) its tangibility and physically-enforced scarcity. Its intrinsic value is a fraction of its market value, in part because the inflated price deters lots of uses.
But point a and b in you're assessment of gold's value are two of the most common arguments for crypto, specifically bitcoin, as well.
a) crypto holders believe that the value will hold because as more individuals use it to store their net worth, the harder it will become to manipulate. ie. a history of price growth/eventual stabilization will occur in time.
b) its algorithmically-enforced scarcity, which many people believe is as valid as physically-enforced scarcity. So long as hash-based cryptography always works.
I think there's potential for cryptocurrencies to find homes in the modern financial landscape. But your counterpoint (a) is based on network effects. Distinguishing between short-term bubble behavior and long-term resilience can only be done after knocking the system with crises. Is there hope? Sure. Is it demonstrated? Absolutely not.
There is one feature gold has over Bitcoin that cryptocurrencies cannot replicate: resilience across technological domains. Gold holds value without computers or electricity. Bitcoin does not. Gold, on the other hand, cannot travel at the speed of light. TL; DR each solves different systems of trade-offs.
If we somehow get to a world without computers and electricity, I doubt gold has much value either. Water and bread though, those will be valuable.
> Gold's value comes from its (a) millennia-long history of stably holding value across cultures and technological domains
That's recursive - you're basically saying that gold has value because it has historically being valuable. Which begs the question of why it has been valuable.
I'm not saying that this doesn't add some (most, in fact) value to gold. I'm just saying that this isn't a property that is enabled by anything specific to gold.
> this isn't a property that is enabled by anything specific to gold
With money, you want five things: fungibility, durability, portability, cognizability and stability [1].
On fungibility, gold is an element. It can only be extracted, not produced in a conventional sense. In fact, before the 1669 discovery of phosphorous, humans had only purified, from oldest to newest, copper, lead, gold, silver, iron, carbon, tin, sulfur, mercury, zinc, arsenic and antimony [2].
Out of those, lead, gold, silver and mercury are chemically stable, though only gold and silver are also physically durable. Both are easy to recognize, though more metals are "silvery" in color than yellow.
Gold won due to stability, in large part because of a few flukes. For most of human history, growth was flat and gold mining was minimal. When we actually started growing, the major powers were using gold. The rate at which they added to global gold supplies happened to mirror their economic growth; this gave gold a few decades of price stability. That memory, together with the millennia of use, forged a cultural memory in the furnaces of the industrial revolution that remains, vividly, to this day [3].
> That's recursive
Cultural memories, like trust, are re-enforced by network effects. Your observation is correct. Gold got where it got, in part, due to luck and then just stuck.
Can that be replicated? Perhaps. I personally think our obsession with gold is silly. But engineering that properly means understanding why it happened in the first place. At least amongst Bitcoin enthusiasts, I come across the types of comments you see others making in this thread, as opposed to bona fide introspection and defenses.
[1] https://en.wikipedia.org/wiki/Money
[2] https://en.wikipedia.org/wiki/Timeline_of_chemical_element_d...
So what you're saying is that gold is JavaScript - it got significant early adoption because the alternatives (like VBScript) were worse, and then that just amplified until it boosted it into an unassailable position. ;)
I do admit that my forest example is absurd. I just wanted to elucidate, as you pointed out, the price isn't supported by human's necessity to survive.
Your last point brings up an interesting tangent, if gold wasn't treated as a store of value, what would its price be? Would it be similar to diamonds where synthetic ones are half the price? Are you aware of any sources that try to answer this question?
I'm not sure gold has been stable recently. it has regularly had 30-50% swings up and down over the last 10 years. recently well off it's highs.
What if trade is essential to survival, and gold checks all the marks as the medium for trade? Of course this could only be the case in a primitive society. If you believe contemporary society could revert to a primitive one, then you would be compelled to hold gold as a hedge.