> Nevertheless, investing in gold at the current price seems unwise, since its price is many times its "natural" price as commodity and so it is more likely to go down than up.
This is a misconception and a fundamental misunderstanding of gold's primary utility for thousands of years.
While it is true that gold's price reflects a significant premium beyond the "natural" market price, this has been the case for millennia. Since ancient times, most demand for gold has not been for industrial uses or jewelry, but rather as a store of a value. This results in gold having a "monetary premium".
It's also worth mentioning that it is no coincidence that humans happened to chose gold as money. Among all chemical elements, gold has a favorable combination of chemical properties and rarity in the earth's crust that make it a suitable choice for storing value over long periods of time. In fact, nearly all gold mined in human history is still around today. We've been hoarding it since the time of the pharaohs.
I'm sympathetic to crypto skepticism, but I'm afraid many people are missing the forest for the trees. I'm curious for those that still truly believe Bitcoin is a ponzi scheme or a bubble - at what price point and time would you start to consider that you may be tragically wrong?
> at what price point and time would you start to consider that you may be tragically wrong?
In theory Bitcoin can keep growing as long as people believe in it.
It has a strictly negative EV though.
* it returns no revenue
* At current mining levels, it burns about 1.8% of its market cap annually. By burns I mean literally burns energy and ASICs. (About $18 billion at current market prices)
* That’s just for mining costs. There are other costs associated with bitcoin such as costs associated with running exchanges, etc. won’t venture to guess here but it’s all in the billions. Coinbase alone had costs of about $1.1 billion in Q1
No market price changes this fundamental math. People could bid up the price to $1 million per coin and burn $360 billion per year on mining and the dynamics would be the same.
Now, what would change my mind would be some kind of use case. Currently we have money laundering, avoiding governments, etc. thin gruel
There is some interesting stuff happening with Ethereum. I don’t know if it will take off, but I at least see ways in which it could (Chainlink etc)
If bitcoin develops some kind of use case, then I’d change my view.
Right now bitcoin in economic is more akin to tourism or a church or something. It takes a bunch of economic resources to run it, but it also makes people happy, and that’s the benefit.
But don’t be mistaken: money goes in to bitcoin to be burnt (like tourism). It doesn’t generate money. That there is a number going up doesn’t change any of the dynamics laid out above. That’s just shuffling around between participants, not revenue or a use case.
Many of these same arguments apply to gold. Do you think gold is (mostly) useless today? If yes, when did it stop becoming useful? Do you think it was always useless?
When you mine gold, you get gold, and gold is nice. If we could magically make 100x the gold, that would be great! Current gold investors would be sad but it would be a win for the world.
Bitcoin mining produces heat, and maintains the bitcoin network. It doesn’t actually increase the supply of anything: the total number of bitcoins is arbitrary. The real value is whatever the network produces (happiness in its hodlers, money laundering, some future use case)
Gold’s utility is: some industrial uses, it looks pretty and has special properties, and if you had to bury some treasure for some descendants in 500 years you could reasonable figure some gold coins would probably be worth something comparable in the future, no maintenance required
That’s about it. Never been a big gold fan but those three uses seem pretty indisputable.
The people arguing for bitcoin present it as a store of value but you need a hell of a lot of costly ongoing maintenance for that. Gold would still have those uses even if all mining stopped. Without mining, bitcoin is defunct, conversely.
Edit: oh yeah, I suppose gold lets you keep some value anonymously and take it with you across borders. I think Bitcoin wins on that count but since I’m listing the uses of gold I shouldn’t omit that. There may be others I’m forgetting
Edit: Yes, you're also forgetting how cumbersome it is to transport gold, how to verify that it's real, how we live in a digital era and yet we're still being bogged down by a physical artifact to store/transport value and how if we'd have a futuristic mindset we would want something immaterial that may be future proof.
Also about the 500years thing, no i wouldn't actually trust that. Sorry to burst the bubble but gold hasn't been here that long in our hands compared to humans, and before gold we used other store of values or currencies. Many other civilizations held their value in their (then rare) tokens (see shell money, see Rai stones, (...), and all of them eventually lost all their value.
In this day and age, in 500 years i would be extremely surprised if humans, or super-humans, or human-AI hybrid, whatever, hadn't figure out how to make gold like we make a sandwich for breakfast. Gold (if still useful, and other much better materials haven't been developed by then) will be as common as Rai stones became when some cunning explorers decided to use their higher technology to transport them and make them total valueless to the tribes that used them to store value.
Gold will see it's "store of value" fate fade in not too long. It's just a matter of when. And don't get me wrong, BTC might too. I also can't imagine that in 500 years the encryption we have today won't be child's play for the future hyper-computers. But anyway, my point is that gold is nothing special in terms of store of value. We're just being bogged down right now for lack of technology, but that will come, just like it came to all the other tokens which eventually turned their value to almost 0.
Gold is bitcoin minus all the bullshit. If you'd offer me some amount of money today and would pay me in either gold or bc I'd choose gold every time. Downside is, you need to physically store it somewhere safe and accessible, but that somehow applies to your bc wallet too. Exchanges with people's money getting hacked or disappearing, people forgetting their passwords, hard drive failure, the failure modes of bc are endless. And in that scenario of the apocalypse where the government collapses and a civil war breaks loose i wanna see that idiot with his mining rig trying to power it with a solar cell, or the idiot trying to get on some form of network (let alone the internet as we know it today) to start a transaction.
Bitcoin has and only ever will have a practical use for criminals.
On the contrary, we actually need them. The people who refuse to believe Bitcoin is real are the ones whose continued drive for fiat currency will fund the UBI for everyone else. It's win-win.
Probably true. On another note, I see Impervious.ai in your post history. I've never been able to wrap my head around what they're building. If you're willing, I'd love if you could point me to any good learning resources.
I'm curious for those that still truly believe Bitcoin is a ponzi scheme or a bubble - at what price point and time would you start to consider that you may be tragically wrong?
What price would tulips have had to have attained for them to be proved "not a mania"? [1] "At the peak of tulip mania, in February 1637, some single tulip bulbs sold for more than 10 times the annual income of a skilled artisan."
Which is to say a high price by itself is not a proof of bitcoin not being bubble. I do have a criteria - bitcoin will not be a ponzi scheme if it genuinely winds up being used as currency. Of course, this wouldn't solve its other noxious problems.
Its useful to read the Social Mania & Legacy section [1] as a more modern look at 'Tulip Mania' tends to see the "historical" record of it as a post-event reaction. A recent book actually suggest that the entire thing might be BS [2]
You are correct that bitcoin is heavily dependent on miners. That said, I don't think you can simply "take away the Bitcoin miners". An excellent example of this is China's recent ban on bitcoin mining, which quickly dropped the network hash rate by >50%. Today, only a few months later, the hash rate has returned[1], and those miners are back online on the other side of the world. Don't underestimate the power of incentives.
I also think investing in gold compared to let's say stocks is a sort of ponzi scheme in the sense of OPs article. So no price point. Until bitcoin intrinsically generates value I'm not putting money in it.
I understand your concern over the lack of "intrinsic value" in the sense that it is not a productive asset generating economic value (like a business). That said, I'd really encourage you to consider that monetary value is real. I don't necessarily recommend investing in it, but there's a reason humans have valued gold for so long.
And literal cash doesn't rely upon internet connectivity to a massive global network of millions of computers in order to transfer a store of value to the dude standing next to me. As methods of payments go, it's possibly the greatest Rube Goldberg machine ever conceived.
Really cool. I've seen a lot of handwritten letter writing services, but most lack realistic variations. It's a pretty crowded market, but this definitely has potential as a spin-off service.
This is a misconception and a fundamental misunderstanding of gold's primary utility for thousands of years.
While it is true that gold's price reflects a significant premium beyond the "natural" market price, this has been the case for millennia. Since ancient times, most demand for gold has not been for industrial uses or jewelry, but rather as a store of a value. This results in gold having a "monetary premium".
It's also worth mentioning that it is no coincidence that humans happened to chose gold as money. Among all chemical elements, gold has a favorable combination of chemical properties and rarity in the earth's crust that make it a suitable choice for storing value over long periods of time. In fact, nearly all gold mined in human history is still around today. We've been hoarding it since the time of the pharaohs.
I'm sympathetic to crypto skepticism, but I'm afraid many people are missing the forest for the trees. I'm curious for those that still truly believe Bitcoin is a ponzi scheme or a bubble - at what price point and time would you start to consider that you may be tragically wrong?