Hey Jesspeculators
I often find it strange that gold bugs and Bitcoin bugs have so much hate for one another when they say the same thing. They want to return to hard money principles. Now the idea is something we all agree on, but the implementation is completely different. Gold is an analogue tool; it is heavy, it is hard to mine, it's costly to find and create, and it reduces ones ability to manufacture money out of thin air, but it doesn't stop it completely.
Going for Gold
You see, if gold prices were to shoot up to Bitcoin levels, everyone and their grandmother would be trying to mine this stuff, looking for it and trying their best to dilute the supply. Gold cannot be destroyed, so there are probably tons lost somewhere, on the earth, in the ocean, and we cannot really account for the supply.
Backing for Bitcoin
Bitcoin, on the other hand, is a digital asset; it can be destroyed by losing your keys; there is never going to be more than 21 million. There are tonnes lost; the supply cannot be changed or diluted when the price increases due to the difficulty adjustment.
Stock to flow
Now the reason I bring up supply is that it's a major factor in the price of an asset; the more the supply, the lower the value...in theory.
The Stock to Flow (S/F) Ratio is a popular model that assumes that scarcity drives value. It is defined as the ratio of the current stock of a commodity and the flow of new products and is applied across many asset classes.
So gold roughly increases its supply by around 2% a year while Bitcoin's inflation rate is around 1.76%, so yes, in both regards, buyers are being diluted. But with Bitcoin, we know the full dilute rate is 21 million; with gold, we don't know; it could be higher than the numbers we have now or lower.
If we consider money supply alone, South Africa's money supply grows at around 12% a year while the US is reported to be around 15% a year, averaging the current rates.
So, in theory, if you're getting out of cash's stock to flow and you're getting into gold or bitcoin, you're getting into something with a lower ability to dilute its value.
Bitcoin versus gold
Gold has a 5000-year history while Bitcoin has 1 decade and some change under its belt, but if we compare the two over the last 8 years, we can see that in terms of price, Bitcoin is crushing the gold market if we only factor on scarcity. In 2013/14 1 Bitcoin got you around 3 ounces of gold; today, it's around 32, having hit an all-time high of 33 ounces.
If we look at this chart in isolation, we can see that gold is actually breaking down against Bitocin by a factor of 10 over a space of 8 years. Bitcoin is about less than one-tenth of the golds reported market cap and has some way to go to reach that 12 trillion level.
So there's room to catch up and grow, and with new money supply created all the time, there's plenty of fiat around to bid up both assets.
Bitcoin has already shown that it can take on gold, so how will this play out when Bitcoins inflation is cut in half once again?
Gold along with bonds have been euthanised
I am not saying gold is a rubbish investment; I am just comparing the numbers. I do think gold also gets a bad rap because, like bonds, it has been euthanised. Gold and Bonds were the systems way of regulating value, but with the paper markets of gold contracts increasing the "supply of gold" by a factor of many times its supply and no one taking claim on their gold banks and governments have been able to suppress the price of gold.
This way, they keep confidence in the value of their currency; I mean, if gold were t be $5000 or even $50 000 you can be sure citizens would be foaming at the mouth trying to get out of fiat or even insist on being paid in gold.
Have your say
What do you good people of HIVE think?
So have at it, my Jessies! If you don't have something to comment, "I am a Jessie."
Let's connect
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Thank you very much for the exchange ,have a good day and a great mood
You too thanks for the support
interesting and informative article, thank you for sharing
Pleasure glad you enjoyed it
Historically, gold has probably been the best asset to buy. I think Bitcoin's going to take its place now that we have computers.
We valuing digital things more and more from games and websites to apps and data so to me it only makes sense that it would eventually move into having its own money to value all the work done online
Gold is not a man-made asset ,but Bitcoin was created by man.
Yes but is pulling it out of the ground, smelting it and moulding it not "man made"? We give gold value by a range of processes both manufactured and administerative! So I don't see how that differentiates the two assets
Bitcoin is good for short-term potential gain and Gold good for long term gain.
I think they are both part of building a good portfolio I just think that as we move to a more digital world, a digital store of value and exchange is going to be important! The payment systems on the internet are still pretty backwards
Off topic but sometimes you know more then me - about my own country. You asked me some some days ago if we had some Jerusalema-challenge in Sweden. I did not know what you were talking about.
Today I scroll at Facebook and saw.....my local foodshop doing exactly this, Soon you know what I am eating too...
LOL I told you, well I saw a friend who moved to Sweden post about it going all over the country so I thought I’d ask!
Yes Now I understand. Its like water bucket challenge but this is most for companies.
This post about gold reminds me of the old generation, always trying to catch up a little money to buy gold. There are still a lot of women investing(...) in gold jewelry, hoping that it will retain /increase its value. There is a whole mentality about gold which is hard to wash away out of the old generation.
I think Indians are the biggest holders of gold for jewellery or something like that, can't remember where I heard it. I can understand the appeal of being able to hold something and touch it if you're from the old guard but the new age kids value digitisation, and thats's not going to change. This is probably the biggest generational shift in while and that's why it feels so different, we're used to passing things on like someone would pass wealth on to a family member, but this time its not being passed on its being rebuilt
Yes they are. In here we have gypsies, who are hoarding gold like hot cake lol. The lack of financial education is what makes people cling to their old ways. Gold gold gold....
Limited availability and transparency are two factors which make bitcoin more stronger.
People will start realising this soon and there will be more and more people investing in bitcoin.
I want to see more than jusy investing in bItcoin I want to see people getting paid in Bitcoin fully or partially. I want to see people settle contracts in Bitcoin! I want to see it used more than jusy HOdl and I think we getting closer and closer each yearb
Gold can be aquired for a long period of time,Bitcoin is just for a short period of time.
That's based on previous history as of the last halving it's harder to acquire a Bitcoin than gold! Bitcoins inflation rate is lower than that of gold
a bit irrelevant but when i read the post about gold and saw some pictures as well i remembered back in the steemit days, some guys had giveaways of free gold and silver coins :p
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Lol well if people start giving away gold I'm happy to take some off their hands at this point! It may help me hedge my long BTC position
Gold is a different type of asset class that will hold value for time to come, Bitcoin was developed, is not a tangible asset class where value will be determined by the user.
@tipu curate
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I think they both useful to have my issue with gold is it’s only a protection asset I can’t access lending markets the way I can with Bitcoin and I can go out and get interest on it
If I had a lot of wealth I’d sure store some of it in gold but I want to make my assets work hard over time.
Perhaps we’ll see gold be tokenised eventually I just don’t know how you would manage supply and would the bid it up to the moon destroy the paper markers
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Since paper money was no longer backed by gold it has only made governments and print presses "richer", it is worthless paper with fancy trimmings.
Store of value is in technology behind digital which will come into fruition depending on use.
Gold became valuable due to social construction with man enjoying the shiny metal historically.
Buyer/Seller is where value is held, people will decide, a bit of both makes a better package if one is able today.
Moving forward into future is going to be interesting how we trade.
Thing has shifted a lot since the technology develpment and also the internet era, especially now with the crypto boom.
Since it a bit harder to store gold, people will maybe shifting to bitcoin as a store of value. We just need a stable price where poeple don't really see much of the value fluctuation. And yeah bitcoin is a new era of gold.
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I think "stability" only comes around the 10 trillion dollar market cap level so there's enough voluble to maintain price rangers with little slippage
I am developing a community on Hive called #bitsocial
It is a place for cryptocurrency afficianados to meet and talk bitcoin.
But it is soon to become a frint page on Hive where you can blog on Hive,but earn Bitcoin. But first I need to build the community and then pay for the front end development. So I hope you will join me there, blog and engage through comments to help build something new. We are in the first stages, but like every journey, thats where it begins. #bitsocial