Gold or Bitcoin, What Would You Choose as Money?
Going Back to My Childhood I was Taught Gold and Silver are Real Money.
From my earliest days I can remember having a silver coin collection. Every Christmas my relatives would give my brother and I Silver. You see, we were born in the 1970's and raised in the 80's. Up until the early 80's Gold and Silver were a preferred financial safe haven. I was luck enough to be born into a family that respected hard assets and passed that along to me.
In 2006 when the world financial markets began to show serious signs of weakness I was buying Silver and Gold. Everyone around me was buying real estate but I thought they were nuts! At the time I was living in the middle of South Tampa one of the many places destroyed financially by the real estate bubble of 07-08.
Many of you know that Gold and Silver went on a tear all the way up to 2011. I still own some but not as much as I used to. Even though the current situation looks eerily similar to 2008. I just don't want to add to my stack.
"Gold is a great way to preserve wealth but it is hard to move around. You do need some kind of alternative and Bitcoin fits the bill. I'm not surprised to see that happening." - Jim Rickards (Gold and Silver Investor)
The Birth of Bitcoin and Crypto Currency.
I always believe that when we really need something the universe delivers. When Bitcoin was born Satoshi Nakamoto developed something that the world needed even if the masses still don't understand it.
My interest in Bitcoin was born in 2011 when my former business partner and I were riding into the office. At the time Bitcoin was $11. I started learning about Bitcoin but I have to admit I forgot about it until it broke through $1,000. We looked at each other and realized we were idiots because we did not pull the trigger.
This did not stop me from learning about Crypto Currency. I began to slowly educate myself. When I sold my house in June of 2014 I took some profits and bought Bitcoin. It was a great feeling because I knew I was involved in something special. Then I made a huge mistake. Instead of taking the time to learn how to trade the altcoin markets I jumped in head first and lost my ass. My first huge blunder was buying AuroraCoin at its peak and then after losing 80% I repeated my stupidity by buying Dark Coin (Dash) at its peak. After just a few weeks I was left with DUST.
So with my tail between my legs I left Crypto Currencies for a year. One of my acquaintances knew my passion about Crypto Currency so he bought me a cloud mining pool with BitClub and asked me to just share it on social media. At the time we were still a small boutique social media agency but we had decent influence. After a few months our BitClub mining was paying off nicely and the Bitcoin spark was once again a flame.
A Meeting That Changed the Direction of Our Business.
In late 2015, Ira Miller of GitGuild reached out to me on Facebook and asked if we wanted to meet for dinner. I did not know he was an icon in the world of Crypto Currency living in my backyard. He is the founder of Coinapult. Erik Voorhees of ShapeShift was his partner. Ira asked us if we could help his wife's company Tigo CTM do some social media marketing. We agreed and we have taken on over 10 more Crypto Currency companies as clients since that time.
A Change of Mindset Occurred.
After countless meetings with Ira and other Crypto Currency users I have come to realize that Bitcoin is the new Gold. This might seem counter intuitive to some Gold investors but here are the seven aspects of money.
- Durable
- Divisible
- Convenient
- Consistent
- Possess Value
- Limited Quantity
- Long History
I Believe Bitcoin is a Safe Haven Investment.
I like Bitcoin for its use as a long term hold. I personally don't believe Bitcoin needs to be the only Crypto Currency. There are so many that have come along that are better as a currency like Dash, Bitshares and Steem. People can argue all day long about how Bitcoin should be the only one but I believe in diversifying my holdings. For me and my house Bitcoin is our Gold.
What is Your Opinion on Gold Vs. Bitcoin as Money?
Definitely you are qualified to assess your own situation since you have experience with both. But I think you would agree it is not an either/or matter. The best advice is to learn about both and why they have value. If you have a stable living condition you can keep your PMs at home in a safe, in the woodwork, behind a loose brick, someplace very, very safe and without storage costs.
However if you are traveling for years on end you will have to pay storage or go exclusively to crypto. But risk cannot be avoided; out of hundreds of start up alt coins many, many will fail and take your money with them.
Also for the time being gold is acting like fiat (due to all the paper contracts that are falsely inflating supply) and crypto is acting like gold on those currencies with limited supply. And it's also true with all kinds of wealth that you can't take it with you. Everything is subject to change.
Both. One is digital and used for every day transactions and Gold and Silver holds the energy of economical wealth and will always climb in value. One is in your mind and one you can hold in your hand. Stack them all is the best strategy in my opinion.
As you say, diversifying into a few good cryptos is a great plan. But don't get rid of your precious metals quite yet. I'm not sure how likely one of those grid disrupting solar flares is, but I'd be concerned about how the networks would hold up under one. Gold and silver might work out better for that particular type of apocalypse scenario.
If we lose electricity the last thing in our minds will be metals...
But we have blackouts and brownouts all the time all over the world. Some last for hours.
If the power or network become unreliable for any reason, you will be happy to have had some cash and metals in hand.
You will be glad to have food and water, medicine, metals will hold you back. Cash may come in handy as paper to get fire going and keep warm or cook.
Unless you are storing the metals in your house you won't have access to them if we lose electricity, and if you do have them at home and they manage to keep some value during crisis, you'd be stranded at home trying to protect your wealth.
I have to respectfully disagree. If there is a one day blackout, life doesn't become the Hunger Games. But it will make it impossible to buy food or gas, etc, with crypto. However, cash or silver will be useful.
So stack up on gold and cash in case we have a ONE DAY blackout? Why not just store little water and food instead?
I do all all the above. And it's not in case. You should look around the world. There are regular infrastructure interruptions all the time. Did you see what happened across the US on Friday?
I come from the third world, I grew up with daily blackouts so I'm not at all concerned because that's normal to me, I know what to expect. I don't have to guess what would happen...
If someone tried selling rocks to me during a situation like that I probably wouldn't be able to contain the laughter.
The US had major electrical and network disruptions on Friday. This happens.
Gold is EMP-proof bitcoin. Think about that one. :)
Bitcoin is EMP proof as well. Unless of course they EMP the entire planet all at once.
How do you get confirmations for your Bitcoin transaction in a power outage? Or simply a network outage? Or both like they had across the US on Friday?
Don't get me wrong, Bitcoin is an important development for financial freedom. But anything requiring constant power and network can and will have failures that affect massive groups of people.
All the attempts to move everyone to digital cash/credit cards in the world will have the same issues. At least with old school credit cards you could make a transaction via carbon.
This is why it is recommended to have cash, gold and silver on hand. All are EMP proof.
It would be the equivalent of my BTC going in cold storage until I can hit the network. We have all so I think we are ok.
Of course, but what about if you need groceries or gas or just to get out of dodge when a major outage happens?
I'll invest in BTC and other crypto, but cash, gold and silver will be part of my emergency planning.
Yup, still have my silver just not as much as I used to have.
Silver is difficult and expensive to get in #panama. Cheap in the states tho. And Singapore is making it easier as well. This place is a good one if you or others are interested: https://www.silverbullion.com.sg/
both! diversify! :)
Bitcoin and gold/silver both have their advantages and disadvantages. With the lack of confidence in fiat currency world-wide, there has been more acceptance of cryptocurrencies yet think the average joe still has no clue about them. There is a form of evolution happening with the way block chains are used....from bank-use, to payment transactional-use, to cloud-storage from what it originally was....a digital ledger (starting with bitcoin), and as such have made disruptive technologies such as cryptocurrencies in alignment. I'm still trying to understand it all myself but get the general idea. You also see a lot of the cryptocurrencies doing hard forks, and creating other "branch-off" currencies. You see litecoin hard-forked from the bitcoin core protocol, and others that I honestly can't keep track of. When you see a fork of ethereum and ethereum classic, sometimes it's hard to know which one, or if both will benefit. It seems many of them do soft forks using Sedgwick to improve upon their infrastructure as well. It's a very interesting time.
As for gold it has been money for 5000 years, and empires have risen and fallen with their misuse of it. I'm curious to see what silver does in the future. One thing I'd like to see is a cryptocurrency backed by gold (or alternate asset). Lots of interesting things taking place with crypto and the Blockchain.
To answer your question at this very second....I would take gold right now as it's $1284.50/usd whereas btc is around $1250/usd. When the trend reverses so would my preferences.
Neither of these are money. They are commodities that people use as a store of value. In order to be "money" you need to be able to buy things with it directly and that means closing the entire loop.
Right now there are lots of places you can "spend" bitcoin, but the fact is none of them really accept bitcoin. They accept dollars or pesos or whatever, but they let you give bitcoin to someone else who will then give them their dollars.
Money is and can only ever be worth what you can buy with it. By trying to tie to something which you believe has intrinsic value, but really only has perceived scarcity value, you detach from the marketplace entirely and you really are just hoping that someone doesn't make a breakthrough.
Aluminum is a good example of this. It used to be rare and valuable and only something the very rich could ever afford. Then we found more mines, and invented better, more efficient extraction technique and now our biggest problem with Aluminum is trying to keep it out of landfills.
There are asteroids not too far from earth. Some of these asteroids have more gold and other precious metals in them, than have ever been extracted in all of human history.
When this happens, the biggest problem we'll have with Gold is trying to keep it out of the landfills.
That's what's meant by a commodity.
Bitcoin is no better. The only thing it has going for it right now is inertia effects and first mover advantage. But DASH and ETH are eating bitcoin's lunch right now to say nothing of the 10,000 other alts.
VIVA or something like it, will make the whole argument moot anyways, since our goal is to completely close the loop on finance by removing governments and banks from the equation and putting that money back into the pockets of people. But we allow and encourage people to continue dealing in what they understand best. Their local fiat.
At the same time we encourage people within the VIVA economy to hold, trade and play with whatever currencies they want.
Excellent post though! It makes people think. I upvoted it.
Three things:
I disagree that gold and bitcoin are not money. BOTH are money. I can and have bought things with both. Just because they are exchanged for something else makes no difference. I ran a business where I took in USD but most of my expenses were in HKD and CHF so I regular converted my USD directly to both HKD and CHF. Payout was also in HKD. So did that make USD "not money"?
The asteroid example is a red herring. What has never been brought up is how insanely expensive snagging one of those theoretical asteroids could be... what if the cost of extracting the gold is only equal to or less than the value of gold itself? Until the theoretical asteroid is mined for a profit, this point is completely moot.
There has been plenty of local fiat over time... most of it is gone, but gold is still here through all those mining breakthroughs and technological inventions. Perhaps it's a pretty decent store of value after all?
No not really. If you look at historical uses of gold it was never used as money for regular folks nor was it ever used in daily commerce. It's role was mostly limited to the settlement of large accounts and debts. The primary reason for that being trust in the issuer. It's pretty damned easy to melt yellow metal into an ingot of lead. Most people don't have the skill to even distinguish fools gold from real gold, let alone actual false gold. So people just plain didn't use it in their daily lives, ergo not money.
The act of converting whatever you have in hand into whatever you need is called "negotiation". Gold has NEVER been a negotiable asset. You may have managed to trade with a person once or twice, but try going to 7/11 and buying a Slurpee with it. Try settling a debt in it even. Unless the contract was written specifically as a commodity contract, you always settle in n fiat of gold.
Fiat is money because it's always negotiable as long as the people you're trading with have their faith in the issuer.
Going back to your own example, you had to trade USD for local fiat in order to pay bills. That means that in your case USD was not money, it was an asset or commodity that you traded for actual money.
You blow this off like it's not important. But that's the real problem.
People assume that money is a thing with backing. But it's not. Money is a fungible instrument that allows you trade one asset for another without an intermediary step. You can do this because people have confidence in the issuer. Once that confidence is gone, trust is broken and even though it may have been money at one time it's no longer money.
Taking this a step further, if you look at Aluminum it too was an incredible store of value, until one day it wasn't. Gold and everything else you're trying to store value in, will eventually collapse because people have to have confidence in their ability to utilize it.
Put another way, what makes money, money and not just a store of value, is the idea that it will maintain it's purchasing power parity during the time in which you hold it. Not go up, not go down and not be subject to "subjective valuation".
In particular, money itself is not useful unless it's being used.
In short, you can think of money as a form of energy, energy to make your own will made manifest in the world. Sure you can try to hold onto Gold or anything else and hope you can trade it for money when the time is right. But it's not money, it's just an asset and it may be there for you or it may not.
I appreciate the effort you have made to explain your position. However, the only piece we agree on is that regular folks did not use gold coins. They used silver. :)
)))..и того,и другого....и по-больше..)))
Great post. Watching ad learning.
I think the best part of owning Bitcoin (or altcoins for that matter) is just the anonimity that comes alongside owning large amounts. Of course you could do the same with gold/silver/etc. but it's so much trickier, and much more difficult to process. Bitcoin is tricky to get started with, but eventually once you get the hang of it you can move around big amounts in no time. Thanks for the article @hilarski