Store of Value?
Gold has long been labeled a store of value.
Partly because of it's lack of "perceived" volatility.
In fact, that is one of the key differences between Bitcoin and Gold, at least according to gold bugs.
While the volatility might be slightly less with gold, check out this chart:
As you can see on the far left, that is the volatility of gold when it first started to really trade freely.
Check out the far right side of the chart, that is Bitcoin currently, which is also at the beginning stages of trading freely.
As you can see, those are some very similar looking charts.
What is most interesting is how far down Bitcoin has come down on the volatility chart as of late.
It even dipped below that of gold for a few short periods of time.
That is interesting.
Keep in mind, that I am not saying that I think that Bitcoin is a better store of value than gold, or that it will eventually be less volatile, but I do think that the longer it trades and the more hands eventually hold the coin, the volatility will most certainly come out of it.
It will be interesting to see how things unfold as time goes on.
Basically the point in all this is this...
When things are first traded they tend to be more volatile.
That, and something is a store of value simply because people believe that it is.
Right now there are a lot of people out there who would much rather sell an ounce of gold then they would sell a quarter of a bitcoin...
I would imagine some of the money currently invested in gold will find it's way into Bitcoin in the not too distant future.
Image Source:
https://seekingalpha.com/article/4104272-bitcoin-investment-decade
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Digital gold !
Really nice comparison. Also feel like the volatility isn't that crazy anymore...
Why is it a store of value? Is it beause it is finite? What if there is no application for gold or people feel they donot need gold as ornaments , then demand goes down!! Would still be perceived as store of value?
Only if people believe it is... which as you just mentioned, preferences can change. However, it has history on it's side as people have valued it for thousands of years... so there is that. :)
pocketsend:100@jrcornel, Gold has been for the ages. It will become in vogue at some point (perhaps sooner than we think).
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I think the more trade volume there is, the lower the volatility will be. Right now it takes 1 big whale to cash out to lower the price, but that is far less likely to happen when the market is as big as the Gold market. It takes more than 1 party to panic, in order to move those markets and if they do, they don't move by insanely large percentages at once.
Great point. I agree. :)
Are you guys saying that there are whales out there big enough to move the BTC market price, based on volume?
I guess in theory that is true, but I don't think in practice that is the source of volatility at current time.
I believe a big source of volatility is 24x7 trading of BTC, and you see psychology circling the globe impacting price. China/Korea/Japan are bullish or bearish on BTC one day, and then 24 hours later the US takes the opposite view. And BTC bounces up and down. And the bigger ups and bigger downs occur when both sides of globe get in sync on the psychology, and BTC and other coins go for big rides up or down.
Most of current price movements are psychology. There are no traditional fundamentals to trade on.
Someone mentioned the bigger slide in the market was caused by stop loss orders.
What we should be focused on is the fact China declared war on cryptocurrency and it barely flinched hitting at its lowest 25% decrease in prices overall and around 25 billion in lost market cap.
Which in the past 12 hours has nearly recovered from the 36 hours rollercoaster ride.
Cryptocurrency 1
China 0
Which country wants to be next?
Beercules
Very clever observation. Nice work
Thanks. Your chart observation is perceptive. I know a lot of factors go into looking at volatility but doesn't it have a lot to do with market cap size? That is one of the first things I've learned to look at with an evaluation of a crypto currency.
Bitcoin is certainly the next new INVINCIBLEGold
Very interesting comparison. Thanks!
The area that you show in the 1970's is when the US Dollar peg to Gold was abandoned by Nixon. Gold went from $35 an ounce to a spike high of $850 an ounce due to inflation issues when Carter was president.
Volcker started increasing interest rates which depressed the price of Gold for the next few decades. With the advancement in computers and HFT, the overall volatility has been somewhat diminished.
There have been massive selloff days in the bear market from 2011 to 2015 that I would classify as volitile.
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