Is the instrinsic value of Bitcoin as an insurance policy?

[tinopener]

Bitcoin is not really digital gold.

Gold has industrial and cosmetic value.

Gold as an investment competes with and forms part of a larger precious metals universe, each with their own unique industrial use, and to certain extent crossover. Litecoin is hardly digital silver in that regard.

Most people will buy real gold instead of digital gold if they can.

....however (and let's leave bitcoin/currency speculation out for now...)

Is Bitcoin merely an insurance policy against a myriad of different things we didn't realise we needed such as:

-inflation
-currency devaluation
-state intervention and confiscation?
-regulation
-the burden of owning something physical (and, lol, having to insure it)

You could argue that insurance companies don't provide a physical product or complex service.

Should we encourage this narrative and tell people that they should be spending a couple of percent of their income on Bitcoin as they do normal insurance?

[mk4]

When people say that Bitcoin is digital gold, they don't actually mean it in a way that you can use Bitcoin for jewelry and for whatever industrial use gold has. They mean it in more in a economic/finance perspective, where people buy gold as an economic hedge.

And yes, what you've listed is what's mostly Bitcoin is "promoted" for. Chamath Palihapitiya, a Bitcoin whale and a famous investor, even called Bitcoin "schmuck insurance".

“It’s the single best hedge against the traditional financial infrastructure,” Palihapitiya said in an interview Tuesday with CNBC’s Squawk Box. “Whether you support the fiscal and monetary policy or not, it doesn’t matter. This is the schmuck insurance you have under your mattress.”

“Just buy the coins. It’s a fantastic instrument,” he added.

source: https://www.cnbc.com/2019/07/09/social-capitals-palihapitiya-says-bitcoin-is-schmuck-insurance-you-have-under-your-mattress.html

As for telling people to buy Bitcoin, I personally really don't like telling people what to do with their money(mostly in person), but you do you mate.

[xcaret]

I agree ,gold bullion, or coins , either, when in my possession give me a secure feeling .
I consider it a long term investment that I can sleep easy knowing I have it in my possession.

 Bit Coin ,on the other hand ,to me is more of a gamble . I might hit the jackpot ,as I'm sure many have done with these bitcoin highs .

I bought gold in 2017 at around $1,650 and Friday it was around $2,450 Cad. I see it dropping today and yesterday .

The folks holding bit coin must be getting nervous about the price drop today   
 I was reading about bitcoin being an easy thing to take in and out of the countries that only allow $10,000 US   Above that it must be reported , the article said Maple leaf One ounce gold coins have $50 stamped on then as face value  . We all know they are worth more than that ,but Canadian customs see them as $50.00 .

Old gold coins are considered collector coins and are not valued at the face value .

By this way of looking at it you could bring in 199 one ounce gold coins for a face value of $9950.00 a shade under the $10,000 limit .hmmm 199 x 2450 = $487550 .
I'm sure they would be asking questions , but it was an interesting article written by a tax Lawyer.   

[tinopener]

I agree ,gold bullion, or coins , either, when in my possession give me a secure feeling .
...

The folks holding bit coin must be getting nervous about the price drop today   

...

Old gold coins are considered collector coins and are not valued at the face value .

Yep, I've always had gold as a hedge, but in ETFs and mining companies. I can't be bothered holding it physically as at least here in the UK we'd probably be in bigger trouble if we needed to rely on that.

Gold itself pumped more or less around the time of the last 2 big stock market corrections of 2015 and 2018, and big drops too, so it is still the same rollercoaster of Bitcoin.

Actually, just looking at the charts, the 2018 gold rally continued right up until the latest bitcoin rally. Hmmm, must be crosswinds of stock market and bitcoin there.

Yes, and a fresh, sweet looking gold nugget is worth more than the melt price.

Ultimately, what I'm trying to say though is we need to build on the narrative of Bitcoin as digital gold into something more all purpose.

[muenze]

Still with real physical gold its just a metal. If everyone agreed a stone should be valued at $10 and you could build things with it, doesnt mean there is a true value.

With Gold its just that alot of people THINK its got a value. Because its somewhat limited. Even tho they say inside the earth theres 1000x more gold than we have now and the universe is full of gold.

So its not that different from Bitcoin which is also useful. Like try send gold to your relatives at other side of world or even carry large amounts of gold with you.

Just because you can feel gold in your hands doesnt mean it has a value. You can feel a stone or cow dung in your hand too.

Throughout history people have used different things for trade.

[xcaret]

I wish more retail stores accepted bit coin. I read on here that you can get some  exchanges to issue you a credit card that you can use at atm's  ( I  forget ,but probably in retail stores too) .

Here in Canada last week when I was trying to cash my bitcoin ($2200 ) . the exchanges were all being blocked at the Canadian banks . they don't allow clients to send or receive cash transferrers from crypto exchanges . 

If I had an account at a US  exchange ,and an atm card , I first would pay the exchange with Money I converted from Canadian into US ,and be charged a service fee. Then the % the exchange chares me . next comes what ever % the credit card charge ,then when I buy something here in Canada ,or withdraw from an atm machine ,I am being charged another % for the service of converting us funds into Canadian funds . Sounds like each % is gradually nibbeling away at any gains my bitcoin make .
 
On top of that ( I'm getting a bit carried away here, but it's true) The exchange are under the regulations of KYC ( know your client) DOSOF ( documents of source of funds) anf FINTRAC ( financial tracking ) all this is for the Government to be sure you pay income tax on your gain.

That's the law ,and I don't suggest avoiding it , I am merely mentioning all the % everyone is getting .

Once again I wish more retail stores accepted bit coin , not just escorts and illegal drug and gun sellers . 

[Wexnident]

Bitcoin is not really digital gold.

Gold has industrial and cosmetic value.

Gold as an investment competes with and forms part of a larger precious metals universe, each with their own unique industrial use, and to certain extent crossover. Litecoin is hardly digital silver in that regard.

Well you're comparing Bitcoin to a physical entity, after all, of course, you'd have a lot of contrasting issues about it. Bitcoin is a digital cryptocurrency, so honestly, whats the point in comparing it to a physical asset when their platforms are different in the first place (digital and physical).

On the other hand, their purpose could be said to be the same, as a safe asset, they don't or at least, safe from, the depreciating value of the dollar after all. And honestly, if people actually wanted to avoid the depreciation of the dollar (on the situation that they could that is), they would have already.

[avikz]

Is Bitcoin merely an insurance policy against a myriad of different things we didn't realise we needed such as:

-inflation
-currency devaluation
-state intervention and confiscation?
-regulation
-the burden of owning something physical (and, lol, having to insure it)

You could argue that insurance companies don't provide a physical product or complex service.

Should we encourage this narrative and tell people that they should be spending a couple of percent of their income on Bitcoin as they do normal insurance?

Bitcoin is neither an insurance policy nor an investment! However, it's a free world so an individual has a choice to consider bitcoin as per their own will. Some considers it as a currency and a large percentage of users consider it as an investment. But it's their own will and since bitcoin is not owned by anyone, they can continue to do so! That doesn't mean that the purpose of bitcoin has changed! It's just the user's perspective and nothing else!

Again you are free to promote it the way you want! You can promote it as an investment, insurance or currency! But always look at the flipside of doing this and act accordingly! For me, no involvement of intermediary in a payment system is enough for me to jump into this market. But different people have different preferences!

[tinopener]

Again you are free to promote it the way you want! You can promote it as an investment, insurance or currency! But always look at the flipside of doing this and act accordingly! For me, no involvement of intermediary in a payment system is enough for me to jump into this market. But different people have different preferences!

Thanks. By the way, I'm not a bitcoin evangelist at all. I have about 10% crypto as part of a diversified portfolio, including gold.

I honestly bought bitcoin purely as a long term gamble, and for none of the noble or interesting reasons thus far stated.

I just enjoy discussing and imagining the way it will go in the future as an asset class, and to debunk the myth it has no intrinsic value.

It's almost like general purpose glue: someone in Canada might receive it as a payment and end up selling it to someone in Argentina who can't buy dollars in order to hedge against their currency.

[sujon5]

Bitcoin is not really digital gold.

Bitcoin is called digital gold because of it limited supply, not "the essence of its value".

[tinopener]

Bitcoin is not really digital gold.

Bitcoin is called digital gold because of it limited supply, not "the essence of its value".

Just on a philosophical point though...

What about Litecoin being digital silver?

Isn't Litecoin just diluted Bitcoin, and not something completely different like silver is to gold?

[davis196]

Is Bitcoin merely an insurance policy against a myriad of different things we didn't realise we needed such as:

-inflation
-currency devaluation
-state intervention and confiscation?
-regulation
-the burden of owning something physical (and, lol, having to insure it)

Do you think that we really need inflation,currency devaluation and state intervention?
Bitcoin is NOT an "insurance policy" agaisnt regulation.The crypto companies are regulated and they will be regulated even more in the future.
The "burden of owning something physical" can be said about owning a cold wallet or your private keys being written down on a piece of paper.
Bitcoin is a risky investment,not an insurance policy.

[mk4]

Just on a philosophical point though...

What about Litecoin being digital silver?

Isn't Litecoin just diluted Bitcoin, and not something completely different like silver is to gold?

Litecoin's "silver to Bitcoin's gold" has got to be one of the worst selling points of an altcoin. Gold and silver as metals has their own different use-cases, while litecoin is pretty much just a less-secure, more centralized, and faster(due to bigger blocks and faster block time and far less adoption) alternative. Imo, litecoin's pretty much just a sort of live testnet.

[tinopener]

bitcoin is not similar to insurance at all.
Does insurance risky??? bitcoin does

Bitcoin is only very risky if you don't hold it as part of diversified portfolio.

Of course insurance is risky, if you don't fill the forms in correctly.

There is also a risk that nothing bad happens to you and you end up spending a lifetime of premiums with no payout

(Just playing devil's advocate BTW, to show that there are things out there with a perceivably similar intrinsic value to Bitcoin.)

[BlackHatCoiner]

I have made this discussion in the past, with another forum member. Bitcoin has been characterized as gold, not because of its industrial and cosmetic value, obviously, but for the fact that the owner is responsible for his treasure. No one, except him, can transfer the funds.

Is Bitcoin merely an insurance policy against a myriad of different things we didn't realise we needed such as:

-inflation
-currency devaluation
-state intervention and confiscation?
-regulation
-the burden of owning something physical (and, lol, having to insure it)

Well, yes, bitcoin did make people realize the disadvantages of all these, but I would say that it made human freer. I really don't want to pay anything with credit card or paypal anymore, I have my decentralized currency that no one can intervene on my willing. This is very important and most of the people who buy bitcoins haven't realized it yet.

Privacy and personal responsibility for your funds. I don't understand why a bank should be responsible for my own wealth.

Should we encourage this narrative and tell people that they should be spending a couple of percent of their income on Bitcoin as they do normal insurance?

We should explain them what it is, IMO. Then, they can make their own assumptions.

[jseverson]

Should we encourage this narrative and tell people that they should be spending a couple of percent of their income on Bitcoin as they do normal insurance?

Sure, but that's a very roundabout way of simply saying it's a hedge against traditional finance lol.

Either way, I'm not too sure how well received a take like this would be, considering most people wouldn't even believe that the traditional financial sector is at risk; compare that to property damage, illness, etc. which actually happens on a daily basis around the world.

I think the number of people who actually believe that Bitcoin is even a hedge against traditional finance should also be put into question. Most people I see around the internet are more casual investors than cypherpunks, and even the recent wave of institutional investors themselves are big players in traditional finance. I definitely think the ideology has merit, but it's likely not the selling point some people seem to think it is.

[coinycoiny]

Its a bit like Trump, with hindsight you wonder how he ever became president, but at the time lots of people believed in him.

In time people will realise that bitcoin was all hype, spread by those holding coins.

[jademaxxiss012]

When people say that Bitcoin is digital gold, they don't actually mean it in a way that you can use Bitcoin for jewelry and for whatever industrial use gold has. They mean it in more in a economic/finance perspective, where people buy gold as an economic hedge.

And yes, what you've listed is what's mostly Bitcoin is "promoted" for. Chamath Palihapitiya, a Bitcoin whale and a famous investor, even called Bitcoin "schmuck insurance".

“It’s the single best hedge against the traditional financial infrastructure,” Palihapitiya said in an interview Tuesday with CNBC’s Squawk Box. “Whether you support the fiscal and monetary policy or not, it doesn’t matter. This is the schmuck insurance you have under your mattress.”

“Just buy the coins. It’s a fantastic instrument,” he added.

source: https://www.cnbc.com/2019/07/09/social-capitals-palihapitiya-says-bitcoin-is-schmuck-insurance-you-have-under-your-mattress.html

As for telling people to buy Bitcoin, I personally really don't like telling people what to do with their money(mostly in person), but you do you mate.

agree in some point bitcoin could be compare to gold due to the fact that both gold and bitcoin are an asset and has a good value over a period of time. However, bitcoin is different and unique compared to gold because its market is being dictated by the bitcoiners. So, whatever bitcoiners do to bitcoin like holding it for keeping then high chances that bitcoin market will be doing bullish or bitcoin will beocme expensive and it will be the opposite if bitcoiners will going to sell ther bitcoin.

[tranthidung]

Bitcoin used to be called as a virtual currency and as the definition of 'virtual', it restricts the access to bitcoin. People don't want to buy a virtual thing, they want something is real, touchable, etc. Governments like the word virtual due to its helpfulness to fear people.

Bitcoin has its intrinsic value that is only defined by the cost to mine it. Personally, I consider bitcoin's intrinsic value is made up of 2 parts: mining cost, and belief cost. Belief cost is regarding to belief that governmental financial economies will be collapsed soon or later. It also relates to the belief to the fixed total supply, deflationary circulating supply curve.

As insurance policy, it is different. Bitcoin is volatile and you can not use it as an insurance if the unit for trading (or other activities) is not bitcoin. Fortunately, for companies that use bitcoin as a standard currency for their operational cost, service cost on customers, staff salary, etc. Bitcoin can merely be used as an insurance asset.