Does much of gold's market cap eventually go to Bitcoin?

[Melbustus]

I consider bitcoin to be mostly a monetary superset of gold. I use the word "mostly" because bitcoin is not physical, is (currently) not recognizable by the general population, and cannot serve a purpose in a non-electronic society scenario.

But obviously it has all of gold's other qualities (the ones that provide most of gold's inherent utility/value), and usually does them better (eg, divisibility, known/limited supply, durability, etc). Plus totally new, and desirable, qualities (transactability, etc).

So....in the rosiest of scenarios for bitcoin and humanity (ie, still a coherent civilization that involves electronic technology, no big flaws found in bitcoin, etc), does bitcoin simply replace gold since it's inherently more desirable in such a world....ie, some corollary of Gresham's law in play...?


(please note that for the purposes of this question, I'm pre-supposing that there's been no 51% attack, gov hasn't killed bitcoin, protocol is still solid and scales ok, etc, etc...)

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[kangasbros]

Not in the very near future. It is very hard for an average Joe to start believing in bitcoin, while gold is physical and something that is easy to understand. Bitcoin is too difficult concept.

And even then, there will probably be many competing cryptocurrencies/virtual currencies in the future.

[Hexadecibel]

There are many competing cryptocurrencies now, but none of them offer anything more than what bitcoin offers, and arguably bitcoin has more support and developers.

Bitcoin will have real competition once a cryptocurrency emerges which offers a service bitcoin could not fulfill. Honestly I don't see that happening as bitcoin is able to evolve and improve.

[n8rwJeTt8TrrLKPa55eU]

There are basically two kinds of "large holders"of gold.  Government entities (central banks) and rich private parties (e.g. Kyle Bass).

Would love to be proved wrong, but I don't think central banks will be selling gold to add Bitcoin reserves anytime soon, I don't think they would want to willingly give it any legitimacy.

Private large gold holders, however, are another matter.  If their reasons to hold gold are to protect against oppressive government actions and  scenarios like a collapse in the financial system, then I predict they will eventually exchange some percentage of their gold hedge for Bitcoins.  Why?

Because if you assume an oppressive surveillance state, the gold hedge potentially fails under several plausible scenarios: confiscation orders, windfall taxes, x-ray border controls, and so on.

If the stormtroopers break down your door with metal detectors in hand, only Bitcoin is both pseudonymous and intangible enough to give you a chance of hiding your wealth or escaping with it across borders.  Big money will figure this out (if it hasn't already) and act accordingly.  Offshore accounts used to be a solution for this scenario, but recent events have proven that banks will give up their clients if pressured hard enough.

Think big.  Bitcoin is a fantastically good diversifier/insurance for multimillionaires and billionaires.  Once Bitcoin starts being marketed properly as "ultimate disaster insurance" to private wealth portfolios, its price will go to unimaginable heights.

[Melbustus]

There are basically two kinds of "large holders"of gold.  Government entities (central banks) and rich private parties (e.g. Kyle Bass).

Would love to be proved wrong, but I don't think central banks will be selling gold to add Bitcoin reserves anytime soon, I don't think they would want to willingly give it any legitimacy.

Private large gold holders, however, are another matter.  If their reasons to hold gold are to protect against oppressive government actions and  scenarios like a collapse in the financial system, then I predict they will eventually exchange some percentage of their gold hedge for Bitcoins.  Why?

Because if you assume an oppressive surveillance state, the gold hedge potentially fails under several plausible scenarios: confiscation orders, windfall taxes, x-ray border controls, and so on.

If the stormtroopers break down your door with metal detectors in hand, only Bitcoin is both pseudonymous and intangible enough to give you a chance of hiding your wealth or escaping with it across borders.  Big money will figure this out (if it hasn't already) and act accordingly.  Offshore accounts used to be a solution for this scenario, but recent events have proven that banks will give up their clients if pressured hard enough.

Think big.  Bitcoin is a fantastically good diversifier/insurance for multimillionaires and billionaires.  Once Bitcoin starts being marketed properly as "ultimate disaster insurance" to private wealth portfolios, its price will go to unimaginable heights.

Some interesting points. Next question then is: How much privately held gold is there? Well, I believe it's estimated that about 150,000 tons have been mined to date, and it looks like governments directly control about 30,000 tons (http://en.wikipedia.org/wiki/Gold_reserve). So, 120,000 tons in private hands. Interestingly, according to that wikipedia page, about 50% of the world's gold exists as jewelry. This is a need bitcoin cannot fill that I hadn't considered.

[FreeMoney]

There are basically two kinds of "large holders"of gold.  Government entities (central banks) and rich private parties (e.g. Kyle Bass).

Would love to be proved wrong, but I don't think central banks will be selling gold to add Bitcoin reserves anytime soon, I don't think they would want to willingly give it any legitimacy.

Private large gold holders, however, are another matter.  If their reasons to hold gold are to protect against oppressive government actions and  scenarios like a collapse in the financial system, then I predict they will eventually exchange some percentage of their gold hedge for Bitcoins.  Why?

Because if you assume an oppressive surveillance state, the gold hedge potentially fails under several plausible scenarios: confiscation orders, windfall taxes, x-ray border controls, and so on.

If the stormtroopers break down your door with metal detectors in hand, only Bitcoin is both pseudonymous and intangible enough to give you a chance of hiding your wealth or escaping with it across borders.  Big money will figure this out (if it hasn't already) and act accordingly.  Offshore accounts used to be a solution for this scenario, but recent events have proven that banks will give up their clients if pressured hard enough.

Think big.  Bitcoin is a fantastically good diversifier/insurance for multimillionaires and billionaires.  Once Bitcoin starts being marketed properly as "ultimate disaster insurance" to private wealth portfolios, its price will go to unimaginable heights.

Some interesting points. Next question then is: How much privately held gold is there? Well, I believe it's estimated that about 150,000 tons have been mined to date, and it looks like governments directly control about 30,000 tons (http://en.wikipedia.org/wiki/Gold_reserve). So, 120,000 tons in private hands. Interestingly, according to that wikipedia page, about 50% of the world's gold exists as jewelry. This is a need bitcoin cannot fill that I hadn't considered.

Oh yeah? I'm gunna sign something with a key holding 1000 coins and wear the message on my shirt. BLING

Someone needs to make an iphone app "BLING verifier"

[Melbustus]

There are basically two kinds of "large holders"of gold.  Government entities (central banks) and rich private parties (e.g. Kyle Bass).

Would love to be proved wrong, but I don't think central banks will be selling gold to add Bitcoin reserves anytime soon, I don't think they would want to willingly give it any legitimacy.

Private large gold holders, however, are another matter.  If their reasons to hold gold are to protect against oppressive government actions and  scenarios like a collapse in the financial system, then I predict they will eventually exchange some percentage of their gold hedge for Bitcoins.  Why?

Because if you assume an oppressive surveillance state, the gold hedge potentially fails under several plausible scenarios: confiscation orders, windfall taxes, x-ray border controls, and so on.

If the stormtroopers break down your door with metal detectors in hand, only Bitcoin is both pseudonymous and intangible enough to give you a chance of hiding your wealth or escaping with it across borders.  Big money will figure this out (if it hasn't already) and act accordingly.  Offshore accounts used to be a solution for this scenario, but recent events have proven that banks will give up their clients if pressured hard enough.

Think big.  Bitcoin is a fantastically good diversifier/insurance for multimillionaires and billionaires.  Once Bitcoin starts being marketed properly as "ultimate disaster insurance" to private wealth portfolios, its price will go to unimaginable heights.

Some interesting points. Next question then is: How much privately held gold is there? Well, I believe it's estimated that about 150,000 tons have been mined to date, and it looks like governments directly control about 30,000 tons (http://en.wikipedia.org/wiki/Gold_reserve). So, 120,000 tons in private hands. Interestingly, according to that wikipedia page, about 50% of the world's gold exists as jewelry. This is a need bitcoin cannot fill that I hadn't considered.

Oh yeah? I'm gunna sign something with a key holding 1000 coins and wear the message on my shirt. BLING

Someone needs to make an iphone app "BLING verifier"

Please note that I'm considering "eventually" here to mean decades; ie, several generations. It's a theoretical discussion.

[n8rwJeTt8TrrLKPa55eU]

Interestingly, according to that wikipedia page, about 50% of the world's gold exists as jewelry. This is a need bitcoin cannot fill that I hadn't considered.

I must concede that for ornamentation purposes and female appeal, physical metals are likely to always have an edge over Bitcoin.  At least until Casascius strings together a bunch of coins and starts producing necklaces

Either way I think the thread title's assumption is wrong, demand for Bitcoin won't necessarily imply migration from gold, I think demand will be additive and both will continue to go up because they address different scenarios and have different risk profiles.  They complement each other beautifully.  And that hybrid 1oz gold/1000 BTC coin Casascius produced embodies the synthesis very elegantly, the premium over spot is more than I feel comfortable paying but I think I will eventually regret never having bought one:

Now Here: Casascius 1000 BTC Fine Gold Coin
https://bitcointalk.org/index.php?topic=54845.0

[Melbustus]

I must concede that for ornamentation purposes and female appeal, physical metals are likely to always have an edge over Bitcoin.  At least until Casascius strings together a bunch of coins and starts producing necklaces

Either way I think the thread title's assumption is wrong, demand for Bitcoin won't necessarily imply migration from gold, I think demand will be additive and both will continue to go up because they address different scenarios and have different risk profiles.  They complement each other beautifully.  And that hybrid 1oz gold/1000 BTC coin Casascius produced embodies the synthesis very elegantly, the premium over spot is more than I feel comfortable paying but I think I will eventually regret never having bought one:

Now Here: Casascius 1000 BTC Fine Gold Coin
https://bitcointalk.org/index.php?topic=54845.0

I think they're minor compliments, but mostly substitutes (again, under the pre-conditions outlined in my initial post). To re-state: the primary value/utility of gold comes from core monetary properties, which bitcoin also possesses...but better. You raise some interesting points about super-oppressive state scenarios ("confiscation orders, windfall taxes, x-ray border controls, and so on"), but I think that's 2nd order to why people primarily own gold (inflation hedge). Thus, in my opinion, they're mostly substitutes.

Long-term, that is. Short term (the next couple decades), you're probably right in that they'll be used as compliments. But in the long-run, the better money should win out unless humanity goes down some road where the currently 2nd order properties take on primary importance.

[ElectricMucus]

Some interesting points. Next question then is: How much privately held gold is there? Well, I believe it's estimated that about 150,000 tons have been mined to date, and it looks like governments directly control about 30,000 tons (http://en.wikipedia.org/wiki/Gold_reserve). So, 120,000 tons in private hands. Interestingly, according to that wikipedia page, about 50% of the world's gold exists as jewelry. This is a need bitcoin cannot fill that I hadn't considered.

Oh yeah? I'm gunna sign something with a key holding 1000 coins and wear the message on my shirt. BLING

Someone needs to make an iphone app "BLING verifier"

That would be about as appealing as idk, wearing bank account number around your neck. But if you really think you gonna set a trend with that - go ahead and do it. You could be the biggest supplier for bitcoin bling.... And I even think if there is another, much larger bitcoin bubble some people ought to do it...  

Of course the irony would be if the thing then contains any gold in the physical form in the first place, like at least the gold contacts if not the casing 

[deeplink]

Not in the very near future. It is very hard for an average Joe to start believing in bitcoin, while gold is physical and something that is easy to understand. Bitcoin is too difficult concept.

I used to think that the concept would be too difficult for an average Joe.

But if you consider the complexity of the current monetary system, almost nobody I know cares about that when they use it.

So I am starting to believe that can happen with Bitcoin too. Once Bitcoin becomes more easy to use and mainstream will see that it works and that they can actually buy things they need with it, they won't be thinking about the concept. That will only be of interest to a relatively small number of geeks.

[benjamindees]

Next question then is: How much privately held gold is there? Well, I believe it's estimated that about 150,000 tons have been mined to date, and it looks like governments directly control about 30,000 tons (http://en.wikipedia.org/wiki/Gold_reserve). So, 120,000 tons in private hands. Interestingly, according to that wikipedia page, about 50% of the world's gold exists as jewelry. This is a need bitcoin cannot fill that I hadn't considered.

Remember, some portion of that has been consumed.

To answer the question, though, I think 10% of private gold is a reasonable maximum.

[HeavyMetal]

I would say so far bitcoin has had about 0% effect on gold capitalization.

Really, we have been using gold for 6000 years, bitcoin for 3. While bitcoin has done a wonderful job in decentralizing its counterparty risk, it still has counterparty risk in that it relies on multiple existing infrastructures like the bitcoin network, the internet, and the power grid.

With gold you can trade where there is no internet connection and no computers. It can be instantly identified by its very high density without the need for mind boggling math, and it can be explained to a 3 year old.

Gold is not just for governments and rich people. Common folk like me can buy it up a little bit at a time. I have a couple dozen oz and as such I get to hold my wealth just like the big boys do.

I am pretty sure gold will be the go to commodity for the very wealthy until such a time as transmutation of atoms because cost effective.

[n8rwJeTt8TrrLKPa55eU]

I'm reposting Gengix's insightful reworking of Exter's pyramid from another thread.  Gold and Bitcoin are two banks of the same river, one is in the tangible realm, the other in the intangible, but ultimately their methods and purpose are very similar.  

Smart people will hold both, because as people have pointed out in this thread, each has advantages under different scenarios.  

As such, it could be argued that in the very long term (100s of years), prudent savings might be typically allocated along a 50/50 split of gold and BTC.  But that doesn't necessarily mean gold is going to drop in price; if you believe that the current financial system is largely a ponzi scheme destined to evaporate, then the amount of money that will flow from overvalued paper instruments into gold over the coming decades will likely far exceed any money moving from gold to Bitcoin.  I base this statement on my own experience: my Bitcoin holdings have been obtained not by selling any gold I owned, but by converting some of my paper holdings.  It's a type of Gresham's Law at the individual level.

[ElectricMucus]

Nice diagram 

[conspirosphere.tk]

So....in the rosiest of scenarios for bitcoin and humanity (ie, still a coherent civilization

As a savage, I find any talk of civilization very offensive

durability

Not much durability compared to gold: any SHTF event (from an EMP to coffee spilled on a notebook could mean disaster for noobs), not to speak of the next trendy p2p money which may take off any time.

does bitcoin simply replace gold since it's inherently more desirable in such a world

I will believe that when Indian, Chinese and Arabs forget about gold to buy just Bitcons

[niko]

That would be about as appealing as idk, wearing bank account number around your neck. But if you really think you gonna set a trend with that - go ahead and do it. You could be the biggest supplier for bitcoin bling.... And I even think if there is another, much larger bitcoin bubble some people ought to do it...  

Of course the irony would be if the thing then contains any gold in the physical form in the first place, like at least the gold contacts if not the casing 

Never underestimate primal urges: http://en.wikipedia.org/wiki/I_Am_Rich

If Bitcoin ever gains traction, there will be idiots displaying their public address barcodes to show how loaded they are.

[Gyrsur]

That would be about as appealing as idk, wearing bank account number around your neck. But if you really think you gonna set a trend with that - go ahead and do it. You could be the biggest supplier for bitcoin bling.... And I even think if there is another, much larger bitcoin bubble some people ought to do it...  

Of course the irony would be if the thing then contains any gold in the physical form in the first place, like at least the gold contacts if not the casing  

Never underestimate primal urges: http://en.wikipedia.org/wiki/I_Am_Rich

If Bitcoin ever gains traction, there will be idiots displaying their public address barcodes to show how loaded they are.

like me!   --> http://blockchain.info/address/1Gyrsur3XcEoGjCarnXvGTVAS3rvjsdVm3

EDIT: also mentionable, gold is not so save as you suppose --> http://www.zerohedge.com/news/guest-post-gold-standard-easier-said-done
"Clearly one of the key risks in this scenario is that the US government would need to acquire as much gold as they can get their hands on, likely through Roosewellian-style gold confiscation."

[iCEBREAKER]

Nice diagram  

Yes it is!  Picture = 1000 words.

I'm going to get it tattooed on my back, to save time when giving introductory explanations of bitcoin.

Edit: Who made it?  Is it from an article?

[n8rwJeTt8TrrLKPa55eU]

Nice diagram  

Yes it is!  Picture = 1000 words.

I'm going to get it tattooed on my back, to save time when giving introductory explanations of bitcoin.

Edit: Who made it?  Is it from an article?

Here is the context for that picture:

http://bitcoinmedia.com/gold-is-a-physical-element-bitcoin-is-an-abstract-protocol/