3. In terms of manipulation, owning Bitcoins is actually a hedge against the ongoing PM manipulation as the mechanisms existing in the gold manipulation 'industry' are not found in bitcoin.
Based on historical prices, I would guess that the floor price of gold (due to demand for jewelry, decoration, and industrial uses) is less than 400 USD/oz. If that is correct, gold's current market price of ~1200 USD/oz is at least 3-4 times its floor price, due to demand for speculative trading (people buying it expecting to make money when its price rises) and for hedging or value storage (people buying it because they think that other investment options are more likely to lose their value).
I tend to think of the bottom in terms of mining costs. But even mining costs are relative since they differ depending the density of the mined ground and the nature of the mining operation. In other words, a mining operation that only extracts gold as a byproduct from its main silver or copper ore, will not be drastically affected - as the other ores "subsidize" gold's extraction. Gold miners though could be out of business.
From the numbers I've seen in terms of cash costs, as these are often published by respective companies, at 400 USD/oz, the current production model doesn't cut it for a long list of companies and mining sites. And from what I'm seeing, the price levels weren't very good for increasing production compared to 2014 either (production fell).
Demand for speculative trading and hedging is dependent on people's feelings and beliefs about the future of the economy, and therefore very fragile -- as shown by the crash of the gold price from the peak of ~1800 to ~1000 USD/oz in 2013--2015. The overpricing is sustained by intensive marketing by the likes of Max Kaiser, Peter Schiff, ZeroHedge, etc.
Well, it doesn't take too much to send the price skyrocketing in case of a systemic crisis. After all, the major gold exchanges are overleveraged "fractional reserves". Physical shortages appear quickly when there is a run on gold.
Gold pumpers, like zerohedge, schiff, etc, are not such a large factor because the west is not that big of a player regarding gold. With a global ming production of 3165 tons, China got 985 tons and India another 849.
India kind of ensures gold demand at any price. It's a cultural thing. It's not speculative. Gold is considered money-equivalent by everyone. They are not thinking that buying gold is wasting or spending money. Gold IS money and ...a superior one because it also gives social status. That's how they see it. Thus they are dumping their fiat to gold, every day, like clockwork. They also know, just as sure as the sun will rise, that in the long run the INR will fall compared to gold. They can't go wrong. They seemingly can't go wrong even on serious gold price corrections after major pumping (unlike USD/gold buyers), because the INR will drop, unlike the USD which is the currency benchmark - in a sense.
Even if gold price went /2 tomorrow morning, India would buy all of it. People there would be like "ohh, instead of 10 grams, now I can buy 20 grams with my money - wooohooo!". That's what they were doing even with small drops like 10-20%, flooding the jewelry shops, creating physical shortages.
Bitcoin's floor price would be due to demand for use as a currency.
Bitcoin has a short, but good track record of beating devaluation in multiple currencies with poor performance while also being able to bypass capital controls. And, typically, where devaluation exists, there are also capital controls in terms of access in foreign currency. So bitcoin would definitely be more useful in such a scenario. There are probably hundreds of millions of people who need bitcoin way more than westerners do, and who would appreciate it more than westerners.
Acquiring bitcoins would be tricky through official routes (exchanges), but if I can burn local currency in power costs and convert it to altcoins / bitcoins (I'm mentioning altcoins because most of the time they can be mined with no specialized ASICs), then it's like bypassing capital controls for foreign currencies.
The number unknown, but very low; most estimates put it below 10 USD/BTC, and there is no reason to expect it to grow very quickly. (Indeed, if the network's capacity is not lifted, it is unlikely to rise at all.)
The only way that a bottom scenario can be experienced is due to some catastrophic failure that would be impossible to fix. Catastrophic but fixable failures could result in serious dumps and confidence issues, but non-fixable issues are another issue altogether.
Capacity upgrades are not a serious market concern. At least the market says so. Price went from 200 to 400-500 in a few months, while the scaling debate was ongoing. As soon as the XT issue seemed to get buried, price rose quickly. The only thing negatively affecting price in all this period has been the orchestrated FUD and attempts to fork the currency into two - which would admittedly be very bad for the fundamentals. XT made price go down and as the risk evaporated price rose. Hearn's stunt and Classic returning with more FUD, and an attempt at contentiously forking that seemed to have a greater possibility of success, had a very negative impact. When this was put behind, price rose again.
I doubt large market players don't know what's FUD in terms of bitcoin's actual scaling capabilities, where it's strengths are (scaling value transacted), the spam issue, what's the case with full blocks and the extremely low fees allowing abuse, etc etc. I also doubt they will "buy" the FUD that core devs who are actually invested in btc (hearn isn't - he sold his) are acting against their own interests or that they will prevent bitcoin from scaling, when they are actually the only people doing scaling work.
Moreover, an item is not effectively "scarce" if there is an abundance of adequate substitutes. Gold has no adequate substitutes for jewelry, and its possible substitutes for certain industrial applications are even more scarce. In contrast, one can create an infinite number of cryptocurrencies that are equivalent to bitcoin, or even better than it.
In theory, gold is highly replaceable even in jewelry. There is no actual need for, say, a cross to be 18k or 22k gold in 100% of its weight. Not visually / not aesthetically, not practically. It could be gold-filled tungsten or lead and the owner would never tell the difference, or experience serious wear (gold filled are much better compared to gold plated which wear out). The only reason why gold is required is to give "value" for the item, yet most of the value (in western jewelry*) goes to the jeweler, not the metal. So you are buying the idea of something being expensive, not even the metal (!). The metal might cost 200$ and the jeweler may be asking for 900$ because, well, "it's jewelry, it's expensive, so since you came here to pay for something expensive, just pay it".
* In india, its waaaay closer to the price of the metal, and the metal used is typically very high purity, like 22-23K+.
Only fools and criminals will "invest" by hoarding a currency, whether it is dollars or bitcoins. Thus, comparing gold to dollars as store of value is a red herring -- a misleading argument that sleazy gold peddlers use all he time.
Again I'll have to use the India example of how citizens buy gold over there. Certainly not "speculators", fools, or criminals.
For westerners, betting against fiat is usually not for beating inflation, as we have more stable currencies, but it can be a political statement against the central banking scheme: "I dump my fiat and buy gold, silver or bitcoins because I don't like the fiat system and its practices". And if one can profit due to the fiat-scheme collapsing on itself due to the debt-bubble requiring a bubble in money issuance to service it, why not.
Good investments are things that will have real value due to expected real demand, not conventional value or value inflated by speculative demand; and, even better, that create real wealth. Stocks, real estate, tools, shops are examples of such wealth-creating things that are automatically protected against inflation.
I live in Greece. Note that in the 80s we were running at inflation levels like 25% (now we are experiencing 0 to -1%).
The stock's market index is currently in the 80's level.
The real estate market is bust. It's oversold and people are "killing" their property for fractional prices of what they'd get a few years ago.
Shops are bust / unemployment hitting 30% etc.
As for tools... well... In the 80's and 90's most tools we bought in the family, like drills, spinning cutters, pressure-cement-breakers, arc welding equipment, and more mechanical stuff for manipulating metals, pipes, etc, were very expensive. Most of them were Black & Decker, Philips, Peugeot, etc. My father, being very handy with them, used them all the time and he really considered them an investment that would never depreciate. And then came the Chinese invasion, in terms of "affordable tools for everybody"...
I can now buy a drill or a rotating cutter for less than 20 euros, even with a ...German label but "made in china". There is no piece of equipment that we have from back then that has not become ridiculously cheap to buy (in its chinese equivalent version). And I can't sell my used tools for nowhere near the prices I bought them - no matter whether they are branded or not.
There are assumptions for all these things (real estate, shops, tools, stocks) which have to be TRUE in the long run, for your money to be safe. Assumptions about the rate of inflation and possible trend reversal. Assumption about the state of the stock market. Assumptions about the general well-being of the economy. Assumptions regarding the global supply of tools. Assumptions about the real estate market. In my case all these assumptions went out the window when the country switched from Drachma to the Euro - which was a political decision. Now, if a fellow Greek had bought gold 10-20-30 years ago, his money would be multiplied right now. Stocks? He could be looking at even having his capital zero'ed out, if he had a lot of stocks that went bust. Real estate? Prices rose in the 90's and early 00's but have now crashed down hard. Shops are more like a liability, etc etc. Even if he held country-issued bonds (a "safe" investment) he would have experienced a 50% haircut and the rest would be paid up to 2042 in steps. Some pensioners argue they'll be dead by then.
The term "inflation" can mean two things. Popularly, it is any drop in the purchasing value of a currency. Technically, it is a drop that is caused by an increase in the amount of currency in circulation, following the printing of new cash or the creation of more virtual money through easing of bank credits etc.. Bitcoin has a controlled and ultimately finite amount of the latter, so technically its inflation will decrease and eventually end. In the popular sense, however, bitcoin's inflation neither bounded nor temporary. The drop from ~1200 USD/BTC on 2013-11-28 to ~220 in Jan/2015 (a loss of 80% of purchasing power) was not due to the issuance of new coins.
You can argue that bitcoin rose from 10$ to 1200$ within a year so it had to catch a breath, correct and consolidate to a much higher level than its starting position. Which is how markets function.
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