Kitco : Bitcoin Sucks

[the founder]

Don’t look now but there is a major currency crash already under way. No, we have not suddenly turned into alarmist newsletter scribes here. The fiat currency Armageddon we are referring to is taking place in the same space that others have tried their hand in and failed previously; the creation of alternative money. Remember Beenz? Remember Flooz? Neither do we. Remember Bitcoin? You won’t, soon.

The recently invented “encrypted monetary unit” that is more complex that the design of the Mayan calendar was supposed to take the world by storm. Forget the greenback when you can swear by Bitcoin. Aha. Whereas the latest in alternative cash once traded as high as $33 (hey, near gold standard status!) it is now changing hands at under $3 and it might soon vanish altogether. Some have called it nothing short of a “screwball scheme to bypass the system.” You know; the “IRS and taxes” kind of system. So, do not be shocked if you get “called in” by Uncle Sam for a friendly audit, or to soon read that “Bitcoin…bit the dust.”

http://www.kitco.com/ind/Nadler/oct242011.html

Founders Note:
First they ignore you,  then they fight you, then you win... clearly with zero mention of bitcoin on the gold and silver site..  now they go full out against bitcoin?   Where the hell did that come from?

[BitterTea]

Founders Note:
First they ignore you,  then they fight you, then you win... clearly with zero mention of bitcoin on the gold and silver site..  now they go full out against bitcoin?   Where the hell did that come from?

If you've think we've won already, I've got bad news for you... the fight has yet to begin.

[stick_theman]

Kitco really sees Bitcoins as a competition.  Kitco is currently being sued by the government for tax evasion and so on.  Interesting, nonetheless.

[cypherdoc]

Nadler was a bear on gold all the way up despite working for Kitco.  he's a dummy.

[Bitcoin Oz]

Kitco really sees Bitcoins as a competition.  Kitco is currently being sued by the government for tax evasion and so on.  Interesting, nonetheless.

Competition for tax evasion ?

[stick_theman]

Kitco really sees Bitcoins as a competition.  Kitco is currently being sued by the government for tax evasion and so on.  Interesting, nonetheless.

Competition for tax evasion ?

lol, no.  Competition as an alternative form of currency at the moment.  I saw Nadler at investment shows a couple times.  Very articulate guy who always gets it wrong.

[Explodicle]

By all means, spread the word about how the price of Bitcoin has fallen! What a swell guy.

[ElectricMucus]

Actually it would be wise for bitcoiners not to see goldbugs as their competition.

They are the first people who would embrace bitcoin for what it is, a decentralized way to pay money. But they will not use it as an alternative to gold.
I recently saw the term as bitcoin as 'internet gold' here, that is just naive wishful thinking and no ghandi quote gonna change that.

[cypherdoc]

Actually it would be wise for bitcoiners not to see goldbugs as their competition.

They are the first people who would embrace bitcoin for what it is, a decentralized way to pay money. But they will not use it as an alternative to gold.
I recently heard the term as bitcoin as 'internet gold', that is just naive wishful thinking and no ghandi quote gonna change that.

would you please clarify.  i have made the switch.  i think Bitcoin has more potential and has many use cases exceeding that of gold.  of course, it also has more risks but these are being addressed quite nicely with encryption.

[ElectricMucus]

Actually it would be wise for bitcoiners not to see goldbugs as their competition.

They are the first people who would embrace bitcoin for what it is, a decentralized way to pay money. But they will not use it as an alternative to gold.
I recently heard the term as bitcoin as 'internet gold', that is just naive wishful thinking and no ghandi quote gonna change that.

would you please clarify.  i have made the switch.  i think Bitcoin has more potential and has many use cases exceeding that of gold.  of course, it also has more risks but these are being addressed quite nicely with encryption.

Gold is useful as a store of value on a fundamental level of reality. It is the first instance of this phenomena. But just the first one we have the technology to have access to.
More see here:

http://www.rfreitas.com/Nano/TangibleNanomoney.htm

[DeathAndTaxes]

Actually it would be wise for bitcoiners not to see goldbugs as their competition.

They are the first people who would embrace bitcoin for what it is, a decentralized way to pay money. But they will not use it as an alternative to gold.
I recently heard the term as bitcoin as 'internet gold', that is just naive wishful thinking and no ghandi quote gonna change that.

would you please clarify.  i have made the switch.  i think Bitcoin has more potential and has many use cases exceeding that of gold.  of course, it also has more risks but these are being addressed quite nicely with encryption.

Gold is useful as a store of value on a fundamental level of reality. It is the first instance of this phenomena. But just the first one we have the technology to have access to.
More see here:

http://www.rfreitas.com/Nano/TangibleNanomoney.htm

At current prices & technology gold fails your own supporting article.

Money should be difficult or impossible to replicate at a cost less than its cost of manufacture even by the most efficient means possible. That is, production costs (aka "intrinsic value") should approximate face value; seigniorage should be minimal to nil.

I own 3 gold mining stocks.  All have a cost of production <$550 an ounce yet gold trades at 3x that.  The industrial uses of gold are minimal and gold is highly recoverable (like aluminum) which reduces demand further.  I do agree that is gold trades close to cost of production it does satisfy all the requirements in the article but interestingly so does Bitcoin.

It is interesting that @ $30 per BTC the production cost for me was <$4 (even including 18 month ammortization of hardware) and likely half that for most efficient miners (no electrical cost) thus in hindsight it showed an obvious and unsustainable bubble.

I won't try to pass judgment on whether electronic money or some other intangible form of currency might be sufficient for all necessary economic purposes. I'll simply note that tangible money has always played a role in human commerce, so for now the safest assumption is that tangibles will probably continue to do so, though perhaps with somewhat lesser importance in the overall economy.

Human nature is evolving.  Over time people have become more accepting to no-physical stores of wealth.  Not just in currencies but in every aspect of society.  People post digital photos now and rarely print them.  People are willing to have a netflix subscription where 20 years ago a VHS or DVD collection was more common.  Bitcoin fits into that evolving mindset (albiet it may be decades ahead of its time).  Bitcoin if priced close to cost of production fits all of the requirements of post nanotechnology currency. 

Physical use is simply an economies of scale issue.  Today it is possible to make a smart card that could hold a wallet, have a screen showing the amount to be transmited and have a pinpad to enter a pin (which is hashed thousands of times to generate key to unlock wallet).  Using bitcoins in physical world could be as easy (and more secure) than using a credit card.  It doesn't exist because demand is so low and unconcentrated that building such a system wouldn't generate enough revenue (currently) to pay for such a system.  So bitcoin has all the advantages of post-nanotech currency in the physical world but it also has those same advantages in the digital world (something that every single physical currency lacks).

[ElectricMucus]

Yeah Bitcoin would be also a possibility in a nanotech world, no question about it but I can't see how gold fails it according to your argument. But I think that has been pretty well described in the article.

I'm just telling you Bitcoin is different than Gold in 2 things:
At first Bitcoin needs consensus not to replace it with another cryptocurrency, gold is unique in its own right.
Gold mining is dependent upon technology and scarcity while Bitcoins scarcity is predetermined over time. 'Peak Bitcoin' occured at the genesis block Peak gold is occurring now or in a few decades depending on estimations.

The problem is the synergy between those 2. Bitcoin was a free for all at the beginning while during the early historical gold rushes miners didn't haul tons of it out one at a time with a pick axe.
This little seemingly insignificant 'error' might be the death sentence for bitcoin we are seeing this now with the emergence of alternate cryptocurrencies.
I can't see this threat disappearing in the near future and while it might not seem threatening now it could very well become so at some point.


So much for that, has nothing to do with Gold and why Goldbugs will not abandon it though.

[DeathAndTaxes]

Gold fails this axiom (form the article)

Money should be difficult or impossible to replicate at a cost less than its cost of manufacture even by the most efficient means possible. That is, production costs (aka "intrinsic value") should approximate face value; seigniorage should be minimal to nil.

Gold trades @ $1600 an ounce and today with current technology can be produced for <$550.  It is not valid as a currency by the definitions of your article.

[ElectricMucus]

Gold fails this axiom (form the article)

Money should be difficult or impossible to replicate at a cost less than its cost of manufacture even by the most efficient means possible. That is, production costs (aka "intrinsic value") should approximate face value; seigniorage should be minimal to nil.

Gold trades @ $1600 an ounce and today with current technology can be produced for <$550.  It is not valid as a currency by the definitions of your article.

Aren't you a little partial on the numbers. A mining company with this efficiency is the top of the line, no wonder you decided to buy stocks
But to be fair you'd have to compare it with fpga bitcoin mining.

I think we both know the answer to that, both bitcoin and gold are approaching this point over time.

[DeathAndTaxes]

Money should be difficult or impossible to replicate at a cost less than its cost of manufacture even by the most efficient means possible. That is, production costs (aka "intrinsic value") should approximate face value; seigniorage should be minimal to nil

Very clearly Gold isn't a currency (by the definitions in the article).  It trades at a massive multiple to its cost of production.  Far more than bitcoin today.

For bitcoin the cost of production isn't just electrical cost but also ammortized hardware cost (including premature failure rate), labor, and storage space.  While many miners may consider their labor and space to be free in economic theory they aren't.

When we say that mining profits will eventually settle at a small rate of return over cost; cost includes all components costs of mining (electricity, hardware, labor, space).

[RodeoX]

So, his credentials are that he is a precious metal expert? Ok, well then I should use my expertise in bitcoin to write an article about how gold is a ponzi scheme.  

[ElectricMucus]

Money should be difficult or impossible to replicate at a cost less than its cost of manufacture even by the most efficient means possible. That is, production costs (aka "intrinsic value") should approximate face value; seigniorage should be minimal to nil

Very clearly Gold isn't a currency (by the definitions in the article).  It trades at a massive multiple to its cost of production.  Far more than bitcoin today.

For bitcoin the cost of production isn't just electrical cost but also ammortized hardware cost (including premature failure rate), labor, and storage space.  While many miners may consider their labor and space to be free in economic theory they aren't.

When we say that mining profits will eventually settle at a small rate of return over cost; cost includes all components costs of mining (electricity, hardware, labor, space).

Yes, as I said it is approaching it, no need to be overzealous. 

[DeathAndTaxes]

Money should be difficult or impossible to replicate at a cost less than its cost of manufacture even by the most efficient means possible. That is, production costs (aka "intrinsic value") should approximate face value; seigniorage should be minimal to nil

Very clearly Gold isn't a currency (by the definitions in the article).  It trades at a massive multiple to its cost of production.  Far more than bitcoin today.

For bitcoin the cost of production isn't just electrical cost but also ammortized hardware cost (including premature failure rate), labor, and storage space.  While many miners may consider their labor and space to be free in economic theory they aren't.

When we say that mining profits will eventually settle at a small rate of return over cost; cost includes all components costs of mining (electricity, hardware, labor, space).

Yes, as I said it is approaching it, no need to be overzealous. 

Gold is aproaching $550?  Have you looked at a 10 year chart? On what long term trend is gold aproaching its cost of production?

[ElectricMucus]

No the cost of production are approaching higher values, you have to look at the overall picture over the next decades this will be true for both bitcoin and gold.

[DeathAndTaxes]

No the cost of production are approaching higher values, you have to look at the overall picture over the next decades this will be true for both bitcoin and gold.

Your wrong.  Gold production costs are only rising because companies are chasing the high price of gold.  The insane (and stupid) 3x, 4x, 5x multiplier between retail prices and production is causing gold companies to open more speculative mines.  Who cares if your costs rise 20% if you can sell instantly sell 100% of what you mine for 400%+.

Gold has no intrinsic value.  There is no evidence (based on 100+ year gold & production prices) that gold prices & production are aproaching each other.  Gold trades completely beyond any production fundamentals.  When people are scared they buy gold.  When gold is flat due to low fear and they see stocks, bonds, real estate, and other estates posting gains year after year people sell it.

Gold has numerous times in the past trade BELOW production cost and many times (like today) traded at insane multiples to production cost.  Your belief that either production or price are aproaching the other is false.