Bitcoin savings plan

[kjlimo]

So, my plan as of right now is $100 / month. 

I plan to put $100 in each month going forward whether the price jumps to $10/BTC or if it drops to 10 cents / BTC. 

By steadily putting in money over time, it will average out the price that I buy BTC for.  This is simply a long term savings plan and I assume I'm not the only person doing this.

Also, if we assume all miners are selling coins, we need 7,200 BTC "purchased" by non-miners daily or about 215,000 BTC a month. 

At current prices this requires, $600,000 a month.  Granted some people are purchasing/selling speculatively based on current price, but another population of people could be "savers" like me.

Hopefully, this poll can give an idea of who will be steadily flowing USD into bitcoin over the coming months.  If there's not 600k / month, then the price is sure to drop again before the end of 2012.

Feel free to update your vote as you adjust your plan.  We'll see how much data we can gather here.

[1715593320]

1715593320

[1715593320]

1715593320

[cbeast]

This is a conundrum. Do I buy a lot of Bitcoin or do I help develop the Bitcoin economy by investing money in real world applications? The former could have me ending up with a lot of worthless Bitcoin, the latter could make my few Bitcoin worth a lot.

[boonies4u]

This is a conundrum. Do I buy a lot of Bitcoin or do I help develop the Bitcoin economy by investing money in real world applications? The former could have me ending up with a lot of worthless Bitcoin, the latter could make my few Bitcoin worth a lot.

You buy a lot of BTC then invest them in real world applications for Bitcoin.

You won't be the one having to sell them for fiat, so you'll feel good about yourself. One of the best current applications for Bitcoin is investing.

[finway]

$3000 at least.

[ElectricMucus]

Zero.

[Edward50]

well the heck is the 0 option, if you decide not to save?
What kind of poll is this.

[julz]

well the heck is the 0 option, if you decide not to save?
What kind of poll is this.

Well it also doesn't have options for those who are gradually selling out of their BTC hoardings.
It seems reasonable that zero or less don't qualify as 'savings' so aren't being surveyed.

[finway]

well the heck is the 0 option, if you decide not to save?
What kind of poll is this.

I think there should be negative saving options
for those who shorted on bitconica.

[ElectricMucus]

well the heck is the 0 option, if you decide not to save?
What kind of poll is this.

I think there should be negative saving options
for those who shorted on bitconica.

Right, this is indeed a great time to short.

[westkybitcoins]

I have nephews who will be getting "bitcoin savings accounts" from me for Christmas, by way of wallets burned to CD and colorful address cards from paymyaddress.com. I imagine that I'll be dropping in a minimum of $20/month (total) to their accounts every month for the next 10 years. It's not much, but it's meant to be an example more than me actually trying to provide for other people's kids.

By then, especially if their parents also contribute (it may take a few years to get them to that point) they should be able to pay for whatever modernized job training that should have replaced the bloated, overpriced secondary education ripoff we currently have.

For myself, I'm saving regularly also... under $100 though (hey, precious metals are also nice....)

[Technomage]

I don't have a regular income. I've not had one for many years. It's difficult to create a savings plan that makes any sense. I save everything except the money I need day to day. I currently have approximately 10% of my liquid wealth in BTC and in addition I'm planning to invest more than 10% to my company, which will be a Bitcoin startup. Starting in 2 months.

[BadBear]

I'm not.  Using bitcoin to store wealth at this point is silly.  You're silly. 

[westkybitcoins]

I'm not.  Using bitcoin to store wealth at this point is silly.  You're silly. 

Hmm.

Had you just said "Using bitcoin to store wealth is silly," I would understand your perspective.

At what point will it switch from being a bad idea to store wealth in bitcoin to being a good idea? What critical point do you think needs to be reached?

[payb.tc]

i 'plan' to save $100,000 per month in bitcoins, however i currently can't afford that much.

[finway]

I'm not.  Using bitcoin to store wealth at this point is silly.  You're silly. 

I don't get it ,why silly?

[BadBear]

I'm not.  Using bitcoin to store wealth at this point is silly.  You're silly.  

Hmm.

Had you just said "Using bitcoin to store wealth is silly," I would understand your perspective.

At what point will it switch from being a bad idea to store wealth in bitcoin to being a good idea? What critical point do you think needs to be reached?

When the downtrend stops, or there is a clear reversal.  The downtrend has stalled for now, but the longer we go without the price going up, the more likely it is we'll see another crash or the downtrend resume  It is young still, and the short/mid term is uncertain.  Long term I'm still positive, but unwilling to tie up assets in bitcoin at the moment.  

I'm not.  Using bitcoin to store wealth at this point is silly.  You're silly.  

I don't get it ,why silly?

[jimbobway]

Remember, you can also try to spend your invested bitcoins and support the bitcoin economy.  Need hosting? Find a bitcoin hosting provider.  Buy a bitcoin tshirt or two.   etc...

[Coinbuck @ BTCLot]

Remember, you can also try to spend your invested bitcoins and support the bitcoin economy.  Need hosting? Find a bitcoin hosting provider.  Buy a bitcoin tshirt or two.   etc...

Yes, infact, Bitcoin is a advantage to hosting providers, they can make lower prices thanks to the non-existant transaction fees.

So what you get: really affordable hosting and you support the bitcoin economy at the same time.

Isn't that great ?

[westkybitcoins]

Remember, you can also try to spend your invested bitcoins and support the bitcoin economy.  Need hosting? Find a bitcoin hosting provider.  Buy a bitcoin tshirt or two.   etc...

Good point. I've just tried out bitmunchies, and hope to give a few of the other bitcoin businesses that can fill a need of mine a try.

[finway]

The downtrend has stalled for now, but the longer we go without the price going up, the more likely it is we'll see another crash or the downtrend resume  

This is about speculation.

It is young still, and the short/mid term is uncertain.  Long term I'm still positive, but unwilling to tie up assets in bitcoin at the moment.  

This is about investment. but i don't get the short/mid/long term conflictions.

Bitcoin is now wellknown, and will be more wellknown, I am sure about that.

[westkybitcoins]

I'm not.  Using bitcoin to store wealth at this point is silly.  You're silly.  

Hmm.

Had you just said "Using bitcoin to store wealth is silly," I would understand your perspective.

At what point will it switch from being a bad idea to store wealth in bitcoin to being a good idea? What critical point do you think needs to be reached?

When the downtrend stops, or there is a clear reversal.  The downtrend has stalled for now, but the longer we go without the price going up, the more likely it is we'll see another crash or the downtrend resume  It is young still, and the short/mid term is uncertain.  Long term I'm still positive, but unwilling to tie up assets in bitcoin at the moment.  

But that's just it... from the chart you posted, it looks as if the downtrend has flatlined. Stability makes for a good store of value (even if just for the time being,) and since the price appears to have bottomed, that makes it the best time to buy from an investment perspective.

I don't see why a flatlined price would indicate a further drop or another crash any more than a renewed increase or new bubble, but I guess if that's your analysis it makes sense to wait it out.

Personally, I'm taking the same stance I do with precious metals: yeah, it may take another hit sometime soon... but as precarious as the global economy is right now, what if instead the price takes off and I'm not properly invested yet? At that point, wouldn't it be better to have bought at $3, missed the dip to $2, but have held through to the surge, than to have not bought at $3, expected a dip to $2 to that never came, and to have missed the surge entirely?

[BadBear]

It doesn't conflict, I expect the price to go down further from here.  Even if it *only* drops another dollar thats a significant percentage at this point.  I expect the price will rise again in 2012 and onwards, but a lot could happen between now and then. 

It doesn't hurt to wait, I have bought and am holding some, but do not plan to buy more at the moment. 

[ElectricMucus]

The whole "investing" strategy into bitcoin stinks to high heaven because the tiny fraction actually used for exchange. If all the coins currently in existence were to hit the market we would need to go down in price another 90%.

Currently we are in the "that will show em" stage... the same people responsible for the bubble have declared a tow war against bitcoinca, Ignoring their sunk costs they are trying to further increase artificial scarcity by buying whenever they can.

This thread is kind of the manifestation of this desperation, its a siege, parasitic on the real bitcoin economy which eventually gets choked to death. We have come to a state where the main net buyers of bitcoins are the ones already holding the most of them.

flame on. 

[westkybitcoins]

The whole "investing" strategy into bitcoin stinks to high heaven because the tiny fraction actually used for exchange. If all the coins currently in existence were to hit the market we would need to go down in price another 90%.

Currently we are in the "that will show em" stage... the same people responsible for the bubble have declared a tow war against bitcoinca, Ignoring their sunk costs they are trying to further increase artificial scarcity by buying whenever they can.

This thread is kind of the manifestation of this desperation, its a siege, parasitic on the real bitcoin economy which eventually gets choked to death. We have come to a state where the main net buyers of bitcoins are the ones already holding the most of them.

flame on. 

Ignoring the bitcoinca angle, I wonder how much of this is equally applicable to gold (the net buyers are the ones already holding the most, etc.)

Point being, people still invest in gold, even though it's rarely used in everyday trade, and it doesn't seem to be a problem.

[ElectricMucus]

The old gold comparison, it would be valid if the investment market wouldn't be that tiny. Half of all gold is used in jewelery that alone is such a tremendous difference. Also see the "why bitcoin is not gold" thread... it explains it in some detail.

[westkybitcoins]

The old gold comparison, it would be valid if the investment market wouldn't be that tiny. Half of all gold is used in jewelery that alone is such a tremendous difference. Also see the "why bitcoin is not gold" thread... it explains it in some detail.

I wasn't trying to say bitcoin is gold, but they do share a lot of relevant properties that you had touched on:

 - If all gold stored (including jewelry) were to hit the market, the price would plummet
 - Most gold is being bought up by people who already have the most
 - Only a tiny fraction of the gold that's in existence is actually bought/sold instead of being stored

I guess I'm not understanding why the idea of someone saving their bitcoins is an issue. I like them, I want some for future use, and I expect the price to go up long-term. Ergo, I buy and store some. Am I obligated to buy (or mine) them and then spend them all, never holding onto any? Because personally, I'm not acting in a desperate, malicious manner, any more than when I buy and save silver or gold or dollars.

[proudhon]

We have come to a state where the main net buyers of bitcoins are the ones already holding the most of them.

I think this is mostly right.  My guess, and it's just a guess, is that most of the buying we've seen over the past month and a half or so has been by people who sold bitcoins before the price went below $3 and does not represent new money.

[ElectricMucus]

- If all gold stored (including jewelry) were to hit the market, the price would plummet
 - Most gold is being bought up by people who already have the most
 - Only a tiny fraction of the gold that's in existence is actually bought/sold instead of being stored

Exactly here is the difference. Jewelry cannot be converted to investment gold effortless there is no equivalent for bitcoin. The closest thing would be using the blockchain for validation of other data while destroying bitcoins. This is almost never done and insignificant right now.

Since the investment market is only a small fraction of the overall market for gold and the main use continues to be jewelery this isn't true either. The amount of gold used in wedding rings probably is higher that the whole investment market.

The last point is also false, quite the opposite almost all the gold in the earth is traded using mining stocks, and the largest holders of gold (on the comex) constantly trade it, use it for leverage, back and forth.


The amount of gold actually hoarded by goldbugs is only a very small fraction of the overall supply while with bitcoin the vast majority sits in someones wallet. It is true that physical gold mostly never moves, but nevertheless it is constantly traded as "paper gold" which can be (excluding fraud) be taked delivery for.

[westkybitcoins]

The amount of gold actually hoarded by goldbugs is only a very small fraction of the overall supply while with bitcoin the vast majority sits in someones wallet. It is true that physical gold mostly never moves, but nevertheless it is constantly traded as "paper gold" which can be (excluding fraud) be taked delivery for.

Ok. I disagree, in particular with this portion, but rather than get into COMEX fraud or central bank holding estimates, let's presume it's completely true.

With that difference in mind, what problem does my saving bitcoins cause?

[Crypt_Current]

- If all gold stored (including jewelry) were to hit the market, the price would plummet
 - Most gold is being bought up by people who already have the most
 - Only a tiny fraction of the gold that's in existence is actually bought/sold instead of being stored

Exactly here is the difference. Jewelry cannot be converted to investment gold effortless there is no equivalent for bitcoin. The closest thing would be using the blockchain for validation of other data while destroying bitcoins. This is almost never done and insignificant right now.

Since the investment market is only a small fraction of the overall market for gold and the main use continues to be jewelery this isn't true either. The amount of gold used in wedding rings probably is higher that the whole investment market.

The last point is also false, quite the opposite almost all the gold in the earth is traded using mining stocks, and the largest holders of gold (on the comex) constantly trade it, use it for leverage, back and forth.


The amount of gold actually hoarded by goldbugs is only a very small fraction of the overall supply while with bitcoin the vast majority sits in someones wallet. It is true that physical gold mostly never moves, but nevertheless it is constantly traded as "paper gold" which can be (excluding fraud) be taked delivery for.

Do you think NMC could be analogous to using gold for jewelry?

[Vandroiy]

Currently we are in the "that will show em" stage... the same people responsible for the bubble have declared a tow war against bitcoinca, Ignoring their sunk costs they are trying to further increase artificial scarcity by buying whenever they can.

Uhm, that would be strange. The people who drove the bubble with their money probably don't have a lot of purchasing power left, and I think they've been neatly disillusioned.

I think it's people like me, who were going against the bubble and just buy back their coins now. On top of these, there might be hobby-speculators who are afraid of he down-trend and only buy back now because it has significantly weakened throughout the last month -- actually, comparing current price to 1 month ago, it might be stopping completely. A lot of people like following trends.

I'm not so much into the whole short-term and trend stuff though. I think Bitcoins are worth more than 3 USD, so I buy/hold when the price is below. I'm not terribly angry if I have to wait a while until it works out.

BTW, @Topic: it really depends on the price and situation for me. I buy slowly, to be less sensitive to swings, but it really depends on price and indicators just how much.

[finway]

Mine it sell it or short it,

not only by mouth.

[jimbobway]

I just bought some more bitcoins.  Time to buy stuff fo r xmas.  Gotta get that bitcoin tshirt.

[adamstgBit]

We have come to a state where the main net buyers of bitcoins are the ones already holding the most of them.

I think this is mostly right.  My guess, and it's just a guess, is that most of the buying we've seen over the past month and a half or so has been by people who sold bitcoins before the price went below $3 and does not represent new money.

This form has an "Average registrations per day:    63.28"
Its safe to say if you register to this form you have bought or will buy SOME bitcoins.
so I'd say bitcoin is being divided by more and more people.

[Cluster2k]

Gavin Andresen, one of the "core developers", is explicitly advising people "not to make heavy investments in Bitcoins", as it is "kind of like a high risk investment"

Jered Kenna, CEO of TradeHill a major Bitcoin Exchange also cautions eager investors and stated to the The New York Observer that "Bitcoin is still an experiment and not to bet the house"

As long as people keep the above in mind then it's all good.  If bitcoin falling to $0 tomorrow would cause undue hardship on your life or your family, it's time to exit.  If not, speculate away.

[kjlimo]

Gavin Andresen, one of the "core developers", is explicitly advising people "not to make heavy investments in Bitcoins", as it is "kind of like a high risk investment"

Jered Kenna, CEO of TradeHill a major Bitcoin Exchange also cautions eager investors and stated to the The New York Observer that "Bitcoin is still an experiment and not to bet the house"

As long as people keep the above in mind then it's all good.  If bitcoin falling to $0 tomorrow would cause undue hardship on your life or your family, it's time to exit.  If not, speculate away.

completely agree!  Which is why setting aside a reasonable amount monthly is a good way to get "invested" in bitcoins, but not put you in a crazy large position that imposes on your lifestyle.

[kjlimo]

i 'plan' to save $100,000 per month in bitcoins, however i currently can't afford that much.

I think you don't understand the definition of a "plan."  A plan is something that you intend to do and have reasonable expectations that it will occur (you are able to do it). 

Otherwise, it's just a "wish."  I wasn't asking for people's wishes...

[runeks]

This is a conundrum. Do I buy a lot of Bitcoin or do I help develop the Bitcoin economy by investing money in real world applications? The former could have me ending up with a lot of worthless Bitcoin, the latter could make my few Bitcoin worth a lot.

You buy a lot of BTC then invest them in real world applications for Bitcoin.

You won't be the one having to sell them for fiat, so you'll feel good about yourself. One of the best current applications for Bitcoin is investing.

That's exactly the point of cbeast. You can't invest Bitcoins right now. Sure, you could buy an VPN service and some mining equipment-dried strawberries for BTC, but that's not very likely to become a good investment. Right now you can invest dollars, but not Bitcoins. This is what cbeast suggests we spend time changing instead of saving up Bitcoins.

[714]

Zero. Zilch. Nada. None. Sell into all rallies.

[miscreanity]

- If all gold stored (including jewelry) were to hit the market, the price would plummet
 - Most gold is being bought up by people who already have the most
- Only a tiny fraction of the gold that's in existence is actually bought/sold instead of being stored

Exactly here is the difference. Jewelry cannot be converted to investment gold effortless there is no equivalent for bitcoin. The closest thing would be using the blockchain for validation of other data while destroying bitcoins. This is almost never done and insignificant right now.

Understanding stock-to-flow ratios is important - the higher the ratio, the more stable the instrument. Bitcoin offers the same function as gold, but in a nearly pure abstract version. When comparing gold to Bitcoin, the market size is tremendously different, but the reasoning behind the stock-to-flow ratios of the two holds. However, sufficient wealth has been flowing into Bitcoin to make it clear the the system offers less of an investment opportunity and more a method of savings or protection for stored wealth: a safe haven.

Since the investment market is only a small fraction of the overall market for gold and the main use continues to be jewelery this isn't true either. The amount of gold used in wedding rings probably is higher that the whole investment market.

This is a very western perspective. Gold jewelry in many regions is bought in order to store wealth. Also, what is visible in the paper and retail markets is disconnected from the high-capacity exchanges done privately at institutional levels. These trades are opaque to those at smaller scales.

The last point is also false, quite the opposite almost all the gold in the earth is traded using mining stocks, and the largest holders of gold (on the comex) constantly trade it, use it for leverage, back and forth.

Trading mining stocks is not trading physical metal - equities are a claim on future production, a form of speculative investment. As discussed, BTC & gold are primarily stores of wealth (representing past production) rather than investments. The COMEX actually represents a relatively small amount of physical metal trading, despite being one of the largest exchanges. The LBMA handles far more physical volume and others (e.g. Shanghai and soon the PAGE) are rapidly gaining.

The amount of gold actually hoarded by goldbugs is only a very small fraction of the overall supply while with bitcoin the vast majority sits in someones wallet. It is true that physical gold mostly never moves, but nevertheless it is constantly traded as "paper gold" which can be (excluding fraud) be taked delivery for.

Incorrect. There are an estimated ~170,000 metric tons of gold above ground as of 2010. Of that, about 2,500 tons are produced annually and accumulated - it doesn't go away, it sits in someone's vault (like a Bitcoin wallet). Gold is not consumed and the amount actually traded fits within that 2,500 tons, as it includes stored gold being reintroduced to market. This is why the gold stock-to-flow ratio is very high and stable relative to other forms of wealth storage.

The logistics involved with large-scale shipments preclude major movements, which gave rise to the paper markets. The paper markets simply extend credit to multiply the effective usefulness of the physical metal's property as a store of value. If 250 tons of paper gold trade in one day, that does not mean that the same amount of physical has been traded, especially if not delivered. Instead, the paper instruments simply create a second derivative used for day-to-day trade: fiat currencies.

Bitcoin and gold are both escapes from less reliable forms of wealth storage (especially from paper gold). With the looming danger of a global, systemic financial collapse, those type of assets will experience inflows no matter how nascent the platform. If even 1/10th of 1% (0.001) of the USD capital that exists in gold today were to flow into Bitcoin (the current ~8mm units), it's USD exchange rate would exceed $100/BTC. Do the same math with gold at $12k/oz and BTC easily reaches the low thousands in USD. Further QE efforts will boost the dollar-relative values for both gold and Bitcoin.

Awareness is the trigger. Whether the Bitcoin economy can handle such heavy inflows is another issue, but I suspect it will be able to. Until the mathematical foundation Bitcoin has been built upon is proven to have failed, it will continue making progress as a safe haven comparable to gold.

[N12]

Zero. Zilch. Nada. None. Sell into all rallies.

Surely you must be very short then at this moment?

[714]

Until the mathematical foundation Bitcoin has been built upon is proven to have failed, it will continue making progress as a safe haven comparable to gold.
[/quote]
I've followed the gold bugs since the 1970s, the message never changes, you couldn't have picked a better illustration of a stopped clock being occasionally correct. "Safe haven" is a bit of stretch when applied to gold or bitcoin.

I'm glad I focused my efforts elsewhere since then, notwithstanding the Hunt brothers silver pump and dump was a little fun. I stumbled across a crafts store that had pounds and pounds of little silver beads *that they thought were shiny coated plastic imitation silver beads and had priced accordingly*. I backed up the truck as they say and immediately turned them over before the silver market collapsed. I sure am glad I didn't makes those beads part of my savings plans.

[boonies4u]

Until the mathematical foundation Bitcoin has been built upon is proven to have failed, it will continue making progress as a safe haven comparable to gold.

I've followed the gold bugs since the 1970s, the message never changes, you couldn't have picked a better illustration of a stopped clock being occasionally correct. "Safe haven" is a bit of stretch when applied to gold or bitcoin.

I'm glad I focused my efforts elsewhere since then, notwithstanding the Hunt brothers silver pump and dump was a little fun. I stumbled across a crafts store that had pounds and pounds of little silver beads *that they thought were shiny coated plastic imitation silver beads and had priced accordingly*. I backed up the truck as they say and immediately turned them over before the silver market collapsed. I sure am glad I didn't makes those beads part of my savings plans.

Goldbugs will be so butthurt when UAC perfects alchemy on mars and uses it to chug out gold from their "mines".

[714]

Zero. Zilch. Nada. None. Sell into all rallies.

Surely you must be very short then at this moment?

I sell what I mine almost immediately and I have no hardware investment allocated to the purpose of mining as I started only when I had to replace a failed video card anyway. I have never had a reason to actually purchase bitcoins, and expect I never will.

It's all lunch money anyway, it helps me pay attention to the curious world of Bitcoin which is very much involved in self-adulation lately, a characteristic that has led me to good shorts in the past. However, unlike common stocks where there's always another short around the corner and the practice of shorting is adequately funded, if bitcoin shrinks to a point Bitcoinica will go with it, and there will be losers in the race to cash out in time.

It feels great to not be someone who has any serious amount of asset exposure to Bitcoin, long or short. It's just too small and opaque to be taken that seriously.

[westkybitcoins]

- If all gold stored (including jewelry) were to hit the market, the price would plummet
 - Most gold is being bought up by people who already have the most
- Only a tiny fraction of the gold that's in existence is actually bought/sold instead of being stored

Exactly here is the difference. Jewelry cannot be converted to investment gold effortless there is no equivalent for bitcoin. The closest thing would be using the blockchain for validation of other data while destroying bitcoins. This is almost never done and insignificant right now.

Understanding stock-to-flow ratios is important - the higher the ratio, the more stable the instrument. Bitcoin offers the same function as gold, but in a nearly pure abstract version. When comparing gold to Bitcoin, the market size is tremendously different, but the reasoning behind the stock-to-flow ratios of the two holds. However, sufficient wealth has been flowing into Bitcoin to make it clear the the system offers less of an investment opportunity and more a method of savings or protection for stored wealth: a safe haven.

Since the investment market is only a small fraction of the overall market for gold and the main use continues to be jewelery this isn't true either. The amount of gold used in wedding rings probably is higher that the whole investment market.

This is a very western perspective. Gold jewelry in many regions is bought in order to store wealth. Also, what is visible in the paper and retail markets is disconnected from the high-capacity exchanges done privately at institutional levels. These trades are opaque to those at smaller scales.

The last point is also false, quite the opposite almost all the gold in the earth is traded using mining stocks, and the largest holders of gold (on the comex) constantly trade it, use it for leverage, back and forth.

Trading mining stocks is not trading physical metal - equities are a claim on future production, a form of speculative investment. As discussed, BTC & gold are primarily stores of wealth (representing past production) rather than investments. The COMEX actually represents a relatively small amount of physical metal trading, despite being one of the largest exchanges. The LBMA handles far more physical volume and others (e.g. Shanghai and soon the PAGE) are rapidly gaining.

The amount of gold actually hoarded by goldbugs is only a very small fraction of the overall supply while with bitcoin the vast majority sits in someones wallet. It is true that physical gold mostly never moves, but nevertheless it is constantly traded as "paper gold" which can be (excluding fraud) be taked delivery for.

Incorrect. There are an estimated ~170,000 metric tons of gold above ground as of 2010. Of that, about 2,500 tons are produced annually and accumulated - it doesn't go away, it sits in someone's vault (like a Bitcoin wallet). Gold is not consumed and the amount actually traded fits within that 2,500 tons, as it includes stored gold being reintroduced to market. This is why the gold stock-to-flow ratio is very high and stable relative to other forms of wealth storage.

The logistics involved with large-scale shipments preclude major movements, which gave rise to the paper markets. The paper markets simply extend credit to multiply the effective usefulness of the physical metal's property as a store of value. If 250 tons of paper gold trade in one day, that does not mean that the same amount of physical has been traded, especially if not delivered. Instead, the paper instruments simply create a second derivative used for day-to-day trade: fiat currencies.

Bitcoin and gold are both escapes from less reliable forms of wealth storage (especially from paper gold). With the looming danger of a global, systemic financial collapse, those type of assets will experience inflows no matter how nascent the platform. If even 1/10th of 1% (0.001) of the USD capital that exists in gold today were to flow into Bitcoin (the current ~8mm units), it's USD exchange rate would exceed $100/BTC. Do the same math with gold at $12k/oz and BTC easily reaches the low thousands in USD. Further QE efforts will boost the dollar-relative values for both gold and Bitcoin.

Awareness is the trigger. Whether the Bitcoin economy can handle such heavy inflows is another issue, but I suspect it will be able to. Until the mathematical foundation Bitcoin has been built upon is proven to have failed, it will continue making progress as a safe haven comparable to gold.

Very well stated. I hadn't wanted to spend time describing the actual situation as I suspect these facts will just be ignored.

But then, even trying to keep things simple and ask the important question, its funny how no direct answer, however brief, seems forthcoming.

[miscreanity]

I've followed the gold bugs since the 1970s, the message never changes, you couldn't have picked a better illustration of a stopped clock being occasionally correct. "Safe haven" is a bit of stretch when applied to gold or bitcoin.

Perhaps it's a stretch with Bitcoin currently and until it matures further, but gold? So treasuries and other politically-controlled government bonds are "safe"? Food which decays is "safe"? Honey last a very long time, so maybe we should stock up on that. What other asset class has held consistent value for over a hundred years, let alone a thousand?

It doesn't take a gold bug to recognize the appropriate purpose for an item. The message doesn't need to change because gold is stable compared to all other asset classes. It is in US dollar and other fiat denominations that gold's "value" varies. Calling the earth (USD) the center of the solar system does not make it so. It's a perspective.

Would you save in lumber if the lumber yard were on fire? All fiat currencies are burning. Gold is as financially sound as granite bedrock. Bitcoin has the same potential within a decade if it can survive any further exogenous shocks until it's about 5-10x its current capacity (~USD$25mm); a probable tipping point.

[714]

I've followed the gold bugs since the 1970s, the message never changes, you couldn't have picked a better illustration of a stopped clock being occasionally correct. "Safe haven" is a bit of stretch when applied to gold or bitcoin.

Would you save in lumber if the lumber yard were on fire? All fiat currencies are burning. Gold is as financially sound as granite bedrock. Bitcoin has the same potential within a decade if it can survive any further exogenous shocks until it's about 5-10x its current capacity (~USD$25mm); a probable tipping point.

Hysteria is an overrated emotional state. At 10x ~= $25M, the bitcoin universe is still far too tiny and easily manipulated to be taken seriously as a savings vehicle.

What is your valuation/comparison metric for asserting "gold is stable compared to all other asset classes"? Saying that gold always has the price of gold is a useless tautology.

[miscreanity]

Hysteria is an overrated emotional state. At 10x ~= $25M, the bitcoin universe is still far too tiny and easily manipulated to be taken seriously as a savings vehicle.

What is your valuation/comparison metric for asserting "gold is stable compared to all other asset classes"? Saying that gold always has the price of gold is a useless tautology.

So does the suggestion that the dollar has the price of the dollar - it only makes sense in an abstract discussion. A form of money such as the dollar is not valued by its "intrinsic" value, but by its purchasing power; how much of X can I get with Y dollars? The same concept applies to gold or any other item used as money. Without that perspective, it can be difficult to value gold.

Elasticity of demand is an important factor in the stability of value. Low elasticity means that an item is consumed quickly and must have a ready source available at all times to supply the demand. Oil is very inelastic, so prices may fluctuate rapidly depending on available supply (it generally has a shelf-life of about a year, is destructively consumed and demand typically exceeds supply). Gold is among the most elastic of materials and exists in sufficiently large amounts of refined quantities that it just sits around without any other significant purpose than as money, in specific - a store of value. The same function could be filled by rocks or other metals, but they have numerous productive uses and are too common to be feasible. Artwork might have a high ratio, but the supply is too narrow to provide widespread utility and different pieces offer subjective value.

A stock-to-flow ratio is indicative of how much elasticity exists for a given item. At present, gold has a ratio of ~65:1 while silver's is about 15:1 - the amount of gold stock that can absorb demand being significantly greater than that of silver is a strong factor relating to the latter metal's higher volatility. Fiat currencies generally have a very low ratio in order to maintain price stability, as well as low elasticity, so their values vary by a great deal over long periods of time. The larger a resource pool, the more relative price volatility it can handle without exhibiting disruptive purchasing power variance.

Bitcoin is certainly a small wealth pool currently. With steady growth to about 10x its current size, it will start attracting a greater percentage of capital. That leads to a compounding effect or tipping point whereby capital flows are 'trained' to flow in a direction associated with preceding flows. Because Bitcoin has survived a relative bubble of extreme magnitude (it'd be like gold going to >USD$50k and coming back down to <$2,000) without collapsing to zero, I see a rapidly decreasing chance of that occurring - especially with global financial uncertainty that will drive capital into hiding wherever it can find shelter (artwork, Bitcoin, corporate bonds, gold, silver, rare gemstones, etc).

Gold is also a Giffen good. When it is in high demand, it not only becomes more valuable, but the available supply declines. This is due to its function as a safe haven resulting from its ideal combination of properties presenting the best physical form of wealth storage (density, durability, etc). Bitcoin has the potential to become a Giffen good as well, the only immediate comparative drawback being required existence of the network whereas gold requires existence of reality to be present (both only have value in the presence of at least two trading parties).

[payb.tc]

i 'plan' to save $100,000 per month in bitcoins, however i currently can't afford that much.

I think you don't understand the definition of a "plan."  A plan is something that you intend to do and have reasonable expectations that it will occur (you are able to do it).  

Otherwise, it's just a "wish."  I wasn't asking for people's wishes...

you can call it a wish if you like, but for me it is a plan, an intention. i'm just not at that level yet.

but if i were making say $200,000 per month, i could definitely see myself putting half of it into bitcoins.

i'd like a lot of them please.

[BTCurious]

I'm considering just converting a bunch of my savings to bitcoin. Not monthly, but just use the buffer I have. Now seems like a good time.

[coin_toss]

This thread seems to be attracting a lot of bears. Bitcoin's fundamentals are good, and it is going to be worth a lot more than $3 in the short to medium term. When that does happen, I am going to laugh very hard at the cautious, timid types on here who relied on a graph to come to the conclusion that bitcoin is heading downwards

[StewartJ]

I'm not.  Using bitcoin to store wealth at this point is silly.  You're silly. 

I would not be so sure about that.

If you consider how much the dollar is losing value through inflation, because of impending economic european crisis and quantitative easing. And add to that the uncertainty of the safety of our dollars in financial institutions... witness the loss of client funds with the bankruptcy of MF Global (8th largest bankrupty ever).

It would seem to me that if BTC found a stable price point, it presents itself as a decent place to store wealth anonymously and in a very liquid manner.

[kjlimo]

I'd say that 70 people responding to this poll so far shows how small the world of bitcoin users is.  Granted this is only one forum (and one subforum area), but we'll need many more people to get involved to keep it growing.  We'll see what 2012 brings!

[boonies4u]

I'd say that 70 people responding to this poll so far shows how small the world of bitcoin users is.  Granted this is only one forum (and one subforum area), but we'll need many more people to get involved to keep it growing.  We'll see what 2012 brings!