- 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.