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Bitcoin vs Gold


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Bitcoin vs Gold

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Time to re-read Cryptonomicon.

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An interesting video. It proposes Bitcoin is never going to be a currency because it has no intrinsic value. It is compared to the dollar, which is also backed by nothing but has intrinsic value because dollars must be used to pay taxes. Dollars boil down to taxes. But what does gold boil down to? What is the intrinsic value of gold?

In 2004, the gold etf GLD was started and there was a rush to buy partly due to the new ease of ownership. Price overshot to 1800/oz and receded to around 1300. Granted there was a recession and massive money printing going on thru this period. It demonstrates there is a component of price which is "timely desire" in addition to "intrinsic value". Presumably price would never fall much below intrinsic value. So purchasing gold today, given its volatility, one has to wonder what is gold's intrinsic value?

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The US Dollar is backed by the good will of the US Government, and the US represents approximately 25% of the World's GDP. While I understand that people might not value that, and that a lot of people would like to get away from the dollar as the worlds dominant currency, it's still a lot more than almost any other currency and definitely more than crypto's which literally are backed by nothing - not even goodwill. I personally think comparing the two is farcical. (I'm not a crypto hater - I just equate the current crypto mania to the internet in the 90's - Google wasn't even founded until 1998. Most of the initial internet companies are gone/failed, and will only ever be remembered by old people like me!)

With regards to Gold's intrinsic value. I would say that it's production cost would be a good place to start. Real Vision TV (subscription required) did an excellent two or three part documentary on Gold if you can watch it.

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SMCJB View Post
..............With regards to Gold's intrinsic value. I would say that it's production cost would be a good place to start.

I did a bit of research into "what an ounce of gold costs to produce" and naturally found a tower of babel as the miners want to understate their costs to make themselves seem profitable to shareholders and overstate costs to minimize taxation. It is a collision of GAAP vs AISC (ie. generally accepted accounting practice vs. all-in sustaining costs), the later being an industry concoction to make themselves look good to investors. Here are a couple of links:
Exactly how much does it cost to produce an ounce of gold? | Financial Post
https://www.prnewswire.com/news-releases/new-gold-delivers-on-2017-production-an...8-outlook-669627313.html

Newmont Mining shows a loss on their 2017 financial statement.
Interactive Analyst Center*?


I thought a bit about it from a macro view and concluded that if the miners were making money their share price would reflect it. So here is a comparison of GLD (a gold bullion etf) vs RING (a miners etf touted to be 90% gold miners). Looking at the 1,3 and 5 year annual returns, gold mining seems to be a slim to average business. So I conclude that it costs about the spot price minus a few percent to mine gold.


10 years ago gold was $800/oz today it is $1300/oz so have production costs gone up this much? I think it must be that demand has gone up and it takes more capital (locations, machinery, regulations) to keep up. Like to go faster you need a more powerful, and expensive, engine in your car.
If demand falls then the miners quickly shut down. There is some price regulation there, but price could fall further if people simply decide it is not worth the current price. A gold crash. What would produce that?

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There are several interesting interviews out there with Rick Rule of Sprott Global Resource Investments Ltd. (Macro Voices (free) & Real Vision (subscription) are two I have seen/listened to). He explains how cyclical mining operations are. If your interested in this field you may want to look them up.

Finally @myrrdin started a metals thread a while back. Could be an interesting discussion to have over there.

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Bill Gates and Warren Buffet comment: Bitcoin is a greater fool strategy. It has no intrinsic value.
I find their opinion interesting because they have so much money, its protection must be of interest to them.

Gates also adds "The government's ability to find money laundering and tax evasion and terrorist funding is a good thing," The point being that Bitcoin is not safe being in jeopardy of government shutdown.

https://www.cnbc.com/2018/05/08/what-happened-when-bill-gates-got-bitcoin-as-a-birthday-present.html

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Ouch, this video is from the November, 2013...
We had seen the Great Bitcoin Pump 2017, but had not seen the Great Depression 2017....

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From the BIS, Bank for International Settlements, the central bank of central banks:
Cryptocurrencies are not scalable and are more likely to suffer a breakdown in trust and efficiency the greater the number of people using them. "Not only does this call into question the finality of individual payments, it also means that a cryptocurrency can simply stop functioning, resulting in a complete loss of value".

https://seekingalpha.com/news/3364456-bis-latest-warn-cryptos?ifp=0

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His speech is brilliant. During the 12 minutes, he covered almost all facts and aspects of Bitcoin, if not more. And I totally agree with all his words. In fact, Bitcoin is not the money in its classic definition. For example, you can't touch it with your hands because you don't own it as paper money. It resides in the space of cryptography. But it doesn't mean that BTC is a bad investment. I also believe that it has bright future.

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Bitcoin is being recognized as "digital gold," but the volatile nature of the cryptocurrency market is making some investors think differently. Perhaps the most obvious difference between Gold and Bitcoin is this: Gold is a tangible physical Precious Metal, whereas Bitcoin is digital.
Follow Cryptonewstrends to look in-depth of what's going on in crypto industry and community.

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I read somewhere that the Bitcoin price is manipulated by some big whales. We now also know that a currency it's not working very well. So why is this digital fart worth so much to so many people? Tulips anyone?

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Comment by Danielle DiMartino Booth CEO of Quill Intelligence:
"Bitcoin is huge as a regulator's and politician's and as a central banker's testing ground for what will be sovereign crypto currencies. .......... Until the dollar loses its reserve currency status, I cannot see it (Bitcoin) being used as a safe haven. I think that Gold will wipe Bitcoin clean if there is true fear that hits the market."

Here is the pod cast which contains other interesting comments of our current economic state. ref 17:50
https://futuresradioshow.com/podcast/ms43/?utm_source=Futures+Radio&utm_campaign...111b&mc_eid=%5BUNIQID%5D

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In my opinion, the comparison between Gold and Bitcoin is fundamentally wrong. First, gold has not been a safe haven asset in the last 100 years. I wrote this article a few years ago to address the "Gold Bug" phenomena: https://www.seeitmarket.com/gold-as-a-safe-haven-through-history-14617/

Nowadays, financial institutions use sophisticated derivatives, OTC markets and forwards to hedge positions whether in equities or other investments.

Bitcoin purpose was not to be a safe haven, rather an instrument that sits on a blockchain. The fact that people started speculating on it and became "hodlrs" is a totally different story.

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thomasalt View Post
Hi, I also would recommend this article - https://www.coindesk.com/bitcoin-gold-better-long-term-bet

50 years? Imagine what technology will be like then. I don't see anyway Bitcoin is around then in its present form. so based upon the requirement that it "cannot be accessed again for 50 years" it would have to be gold. How if the question was reworded it may be different.

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Not too long ago, archaeologists unearthed a small cache of Cleopatra gold coins. Presumably buried since her death. Even though the government has long since passed, those coins can still be spent today to buy valuable goods, not to mention their historical value. I wonder what people would do with an unearthed 2000 year old hard drive with a bitcoin account on it?

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Yra Harris, a former member of CME board of directors and one of my favorite economic commentators, had some interesting comments about gold on December/10/2018 podcast:
"Gold as a hedge against inflation is the wrong way to look at it. Gold is a hedge against central banks loosing control....and what will make gold really ratchet up is that all of a sudden the Fed would do an about face. I'm not talking about rising rates...but if the Fed would actually have to announce a type of new program like 'we are going to stop shrinking the balance sheet for a while'. Gold will get a bid.....Gold is the ultimate currency......The Chinese and Russians are looking for a way to create a gold backed currency....sanctions....dollar reserve currency...SWIFT system....they don't like it."

Here is the podcast. Pick up at comments at 38:00
https://futuresradioshow.com/podcast/ms47/?utm_source=Futures+Radio&utm_campaign...80d1&mc_eid=%5BUNIQID%5D

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Money is the art of persuasion by methodical repetition thus self-sustaining cyclic causality. Perception is the center point to any community herd. Relativity plays in and out of favor.

The most basic primordial defect in consciousness is the ever-present desire to Believe. With
this modality tightly attached to each individuals Perception and then combined in groups. The ever-present continuum is to reinvent by imaginative means "What Is Old Is New Again". Conversely, it's also said There Is No-Thing New Under The Sun.


Time assumes value is a vertical commodity in that relics are rare and therefore must increase in value. This is how the art of persuasion in a herd mentality is imbued with forward valuation afforded by the illusion of Guarantee entrapped within "BELIEF" (Be Lie).

Paper money in and of itself is just paper. If the papers began unusually progressively to fade the imprinted image. Fear would engage, and the holder would seek immediate validation to what each piece's represented value is before its blank with an agent of the issuing entity. This is Representational Value.


Gold is a rare element. So, assumed by mutual consensus across the planet. However, what if a mountain's surface was washed away exposing a once undetectable by shielding trillion tons of raw solid Gold. All the stacked bullion would suddenly become a liability. Panic to sell for any amount would engage in hopes to get at least something for the then perceived nothing.


Crypto is digital in nature and can only be held in derivative form. Meaning you can print out the address string of representation value. Other than that, its Digital. This in turn requires other devices to execute value for exchange vs handing paper or metal. Yet Fewer transaction anymore occur in physical exchange of currency.

Barter is Spot Value where the exchange of things for things or services is in complete relativity to the right then and their evaluation. Persuasion and Reverse Persuasion thrust momentum into the entangled engagement.


In conclusion the basis of value is in constant motion. Because Gold is assumed by consensus belief to be special it carries an established Communal Value Position. This is likened to Santa Clause. As the valued concept travels forward, generation to generation for the majority simply because its common and convertible within tolerance to Changing Times.

It appears quite obvious the momentum of money is hard leaning towards a Digital Methodology. It is possible that physical attachment Need Not Apply moving forward. Sorta Like We Don't Need Chimney's to continue the time tested Santa Sleigh Story.

Everything is Money. It's more of a popularity Belief Imbued Established Fashion System that perpetrates the continuum of what Objects and Concepts be it Relic's or New. Are the Comstock of convertible conveyance for Goods and Services.

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Here is an interesting comparison of Bitcoin vs Gold in the recent stock market selloff since October 4, 2018.
S&P 500 ($SPX), Gold ($GOLD), Bitcoin ($NYXBT), Dollar ($USD)

Since October 4, the S&P 500 has lost 18%
Gold is relatively uncorrelated to the stock market with a small gain of 4%
Gold is inversely correlated to the Dollar as is expected since dollars are used to buy gold.
Bitcoin is correlated or reacting to the stock market or to some other stimulus not on the comparison chart. Bitcoin has lost 38%
Bitcoin does not seem correlated in any way to the dollar.


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From SeekingAlpha.com:

Central banks in no rush to issue e-money
Jan. 8, 2019 5:26 AM ET|By: Yoel Minkoff, SA News Editor
"At this stage, most central banks appear to have clarified the challenges of launching a central bank-backed digital currencies (CBDC), but they are not yet convinced that the benefits will outweigh the costs," according to a survey by the Bank for International Settlements.

85% also said they are unlikely to issue a CBDC in the next three years.

Sweden's central bank has been working on an "e-Krona" project since 2017, while the ECB and BOJ are collaborating on "Project Stella."

https://seekingalpha.com/news/3421283-central-banks-rush-issue-e-money?ifp=0

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What is interesting to me is that you see with bitcoin the reason that a currency needs inflation.

Once everyone believes the value of the currency will be worth much more tomorrow than today it stops functioning as a currency because everyone just starts hording it and not using it as a medium of exchange.

Bitcoin as digital gold is just the new narrative the crypto community came up with when it failed as a currency because of hording.

Crypto at this point is just a bucket shop in the clouds.

In that sense I think a pure trading game divorced completely from reality is actually really cool.

A pure trading game might be something the world needs or at the least really wants.

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centaurer View Post
What is interesting to me is that you see with bitcoin the reason that a currency needs inflation.

Once everyone believes the value of the currency will be worth much more tomorrow than today it stops functioning as a currency because everyone just starts hording it and not using it as a medium of exchange.

That's exactly what I believe happens, but I think we can go into a bit more detail than that. What really gives the asset value is your ability to transfer it to other people. The more people that use the currency, the more valuable it is to you because you can use it more places. If nobody is actually using it then the ultimate utility of the coin goes down.

The truth is that hodl is just a meme. When you look at the Mt Gox crash almost everyone got washed out of the market. I expect the same will happen this time around as well. As soon as people realize that the number of transactions in the near future will be less than the number of transactions today, there is no reason to hold the asset. So they all bail.

A fiat system has the Federal Reserve to modify the money supply to create inflation so that this doesn't happen. When things fall apart they make money easy to borrow to increase the amount of transactions. It creates a reason to buy before complete collapse. Bitcoin is essentially the opposite. Instead of becoming a safe haven it is a risk asset, and that makes the tops and bottoms exaggerated.

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TWDsje View Post
That's exactly what I believe happens, but I think we can go into a bit more detail than that. What really gives the asset value is your ability to transfer it to other people. The more people that use the currency, the more valuable it is to you because you can use it more places. If nobody is actually using it then the ultimate utility of the coin goes down.
.


Oh for sure but I also think the bull run is hugely to blame for the lowering of velocity.
This guy did some velocity analysis
https://nodar.medium.com/q3-2018-bitcoin-velocity-analysis-d414709055

It is just not shocking at all you would have lower velocity when the price 10 bags.

For me personally I am interested in buying bitcoin under $300 but even that might be high. $200 is probably the point I actually start buying. I will be interested though as a deep OTM call option on the infrastructure.

I mean I was interested at $300 not that long ago and the only thing that has changed is less people are actually using it as a currency and there is a massive increase in supply. I need to get pennies on the dollar though to be interested. Young men have a collective urge to speculate and make their fortune quick. I think there was so much pent up speculative demand from young people mostly picking index funds post financial crisis that crypto still reflects this speculative premium. The dream is still alive.

I actually did buy some GLD last Christmas when bitcoin was the family dinner conversation. It seemed obvious to me when the shoe shine boy is talking about digital gold I should buy the real thing.

The least shocking thing in the world right now will be bitcoin volatility drying up until the next dump. I am impressed with the way people are able to hold and ride down this most orderly of liquidation.

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Hi all!

I am Siva form MoonX.

How are you?

I am hoping to get your opinion on something....

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Yra Harris says "...donít buy into the inflation nonsense. By that time, gold is too late. Gold is a protection against central banks absolutely realizing that theyíve gone down a path that they have no way out of ..... Thatís what you wanna go for. The inflation will be the ultimate ugly effect..."

Financial Repression Authority

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A better title for this thread might be "Dollar vs Gold or Bitcoin". Today's dollar is the ultimate fiat currency. "Fiat" meaning it is not backed by anything real. The recent 2009 economic meltdown highlighted the fact that the government could simply print vast sums of dollars to bail out the economy. Many people think that we can also print money to fund government programs. This has created a new "Modern Monetary Theory" which simply proposes to forget about the hassle of paying back government loans rather just print money. It is a timely subject given the difficulty the Federal Reserve is having recovering QE outlays, and similarly the European Central Bank, and political climate in western democracy's. MMT may take hold as policy. Its implications are profound. Where is wealth best stored, dollars gold or bitcoin.
https://www.bloomberg.com/opinion/articles/2019-01-10/u-s-economy-modern-monetary-theory-bets-deficits-don-t-matter

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Interesting you should mention this. I just watched THE GREAT DOLLAR DEBATE with Grant Williams (Matterhorn Asset Management, Vulpes Investment Management), Luke Gromen (founder and president of Forest For the Trees) and Brent Johnson (CEO of Santiago Capital) over at realvision.com. They discuss many of the things you highlight with regards to the Dollar and Gold but not Bitcoin! Unfortunately I think its behind the paywall.

I would say, that while many of the things you and Bloomberg point out are potentially true, and potentially concerning, I think it is also true that the Euro-center is already in considerably worse shape than the US.

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Camdo View Post
An interesting video. It proposes Bitcoin is never going to be a currency because it has no intrinsic value. It is compared to the dollar, which is also backed by nothing but has intrinsic value because dollars must be used to pay taxes. Dollars boil down to taxes. But what does gold boil down to? What is the intrinsic value of gold?

In 2004, the gold etf GLD was started and there was a rush to buy partly due to the new ease of ownership. Price overshot to 1800/oz and receded to around 1300. Granted there was a recession and massive money printing going on thru this period. It demonstrates there is a component of price which is "timely desire" in addition to "intrinsic value". Presumably price would never fall much below intrinsic value. So purchasing gold today, given its volatility, one has to wonder what is gold's intrinsic value?

The intrinsic value of gold is higher than that of the dollar and lower than that of bitcoin.

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The intrinsic value of gold is higher than that of the dollar and lower than that of bitcoin.

Can you explain the rational to this statement.

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Camdo View Post
Can you explain the rational to this statement.

This is due to the complexity of mining gold and Bitcoin and the lack of such difficulty in creating fiat money. Price and value are not the same. In Bitcoin, an advantage over gold is that Bitcoins are finite and gold is not. It is impossible to find new mines, new profitable methods of mining or to extract it in space on asteroids (which will be done at the end of this century). Bitcoin has intrinsic value, at a minimum it is the purchase of other cryptocurrencies. Digital gold of the 21st century is Bitcoin.

: Лалала:

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  #31 (permalink)
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Mining gold in space is almost as ridiculous as the Canadian oil sands...

The problem with comparing crypto to gold is most of the time gold has very low volatility and is practically the opposite of crypto in that sense.

Bitcoin has really just created a digital bucket shop and purely speculative game.

Clearly there is an appetite for this kind of speculation. It is good to see something get around regulation and fill that need.

It also fills a nice void of creating cheap data sets of real world money bets.

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  #32 (permalink)
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I think Gold is a safer investment, while Bitcoin might be a bigger bet and offer greater returns.

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  #33 (permalink)
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A "Gold Standard" is slowly gaining quiet acceptance in the corridors of central banks, without fanfare or explicit declaration.
The source of this article is interesting from a macro economic point of view. OMFIF is a forum for central bankers, economic policy and public investment.

https://www.omfif.org/analysis/commentary/2019/july/towards-new-de-facto-gold-standard/

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  #34 (permalink)
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Bitcoin Vs. Gold is wrong thinking. Big think: Bitcoin and Gold are allies in the battle for financial choice.
From ZeroHedge.com
https://www.zerohedge.com/crypto/gold-versus-bitcoin-debate-distracting-us-unfortunate-economic-truth

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  #35 (permalink)
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Chart of $SPX (S&P 500), $GOLD, $NYXBT (Bitcoin) , and $USD (Dollar)since October 4, 2018, when the Federal Reserve announced a rate increase, only later to be rescinded after adverse market reaction. None the less, a good position to track performance as the first crack in the long outstanding 10 year stock market rally. Dollar up 5% remains strong, everyone wants dollars. S&P 500 up 15%, lots of dollars finding a home in stocks, Gold up 30%, makes steady increases despite rising stocks, is this a confident stock market?, Bitcoin up 50%, what a wild roller coaster ride, catch the gain if you can.
Ira Harris points out in regards to Coronavirus, "If the global economy experiences a dramatic slowdown where will the funding of debt repayments come from?....GOLD...making new highs is indicative NOT OF INFLATION SCARCITY BUT OF CENTRAL BANKS LOSING CONTROL IN THE FACE OF A HEIGHTENED FEAR OF DEFLATION. It is the fear of deflation in a world saddled with record amounts of DEBT, which the International Institute of Finance (IIF) has cited at more than $250 trillion.
https://yragharris.com/2020/02/09/coronavirus/

Pick your safe harbor.

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  #36 (permalink)
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The next cryptocurrency melt up is starting right now. With the bit coin halfing event and the restriction in supply happening this May, things can start pushing up again.

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  #37 (permalink)
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It arguably started 6-8 weeks ago as its already up 4000 or 61% from the 6500 lows. Will be interesting to see what happens with the halving. Forward term structure is already very elevated. March is 200 over Feb and June is 500 over Feb! I do wonder if the conorvirus is driving some of this?

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  #38 (permalink)
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With the price under 10,000 right now, it's a real good time to jump in.

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  #39 (permalink)
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ChrisDouthit View Post
With the price under 10,000 right now, it's a real good time to jump in.

https://bitcoinblocks.live/ <<< look at the blockchain, the gold narrative is false and dying so I'm not going to jump in... I am waiting for the right time to short with leverage

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  #40 (permalink)
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I added the bit going today and added the gold yesterday.

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  #41 (permalink)
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ChrisDouthit View Post
With the price under 10,000 right now, it's a real good time to jump in.

Trading 4220 down 58% in a few weeks.
Going to zero?
Personally think the drop is institutions selling to raise cash but that does it go back up if they don't reenter? I think they do. We will see.
Right now I think you need to think of Bitcoin as a $0 call option with a price of $4420. While that may sound obvious/stupid I don't think you buy 4k because you think its going to 5k. You buy 4k because it's either going to $0 or pick your number!

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  #42 (permalink)
 
 
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I think the essence of the argument is who is a better safe haven, Gold or Bitcoin?
The answer (in my opinion) is neither. Safe Haven is cash..as @SMCJB said it right.

However, as opposed to Gold dumping which I believe is institutional selling, the entire crypto market is made out of algorithmic market makers and sophisticated IA that detects leveraged buying and dumps it instantly to get rid of the small players. I have seen this "Recycle and rinse" cycle since Bitcoin was at the early hundreds.
This is just my opinion based on price observation and reading about the MMs in the crypto space.

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  #43 (permalink)
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Cash is a position.


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  #44 (permalink)
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Gee, I sure wish the CME BTC options were liquid.


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  #45 (permalink)
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Yeah the CME and ICE Bitcoin Options have been a real disappointment.

Some crazy stuff happened last night. On the lows the curve was in backwardation* rather than the contango it's always in. Probably due to a large order in the backs but interesting none the less.

* On CME Mar/Apr has a low of -20 vs 25 settle, Apr/May 0 vs 40, May/Jun -50 vs 25, Mar/May 0 vs 65, Mar/Jun -50 vs 90

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  #46 (permalink)
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SMCJB View Post
Some crazy stuff happened last night. On the lows the curve was in backwardation rather than the contango it's always in.

While not as pronounced as in the overnight situation both CME settled their curves very flat with at least one month in backwardation. This is a big change from just a few weeks ago where the first 4-5 spreads were all in 75-100/contango and an even bigger change than 5-6 weeks ago where the front spreads where all higher than 100.

I wonder if it is somehow related to this...

Coindesk: $100M+ in Margin Calls: Crypto Lenders Demand Collateral as Market Buckles
https://www.coindesk.com/100m-in-margin-calls-crypto-lenders-demand-collateral-as-market-buckles

Also if your wondering why Bitcoin sold off so much this week, this is interesting...
Coindesk: Bitcoinís Price Slides $1,000 in 30 Minutes After Margin Calls at Bitmex
https://www.coindesk.com/bitcoins-price-slides-1000-in-30-minutes-after-margin-calls-at-bitmex

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  #47 (permalink)
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seems like during these tragic times, both Gold and Bitcoin are increasing in value. I believe there is a strong correlation between these two as they can be both considered safe-haven investments.

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  #48 (permalink)
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Anyone thinking of buying Greyscale Bitcoin Trust (GBTC) as a substitute for real Bitcoin should take note of the slippage. Greyscale charges a 2% annual fee and sells at a premium to the Bitcoin that it actually holds.
Over a 2 year time span 3/22/18 to 2/12/21 GBTC yielded -36.1% less than Bitcoin.
Over a 1 year time span 9/4/19 to 2/12/21 GBTC yielded -17.1% less than Bitcoin.
Over a 100 day time span 9/22/20 to 2/12/21 GBTC yielded -3.6% less than Bitcoin.

Making the same time span comparison for Gold (Kitco spot) and iShares Gold Trust iAU
Over a 2 year time span 3/22/18 to 2/12/21 iAU yielded -0.3% less than Gold.
Over a 1 year time span 9/4/19 to 2/12/21 iAU yielded -0.7% less than Gold.
Over a 100 day time span 9/22/20 to 2/12/21 iAU yielded -0.8% less than Gold.


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  #49 (permalink)
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I gather the premium it trades at can fluctuate wildly as well. Still it's one of the few ways to buy Bitcoin in a standard brokerage account. Although the first Canadian/North American ETF was approved last week.

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  #50 (permalink)
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The last time I looked into Bitcoin, it seemed like cashing out was one of the biggest challenges if you were using it to store substantial amounts of value. Have there been any new developments to make that easier? The last real news I had followed was the collapse of Quadrigacx which spooked me from looking into this any further.

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