Understanding Bitcoin vs Gold
Gold has no fundamentals to speak of except some shitty value in industry and the fact that it’s limited and impossible to forge (better than Bitcoin here by a bit). Ultimately you can’t eat it or live in it and you can’t shoot people with it. Without it’s culturally derived value, gold is basically worth maybe $20 an ounce.
Likewise Bitcoin is a number in a ledger. Sure, it’s good at moving millions for cheap… (better than gold), and works online so it has some shitty fundamental value too (the MTV ratio might be relevant here), and is even more limited — also nearly impossible to forge (weaker than gold here).
But both of them basically suck as currencies by themselves, and that’s why their primary use, today, is as a stores of value and as a non-correlated asset. Indeed Bitcoin’s value as a non-correlated asset is basically undisputed, and a simple google search will not turn up any meaningful dissenting views on this point.
The difference between Bitcoin and gold is that you can build a high speed, fully trustless transfer system on top of Bitcoin. And you can’t build it on on top of gold. On the other hand, if the internet falls apart, Bitcoin becomes basically worthless… and gold doesn’t. Indeed, aside from guns and seeds, gold may be an asset of choice in a post-internet apocalypse.
And that’s really what it comes down to. When you invest in Bitcoin, you are investing in the continued existence of an internet and society. When you invest in physical gold, you are hedging against these things.
Is it in a Bubble?
Maybe. It’s nearly impossible to tell.
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Is Bitcoin the new standard replacement for wire transfers overseas? Can I get an insured, Bitcoin-denominated bank account … and withdraw cash from it as needed? Is appropriate Bitcoin regulation for fiat transfers present in all major world powers?
Actually the answer to these questions is : no, no and … no. Even in Japan, where Bitcoin is legal tender, banks still haven’t built out the infrastructure to handle insured deposits.
Bitcoin, despite it’s valuation in the billions, is a fledgling financial asset. Buying in now is still buying in early. Yes, it could go down by 50% after you buy in. But in the long term nearly every asset manager predicts growth. Especially in 3 years when the supply halves again.
