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Market Lab Report - Bitcoin vs. Gold

Dr. K's Crypto-Corner

by Dr. Chris Kacher
Cryptotechnologies...Kryptonite for Governments™


Can bitcoin become the new store of value?

Any global store of value must be scarce, fungible, malleable, and durable. Both gold and bitcoin share these values except bitcoin does each of those better. Bitcoin's supply level is fixed and transparent. This eliminates fears of the typical inflationary pressures associated with overproduction of gold that could diminish its value. Further, bitcoin is on a disinflationary supply schedule while the global supply of gold has increased by 1-2% annually over the last century. But the amount of gold could spike higher. Major advances in mining technology and space exploration could bring a surprisingly amount of gold supply onto the market. 

In addition, bitcoin is seamless while gold is cumbersome in terms of storage and transport. Meanwhile, bitcoin transactions will eventually be instantaneous while storage in wallets or cold storage will become relatively hack-proof. Bitcoin is also counterfeit-proof unlike gold: https://strategiccoin.com/why-bitcoin-is-superior-to-gold/

There’s about 150 billion dollars worth of bitcoin, and there’s 8 trillion dollars worth of gold. As more investment is made into bitcoin, its value will grow. And as more see bitcoin being a superior substitute to gold as a store of value, further investment into bitcoin will be made which will further drive up its price.

Many of the things that make gold attractive also apply to bitcoin. Both are not backed by any government and both have intrinsic values that are unclear. Both are hedges against times of serious crisis such as a major event that makes the financial disaster of 2008 look like a walk in the park. What happens when the QE sovereign debt bubble bursts?

Some say gold's advantage over bitcoin is that it's not dependent on the operation of the internet, thus affording it a degree of protection from heavy-handed governments. But governments have no control over peer-to-peer which is exactly where bitcoin would be traded and continue to thrive as has been already demonstrated.

And while some investment banks such as Goldman Sachs argue that gold has much lower volatility thus bitcoin lacks unit of account, bitcoin volatility will diminish as the technology matures and increases in value. The whole cryptospace is about where the internet was in 1994-95 based on today's 10-20 million users.

Interestingly, one thing different from the cryptospace compared to the dot.com bubble of the late 90s has been the lack of deep interest by Wall Street analysts and Wall Street banks, and not even Silicon Valley is on board. Instead, top minds from both groups have migrated into the cryptospace. In time, Wall Street and Silicon Valley will join. [Update: Both have started wading into the cryptopool as institutions such as the NASDAQ as well as VCs see huge potential in blockchain.] So there is a massive amount of capital waiting to be invested in the cryptospace of which bitcoin maintains pole position.

Please read this excellent article on blockchain technology if you wish to gain a deeper understanding of the technology.

Riding the Revolutionary Rocket with Cryptotechnologies... Entirely Evolutionary™ 

(͡:B ͜ʖ ͡:B)

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