Is Bitcoin about to replace gold?

See the latest Australian dollar analysis here:

Macro Afternoon

Raoul Pal asks the question:

Is this true? Here’s the same chart without the dubious technical support line:

It is true that gold faded against BTC in the last few weeks after PayPal allowed its use of the latter on its platform.

But, in context, the move looks news-related, not structural. BTC has been yoked to the gold price for about three years in the current range. Drawing a line on a ficticious market for an imaginary product using made-up technicals is evidence only that Mr Pal has caught BTC voodoo.

That is not to say that BTC might not suddenly start pricing itself independently of gold. The yoking is absurd to begin with. Gold is pure money while BTC is pure bullshit. Yet that is BTC’s power. Anything is possible given BTC  exists only as a figment of the imagination. Notwithstanding that we also living through monetary end times so such creations can take on an importance that far outweighs their real significance.

For now, it’s a safer bet, to assume that BTC is playing the role of some kind of whacky and ethereal gold proxy. To be honest, nobody knows what this thing is worth because it doesn’t exist as either a store of value or medium of exchange beyond the brains of few anarchists.

Either way, both BTC and gold appear about to take another pounding as DXY rallies into the extraordinary risk cluster growing around the virus and US democracy.

Next year looks more constructive for both as the vaccine wave arrives with more US stimulus.

David Llewellyn-Smith

Comments

    • Yes, a ban is the risk for cryptos. If it becomes illegal and effectively only used outside of legitimate businesses then what is it’s long term future. TPTB won’t tolerate a competing currency. That said, it may be worth a punt in the short to medium term. A ban is not imminent.

      • They aren’t going to ban it. In fact, it is going to be the opposite. Once, Bitcoin gets to a certain point of adoption the Tax Office is going to want their cut. They will say that if you earn a certain amount of Bitcoin you must pay the Tax Office a cut. Once that happens, it will start to be perceived as a legitimate currency in the eyes of the population. The market cap is too high, and the momentum unstoppable at this point.

        • I have to confess, I’m keen to get some onboard (some!). But I wouldn’t bet my house on it. The issue with any money system is that the Gubmint wants control of it — when there was a gold standard, the gubmint could rort it to an extent, but once they ripped the ar$e out of it, everyone said: here’s your dollars, I’ll have my gold, thanks. And Nixon had no choice but to abandon it.

          The West has very expensive welfare and/or defence costs and they can only be ‘afforded’ by perpetual expansion of the money supply, to the detriment of the working sheep. Taxing BTC earnings is fine but they still don’t have real ‘control’ and people will simply migrate to alternatives to avoid. And i don’t know how, logistically, any firm could commit to paying someone in BTC unless it was the major medium of exchange (exchange rate risks would be too large and hedging costly).

          • I’m still doubtful as to whether it could become the dominant monetary system in this country, but I think the days of there being a 100% exclusive monopoly on money are coming to an end. I see BTC and maybe one or 2 others becoming a significant minority, simply because they can’t be realistically banned and they have too much traction. People tend to overestimate the powers of government imo, particularly when it comes to the internet.

          • I agree. I’m going to set up a Kraken account and put some on, but only small, and in the context of adding to my physical holdings of gold, platinum and silver.

        • This week I saw some stats that in the US 80% of people who bought btc did so in the past 12 months and 33million Americans owned BTC. That is 9% of the US population according to the worldometer, so they are over the magic 5% adoption rate threshold which means BTC should survive.

    • “It all depends if central banks tolerate the competition after they bring out their own digital currency…” – yes they will bring their own as they are running out of idea with the current fiats. And will be on the back of blockchain technology. I doubt CBs will agree on which blockchain will rule so interoperability will be needed – this is where Polkadot and Quant are coming into play. IMO.

  1. Mike Herman TroutMEMBER

    It was only 3-4 weeks ago that the news media was awash with stories about gold heading to dizzying new heights…now its btc’s turn. Maybe he is right, who knows… I hold gold and will continue to do so…

  2. Bitcoin is the fake gold of our time in this post truth fake world.
    From its gold “coin” logo to the way its “mined” is all semantics of the real thing however that’s where the similarities end.
    Physical gold and bitcoin is essentially opposites of each other.
    I find it interesting some people own both, especially preppers that hold physical for our dystopian future but then strangely have bitcoin as well.

    • Maybe it’s a sign of open mindedness – not being wedded to ideology? BTC is a product of the free market and people who embrace free markets tend to like the idea of both gold and competing currencies (away from fiat).

      • Possibly. It also could have been created as a more secure way to launder money.
        The Ukraine, Russia and Venezuela often top varies studies of the greatest adoption of crypto currencies.
        Place in Africa like Nigeria are also high

      • Lol me too. It is a completely speculative bet. I’ve got some, have no desire to add any more to my stash at this point in it’s development. If it does become widely adopted I should be fine. If I lose all my money, well at least it was an interesting experience.

        • 1-2% of inevitable assets as a speculative bet (100x) and a potential store of value. Apart from precious metals and stocks, what are the alternatives? Aussie Indexed Bonds? Deposits paying as little as 0.1%. Fiat money is being debased.

          The higher risk is related to it’s storage and counterparty risk. Cold storage also has significant risk.

    • I know. There is something seedy listen to a bronzed, x banker isolating in his bachelor pad mansion in the exclusive tax free little cayman island telling people what they should buy

  3. I bought into Polkadot and Quant but not because those coins have magical powers. Reason behind my decision is blockchain technology that is being adopted by everyone – including banks and governments.
    No one know which crypto will win but if one can pcik that winer there is lot of money to be made. My picks are pruely on what these two are promising to deliver. Time will tell if I backed the right horses.

  4. Narapoia451MEMBER

    It is what it is – I sold out of the BTC I bought at 6.4K this week. I’ll prob buy back in when it inevitably drops again and just accumulate over time. Pure speculation.

  5. “dubious technical support line:”

    Aren’t all technical support lines dubious?

    Regardless, you continue to be wrong about Bitcoin. From everything I’m reading it looks like institutional investors are jumping in now. You can say it’s pure BS all you like. It’s been around for over 10 years now and going from strength to strength.

  6. No, BTC is not replacing gold, cannot replace gold. Bitcoin is actually just a concept, an idea, one of thousands, whereas the limited amount of gold on the Earth (gold, the flesh of the Sun god, Ra) was formed in supernovae, and has been here since the planet formed and will still be here when our Sun goes into its Red Giant phase and fries the Earth into a cinder.

  7. macaroni jewelerMEMBER

    I like the concept of privacy coins, Monero etc and BTC.
    BTC was the first crypto to solve a problem of immense complexity, and it was developed by-
    Some benevolent capitalist who wanted to circumvent the monetary system and obviously devoted countless hour of incredibly difficult work to solve it and it’s never been successfully hacked…. Then suddenly our hero chose not to receive any acknowledgment for their achievement and now remains anonymous.
    More likely buried in a shallow grave somewhere… there is something very wrong with the back story, and therefore I’ll refrain becoming engulfed thanks.

  8. The only way crypto has legs long term is if it can be used for day to day purchases. PayPal has the capability to make it happen assuming they can hedge the volatility risk for merchants who accept it as a payment method. If you are a merchant would you accept a payment method which could drop in value by 20% overnight if your costs were fixed in fiat? I sure as hell wouldn’t.

    • I think the volatility issue is really only around the fact that it is still, right now, only in a relatively small number of hands. As it becomes more popular, volatility should decrease. The way it is becoming more popular is through a series of booms that spread it over a wider number of people each time.

    • Also would you buy anything with it when it can swing up 5% in 1 day. Would you want your country’s currency to be pegged to bitcoin? If so can you think of any reasons that would be a bad idea. Perhaps it just should remain as it is, a digital speculative product you can trade.

  9. I dont buy often with it but Crypto are amazingly convenient for international transaction (dirt cheap and confirmed within minutes, fully traceable) and I find the idea of smart contract game changing.As currently see in US, a voting system based on chain would be very valuable.

  10. Aussie1929MEMBER

    Bitcoin is a disaster for the masses, they tout that it democratises money and will be better for all yet it is a proxy for data hacks used for ransom payments and scams, it is actually detrimental to the masses. You can’t demand ransom for data with precious metals. My 2 cents

  11. Good, more of this, please. So the fiat pump… Trillions and it’s all real all those Trilliions of USD?

    The one key differences the Issuer. The USA will pay back their printed debt you’d guess as they’ll be here in another 100 years wed wager. Hmm BTC is decentralised and trustless and limited supply and could be here in 100 years but right now in BC world, it looks like Napster. Most interesting.

  12. I’ll go with Raoul on this one. MB are simply intellectually too lazy to understand it. A veneer thin effort been applied with a thick spread of preconception.

    Luddites will always be luddites.

    We can’t all be early adopters. Or mid adopters. Someone’s got to be late to every party – that’ll be MB.

    BTC is no less imaginary than the fractional reserve bank created digital entry fiat in my AUD and USD bank accounts – except BTC isn’t being debased at a break neck speed. I don’t remember ever touching that imaginary stuff. Can’t even convert your fancy imaginary digital fiat for cash fiat these days (other than in token walk around money quantities). LOLOLOL

    Gold and silver as a means of exchange? Pahlease. Try owing some (storage fees, bid-offer spreads, etc. etc. etc.) and then come talk to me. Been there done that. Garbage.

    Who’s ever heard of an actual audit of gold reserves apparently held by the US for example? BTC is auditable now, and now, and now, and in a bit later, and even after that. Auditable by anyone. Not just Steve Manuchin. LOLOLOL

    Who’s heard of court settlement after court settlement by banks being busted for fiddling the paper markets for Gold and Silver?

    Who’s compared the paper market volume for gold and silver against the physical and concluded that the physical is fair reflection of value versus a fiat manipulated market?

    • I’m in the same camp as Raoul and you. Too much smart money flowing into it for it to be ignored. Also, the BTC vs gold argument is a bit played out at the moment. And let’s be honest. Most people don’t own gold anyway.

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