Jump to content
Sign in to follow this  

Bitcoin - Digital Gold - Part 1, 2 & 3 by TrendFollower

Recommended Posts

Part 1:

 

I wanted to take some time to post why I think Bitcoin can be good for society rather than just what the media reports like it is used by criminals and it is mainly used to launder money, etc. If enough people 'like' what I am writing and sharing with the IG Community then I shall continue with part 2 and try and keep it in small readable chunks. I will try and share information and my views about Bitcoin which you may or may not choose to use when making any decisions about investing or trading Bitcoin. 

 

I have been doing a lot of reading recently and I have realised that right from the beginning, Satoshi Nakamoto, envisaged a digital analogue to gold. He saw a new kind of universal money that could be owned by everyone and spent anywhere. Bitcoin was always meant to be scarce (only 21 million would be released) like gold and would only be worth what someone was willing to pay for them like gold. It would also be hard to counterfeit.

 

For me, Bitcoin, has certain advantages over gold as a new place to store value. If you wanted to ship gold from UK to US then you would need a ship. Now to move Bitcoin from UK to US all you need is a digital private key and the click of a mouse. For security, gold, required security or muscle. With Bitcoin, Satoshi Nakamoto's security is uncrackable mathematic formulas rather than the security or muscle. Now to most people the technical details behind Bitcoin are very complex involving advanced mathematics and cryptography. However the technical details behind the internet, is complex too but people still invest in the tech stocks relating to it.

 

If you go back to the origins of Bitcoin then one of its aims were to take power away from banks and central governments. These are the very people that are calling Bitcoin a fraud, ponzi scheme, bubble, etc. Hmmm! For me the key moment was the financial crisis and the perception people had about central governments and financial institutions. You could argue that this was a utopian moment. 

 

During 2017, I read many articles (market noise) as many of the people who read my posts will now is how I describe such media bias. This very media supported by bankers, economists and government officials have dismissed Bitcoin as a speculation frenzy and compared it to the Dutch tulip mania which really annoyed me. Tulip mania was around four centuries ago. They then reported that there was no central authority for Bitcoin. I laugh at this as this very same central authority allowed banks to fail and people to lose their property during the financial crisis. 

 

I will end part 1 by stating that at the time of writing this Bitcoin has just hit $17,000. Bitcoin helped bring Cryptocurrencies to the mainstream and the digital currencies that we talk about today such as Ether, Ripple, Litecoin, etc. have all originated from the birth of baby Bitcoin, which with age is growing into a very mature adult. When it becomes a grandfather or great grandfather once the last of the 21 million are mined and released then the price at that time will be very interesting. It is your view on this which will determine whether Bitcoin is a long term investment or not. I am not going to suggest that anyone invests or trades Bitcoin. IG has provided us all a platform to trade Bitcoin with leverage to help achieve profit maximisation. Be that long or short!

Share this post


Link to post

Part 2:

 

I think one must be careful of media scaremongers. 'Market Noise' as I call it. Those who are familiar with me will understand where I am coming from. We need to remember what Bitcoin stands for. It is a decentralised currency with peer to peer technology. Now do I trust central banks around the world. Not really. If you go back in history then you will see examples of how fiat currencies have been debased. From an economics perspective, throughout history central banks have printed far too much new money. You only have to go back to the recent financial crisis and bank bailouts by governments. 

 

Those of you who remember or are familiar with the gold standard will appreciate that every dollar was backed by a certain quantity of gold. It was the most popular global monetary system at the start of the 20th century. Basically, the Federal Reserve, and other central banks could only print more money if they backed it up by more physical gold, If they could not then as a result they could not print more money. However, during the Great Depression, this restriction was suspended so that central banks could print more money to stimulate the economy. From memory it was around 1971 and Nixon finally cut the value of the dollar loose from the gold standard.

 

The point I am trying to make is that this meant that the dollar and other global currencies around the world would be worth only as much as someone was willing to pay for them. For me as we approach the adoption of digital currencies why this should be any different for cryptocurrencies? Printing more money has meant existing money was worth less. There lies your problem. Bitcoin wants to eliminate this problem.

 

I think 'little knowledge' is dangerous. I think media bias is dangerous. We are seeing the biggest change in my lifetime with cryptocurrencies and blockchain. Combine this with the power of the Internet and we will see humungous change in the way we conduct business and pay for goods and services. The best advice I can give is for people to read books on Bitcoin, Cryptocurrencies and Blockchain. 

Share this post


Link to post

Part 3:

 

I think one of the most fascinating stories around Bitcoin is how the Winklevoss twins became Bitcoin billionaires. The twins both studied with Mark Zuckerberg (Facebook) at Harvard. So they are clearly bright individuals. They sued Zuckerberg as they felt he stole their idea for Facebook. From memory they got around $65m. The twins were tech savvy and wealthy. They have invested in Bitcoin at a lot lower prices in the tune to I think $11m which back then would have been a monstrous move, but that is what it takes to become Bitcoin billionaires! Not a lot of people may know this but the twins had a goal to keep buying Bitcoin so that they held at least 1% of all the Bitcoin in the world. Also the likes of Mike Novogratz (Fortress) and many like him started to acquire large amounts of Bitcoin. This presented an upward pressure in prices. 

 

One important thing to remember that there are some countries out there where one could envisage Bitcoin being a more efficient place to store money than say the dollar. Countries like Argentina and Venezuela spring to mind. Another advantage Bitcoin has is that it can be the verifiable place where everyone can keep track of who owns what. I can see how South American countries could be the early adopters of something like Bitcoin.

 

The strong advocates of Bitcoin are suggesting that it is the next step in the evolution of money. It is hard to disagree with this as the future is digital currencies in some shape or form. Even if Bitcoin was to fail it will be remembered as something that led to any digital currencies in the future. By the way I am not suggesting that Bitcoin is going to fail. Bitcoin could be universal around the world and be used to pay for goods and services whilst travelling in any country around the world. Gold is universal but it is difficult to acquire and hold. Bitcoins can be bought, held, transferred by anyone with an Internet connection. Just one click of a mouse is needed!

 

If we go back historically then I cannot remember any new asset that could challenge gold. I am talking over the past 5,000 years. Bitcoin could be a better version of gold, a digital store of value - 'Digital Gold'. It actually is more scarce than gold which makes it even better in my opinion from an investment perspective. It is more divisible and more durable. It is easier to transfer. The blockchain protocol has made it possible to transfer value around the world just as the Internet protocol has provided a decentralised way to move information. 

 

Just imagine if people around the world saw Bitcoin (I can see this applying to the younger generation) as a substitute for gold. The value of Bitcoin would skyrocket. The younger generation are not that much interesting in acquiring gold. However they are more interesting in digital currencies. Gold's market cap is around $8 trillion. Bitcoin has to hit around $50,000 to be worth just $1 trillion. Therefore it Bitcoin was successful in becoming the substitute for gold then long term $500,000 is possible, who knows? I am not suggesting it will, I don't know but this is the long term vision of those who invested big in acquiring Bitcoin.

Share this post


Link to post

Hello TrendFollower

It looks that even after the price of Bitcoin has nearly halved ,you are still quite positive about the future of Bitcoin.

By now you must have seen that many countries in the world are banning the trade of Bitcoins in their countries.

Not only that it looks that in future most of the countries would even make it illegal to trade in Crypto-currencies.

Bitcoin is not a viable and proper investment. Though the supply of Bitcoin is limited as only few people own them but there is no dearth of other hundreds of potential substitutes. owning Bitcoin is a gamble rather than an Investment.

It is also possible if people are buying Bitcoins with borrowed money ,it will bring enormous problems and it can effect the whole financial system and bring down the stock markets in the world.

Still I think that it is just a Crypto Mania and might bring down the entire financial system in the world.

 

peter77

 

 

Share this post


Link to post

,

 

I have been trading Bitcoin since the $2,000 levels and below as well. Due to the volatility it is a trend followers dream as you can profit from it trending both up and down. I invested in Bitcoin at around the $7,000 levels. During this time I have seen many negative stories about Bitcoin and Cryptocurrencies in general and Bitcoin is still up from $1,000 levels to around $10,000 levels at the time of writing. This is after the 'so called' crash and correction that was due. I have seen all these same stories appearing online and in newspapers and magazines. I ignore them as they are what I call 'market noise'. I look at the price action and behaviour.

 

Governments will adopt some form of 'digital currencies' in the future in my opnion. A few countries have already started. Trading in Bitcoin does not influence the price as much as physically acquiring Bitcoin and physically selling Bitcoin. This is what moves the price. As long as there are buyers willing and able to acquire Bitcoin then the price will continue to go up. Yes there will be large corrections along the way but those of us who have been involved are fully used to them and more or less expect them now. I fully expect a large correction every quarter on Bitcoin. It is nothing new. 

 

For me an investment is something which an investor can sell and have the opportunity to make a profit. Bitcoin meets the criteria. If you compare the last nine years of holding Bitcoin compared to say gold then it outperforms it by a very large distance. I accept that Bitcoin is speculative and a high risk investment or even trade but no more so than a micro or nano cap that is a high risk growth share. Could an investor have made large profits from investing in Bitcoin? Yes, absolutely they could. This make it a very compelling investment. I accept it is extremely high risk and not for everyone. 

 

If people invest or trade anything with borrowed money (not just Bitcoin) then it will bring enormous problems. However, Bitcoin, is not directly linked to the rest of the financial system or stock markets. If Bitcoin failed then I don't think it would bring the rest of the stock markets down. The money acquired from selling Bitcoin on the way down would most likely find a new home or move into another asset class. 

 

Let's see if Bitcoin still exists come 1st January 2019 and what the price is. You may be right, who knows. The only thing for me that will determine Bitcoin's success as an investment is the price behaviour and action and not the media articles which include a level of bias to influence readers who maybe don't understand the significance of not only cryptocurrencies but blockchain as well. 

Share this post


Link to post

I came across this article which I posted back in January 2018 as I was going to share with someone and thought I would see if anyone has any further comments. 

Share this post


Link to post

Bitcoin Gold is up nearly 7% at the time of writing. Personally I cannot see room for Bitcoin, Bitcoin Cash and Bitcoin Gold. At some stage there must be a battle and a winner must emerge. 

I don't know if technically this is even possible but could Bitcoin, Bitcoin Cash and Bitcoin Gold re-merge (re-fork) and become just Bitcoin and conquer the Cryptocurrency market?

I understand the reasons for the forks but I just do not see room for the three of them. Surely, they would be stronger together to form one formidable Bitcoin than go their separate ways as they have too many similarities and not enough differences. 

This may not be technically possible but what do people think?

Share this post


Link to post

As most of you will know Gold is the ultimate 'safe haven' and store of value and has been for the past thousands of years. 

Many of you who have read my posts on Cryptocurrencies, Blockchain and Token Economy will be aware of my views based on my reading and research conducted that I think Bitcoin will begin to take a part of the $8 trillion Gold market over the next 5, 10 and 20 years and possibly even longer in terms of becoming the 'Digital Gold - Digital Store of Value'. 

I read this morning that the second biggest market in this relation was Silver at $50 billion in terms of store of value. Something very important has happened which is Bitcoin has overtaken Silver. Bitcoin is now $60 billion in terms of store of value. So Bitcoin has overtaken Silver in terms of market cap. 

Now I have read many articles where 'experts' say that Bitcoin cannot become a 'store of value' because it is too volatile. My personal view is that I think this will change as more institutional investment comes in, it gets widely integrated into investment portfolios and becomes a mainstream asset class that has a market cap in the trillions. This will decrease the volatility in Bitcoin, though I accept it could take many years and many changes to Bitcoin for that to happen. 

Share this post


Link to post

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.
Note: Your post will require moderator approval before it will be visible.

Guest
You are posting as a guest. If you have an account, please sign in.
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Sign in to follow this  

  • IG ISA Season

  • Member Statistics

    • Total Topics
      6,402
    • Total Posts
      28,455
    • Total Members
      37,354
    Newest Member
    cfdnewb
    Joined 22/03/19 00:40
  • Our picks

    • Are we on the verge of a No-Deal Brexit? - EMEA Brief 21 Mar
      The EU has indicated that Theresa May needs to get backing from parliament on her Brexit deal before they agree to delay the UK's withdrawal from the EU. The Prime Minister is heading to Brussels today for the European Council meeting to try to force an extension in order to avoid a no-deal scenario.
      • 0 replies
×
×