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

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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!

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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. 

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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.

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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

 

 

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,

 

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. 

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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. 

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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?

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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. 

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I wanted to take this opportunity to address some of the advantages Bitcoin has over Gold in terms of 'Store of Value'. 

First of all, Bitcoin has far more lower storage costs than Gold. Bitcoin is also easier to transfer from one person to another or even one country to another than Gold. You have to ship Gold for it to get from one country to another but not Bitcoin. Digital Gold is the future in my opinion. It could take many years I accept but I think it is coming. 

Bitcoin has divisibility which means one can execute micro transactions. With Gold you cannot. It is easier to counterfiet Gold than it is Bitcoin. Gold is heavy. Gold bullion / bars are heavy to move and transport. Bitcoin is weightless. You can transfer the value of Bitcoin far quicker than Gold. There is no government manipulation or interference with Bitcoin but there is with Gold. There are no government controls for Bitcoin but there is with Gold. You can buy a cup of coffee with Bitcoin but you cannot with Gold. 

From memory (so please do not quote me on this) but you can divide Bitcoin to around the eighth decimal place which is a Satoshi. It is more likely in the future for people to carry a Crypto Wallet and carry therefore carry Bitcoin than it is to carry Gold to pay for goods and services.

 

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Are investors using Bitcoin as a hedge their exposure against traditional assets? Is it being used as a safe haven?

Two to three years ago when ever there was anything in the media in relation to Trump and North Korea, the price of Bitcoin appreciated. I do wonder if the US-China Trade talks and the negative news is also enabling Bitcoin to shine?

 

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I would urge those who are positive about Gold and negative about Bitcoin to conduct a simple piece of analysis. 

In around 2008 / 2009 when Bitcoin arrived if you had invested say $1,000 in both, what would they both be worth now and what percentage return (profit and loss) would you have achieved?

I think you all deep down know the answer but the significance of the returns and value of investment is quite staggering. It begs the question what represents (based on evidence) the best store of value and best capital protection? This is even after several large 70% - 80% corrections throughout this period in Bitcoin!

A shift in mind-set is coming and it is the younger generation who are more 'digitally enhanced' that will embrace digital currencies and Bitcoin as a store of value over Gold.  

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A better store of value than both Gold and Bitcoin in terms of capital protection is a savings product with National Savings and Investments (NS&I) as it is 100% backed by HM Treasury. Therefore your capital cannot go down where as it can with both Gold and even more so with Bitcoin as both move up and down and Bitcoin is far more volatile at this moment in time. 

However, knowing what I know about Bitcoin's extreme volatility, if someone gave me for example £1000 and asked me where I would invest it, Gold or Bitcoin, then right now I would pick Bitcoin every time. I think this time next year Bitcoin will have provided a better return on my capital than Gold even after a potential 80% drop at some point in 2020 for Bitcoin. 

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Death, Taxes, Crypto: Fmr. $13 Billion Asset Chief Certain Every Investor Will Own Bitcoin

https://www.ccn.com/every-investor-will-own-crypto-bitcoin-eventually

This is a very interesting article. The title is very misleading but when you actually read the article you will begin to appreciate just how much Bitcoin could rise from even these high levels. 

 

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The Gold Standard disappeared around 1971. This tells me that is is no longer the reserve currency since that date. There were issues which led to Nixon making such a decision. Gold is no longer the standard used to measure wealth. In India it used to be for centuries. However the new younger higher middle class are moving towards equities and property in India. They are arriving at a stage where the 'West' were many, many years ago. 

If the US Fed keeping on printing dollars and pursues its QE then US Dollars are in danger of remaining the reserve currency. China has already made noises about this a few years ago but there is a new kid on the block which no country owns or controls, Bitcoin.

If Bitcoin can transition from being perceived as a 'Store of Value' something which can be used to exchange for goods and services then game on. Could it ever become the world's reserve currency? Who knows!

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I want to see how Gold's price behaves this coming week. If you had invested in Gold and Bitcoin at the same time at the start of 2019 then which would have preserved your capital better? 

With all of the geopolitics around the world, Bitcoin is really coming into its own when it comes to safe haven status. If reports are to be believed then capital is flowing into Bitcoin from China. 

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2 hours ago, TrendFollower said:

I want to see how Gold's price behaves this coming week. If you had invested in Gold and Bitcoin at the same time at the start of 2019 then which would have preserved your capital better? 

With all of the geopolitics around the world, Bitcoin is really coming into its own when it comes to safe haven status. If reports are to be believed then capital is flowing into Bitcoin from China. 

I was looking at btc today and I thought one last spike before the fall, let's just see I think this is a bull trap

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@Foxy,

You may be right I do not know but it would be a shame to miss the profit potential on such an opportunity. The higher the rise, the bigger the fall in my experience. Are you going to short Bitcoin then?

The price action is allowing those who want to profit from the price movement an opportunity to do so. 

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5 hours ago, TrendFollower said:

@Foxy,

You may be right I do not know but it would be a shame to miss the profit potential on such an opportunity. The higher the rise, the bigger the fall in my experience. Are you going to short Bitcoin then?

The price action is allowing those who want to profit from the price movement an opportunity to do so. 

@TrendFollower

No not at all it's not my thing, I study market behaviour and btc is not something I know about, I don't even understand what drives it. I can see the temptation if it falls as it has previously or even rises as it has previously but no not for me. To be honest, I don't really like to trade FX. Equities are my favourite because I understand the overall bullish nature and the need for correction without much need for in-depth fundamental knowledge. I do like oil again any fundamentals are pretty much on the news and regular market reports you can follow online. but for now, I'm sticking to the DAX.  

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@Foxy,

Ok, that is fair enough. Crypto’s are extremely high risk and volatile. They are more for ultra aggressive and higher risk taking traders. I still think one can trade Crypto’s based on price action and basic technicals but would never encourage one to do so if they did it feel comfortable. 

I do a lot of reading and research daily on Cryptocurrency, Blockchain and Tokenisation so do have that fundamental knowledge from an investment perspective which also helps from a trading perspective.

Whales and speculation drive Crypto’s as well as other things. I also trade Commodities as well. 

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One of the things that is interesting about Bitcoin is that it has no negative yield unlike Government Bonds. In fact at 0%, Bitcoin has higher yield than Government Bonds in 18 top counties around the world.

Bitcoin is also the best performing asset class since the start of 2019. It has outperformed Crude Oil, US Stocks, US Real Estate, Global Stocks, Global Real Estate, Tech Stocks and Gold in 2019.

I have stated in many different threads and posts that one must try and trade the strongest trending assets. This is what makes the biggest different in a traders portfolio in terms of profit performance

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People dream and some had a vision of being a passenger in a driverless car, travelling to the moon for a vacation or something which seemed unimaginable only 20 years ago.

Therefore can there not be a vision of paying for goods and services using either 'Digital Currencies' or 'Cryptocurrencies'? I believe this vision will be executed in one form or another in the coming 20 years. It will take time and the infrastructure is being built and foundations being set as we speak. 

This is an enormous project that requires global participation and global regulation. It will be revolutionary and it will come and we will begin to see see real traction and momentum in the coming 10 years as winners emerge from this the Crypto universe. I believe there will be several as each of the major winners will specialise in speed, efficiency, security, etc. 

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Disclaimer: I do not wish to get into any heated discussions or unnecessary arguments.

I have a 'Positive Bias' towards Bitcoin and certain other Cryptocurrencies. I stress only certain some and not all. This is based on fundamental analysis, reading, research and daily following of news in this area. Also I follow the price action more of less daily and throughout the day and use certain technical indicators (not all) and all this combined forms my 'Positive Bias' towards Bitcoin et al. I also follow Blockchain, Tokenisation, and start ups in this exciting area. I am involved in Blockchain and Tokenisation from an investment perspective too. 

Now if someone has a 'Negative Bias' towards Bitcoin et all then I have no problem with that. However, if they have a 'Negative Bias' without conducting the fundamental analysis, reading and necessary research on the subject area then it is not a bias but an opinion which could be right or wrong and only time will tell. If someone strongly feels that Bitcoin is going to end up crashing and will get annihilated then I would strongly urge them to short it and profit from this by making lots of money.  

From a trading perspective any positive bias is more likely to lead to bullish views and potentially more long trades than short. One would expect any negative bias to lead to more bearish views and potentially more short trades than long on the asset. 

Now I have articulated why I am positive on Cryptocurrencies, Blockchain and Tokenisation on several different threads and posts. I may end up being wrong but that is fine but I have articulated my arguments and personal thoughts / opinions. I think it is important for those who are negative on the above to do the same so that a balanced discussion with arguments from both sides can be presented in a professional, polite and nice manner so that the IG Community benefits as a whole. Each can then make up their own minds and decide for themselves by weighing up both sides of the argument. 

I highlighted my overall 'Road Map' several times on several threads about this asset class and I have seen nothing to date to change my view. However, I am more than happy to change my view should I acquire any knowledge or information which enables me to do so. If any evidence is presented by the form of price action which suggests Bitcoin is going to zero then I am more than happy to change my view. I try not to get emotionally attached to any asset which I trade and Cryptocurrencies are no exception. 

Why is Bitcoin going to zero and what evidence, information or data is there to support this right now? If one conducts Fundamental Analysis on Bitcoin then what information / evidence is there to suggest that Bitcoin's price will crash and it is just a mania? Once this is presented then I am more than happy to review my 'Road Map' for Bitcoin. For now I think yes there will be a drop (this would happen in another other asset class after such a parabolic rally) and then there is more chance of Bitcoin hitting $10,000 than making a new low from the current position. Of course I may be wrong but I can only form an opinion based on current fundamentals and technicals available. 

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