Bitcoin vs Gold – Part 2: Risk Factors and Historical Performance Between the Two Assets

Finish topic 1 with basic arguments about the origins and the differences between the two types of asset, one thing being gold, which has millennia of history linked to human culture from jewelry making to jewelry making. Confront a great invention of humanity in the 21st century called Bitcoin. What will humanity choose next to keep its wealth for hundreds of years to come? The road to winning Bitcoin will be easy when countless protests and bans from different countries have occurred over the past 12 years. In this article, we’ll explore in more depth what risks Bitcoin is exposed to and how the infinity of the Internet allows us to grow into every corner of people’s lives.

(On April 22, 2021, there was a heated debate on Bitcoin and gold on the Stansberry Research channel moderated by coordinator Daniela Cambone, who asked questions and moderated the debate with two participants. Michael Saylor and Frank Giustra confront opposing views Gold and Bitcoin. What will be the new store of value and the solution for mankind.)

Risk factors

Coordinator: JPMorgan’s December 2020 public report shows $ 2 billion flowing into the Grayscale Bitcoin Trust, compared with an outflow of $ 7 billion from gold ETFs October-December 2020 JPMorgan predicts the Trend will continue as the inflows of gold into Bitcoin increase. My question to Frank is if JPMorgan’s calculations that gold-to-bitcoin flows are billions of dollars are correct, how can you hedge against that?

Frank: I usually don’t listen to anyone on Wall Street because what they say is often more wrong than right, but measuring Bitcoin’s growth over a short period of months is not sensible. Like throwing arrows in the dark. But I judge and measure the greatest risk Bitcoin is exposed to is what I talked about earlier, which Michael avoids and which he doesn’t have to worry about. Central banks and governments pose the greatest risk. When bitcoin gets big enough and popular, it will be seen as a threat to currencies and the dollar in particular.

The government has to control the currency and have a monopoly because it has to manage its financial and monetary policies so that it has to control the currency whether you want it or not. And whether direct or indirect taxes, inflation taxation is the government’s preferred method right now, which means they can control any debts they run up and you are the consumer. Consumers pay taxes through inflation.

He (Michael) really believes that the government will allow Bitcoin to replace all of the value of gold and he is also suggesting the full value of the bond market, do you think the government will allow that to happen. I think this is insane.

Take a step back and look back and wonder what if the lawmakers competed with the anarchists and in which case the anarchists would be Bitcoin, I don’t know how they allowed that to happen. They don’t completely destroy Bitcoin, but they can make a lot of small cuts, such as: B. the change in investment laws, the ban on Bitcoin and the ban on exchanging it for fiat money, the wiping out of all two institutions that buy Bitcoin and push it into the underworld.

And the government will use any excuse and the real reason is to protect its monopoly of money and maintain its enforceability in monetary policy, but it will use other excuses such as prosecuting criminals who use bitcoin to protect consumers. Save the environment, launder the money, and you will use the final trump card of national security against Bitcoin if it poses a threat to the currency.

Central banks, in turn, have a principle of buying gold, they own gold, they have $ 7 trillion worth of gold, and they will not allow any other asset class to become a store of value. , it’s not going to happen. And central banks will create their own digital currencies like China does and they won’t want to compete with bitcoin, if bitcoin is big enough they will chase it and get rid of it. This is how the world works.

Michael’s objection

Michael: Central banks don’t own bitcoins, but when countries start buying bitcoins the price will go up, argument one.

Argument two: our US dollar will be the big winner from bitcoin proliferation, 5 billion people will have mobile wallets on their phones, they will have a currency layer that runs on light rail and run on payment compliance, we have strong currencies like US dollars, euros, yen … big failed fiat currencies will fall from the bottom of the top 50, losing their monetary rights in particular, economic collapses in countries in Africa, South America and Asia. Instead of keeping their currency, they will switch to the dollar. Bitcoin is critical to the US technological supremacy and the supremacy of the US dollar.

One day, 5 billion people will use the US dollar as their currency. I don’t think the government will be against it, I think the government will accept and will the government allow bitcoin to take away the capitalization of gold or part of the bond market? They made this possible through the development of the S&P 500, ETFs and mutual funds, I think as long as the assets are managed and custody by the banks, there should be no problem for the insurance companies and investors are investing in Bitcoin. Every week, 2 to 3 million new people around the world buy Bitcoin. Bitcoin is the most popular fixed asset in human history, it’s spreading like wildfire. Government voters will own it, it will be politically popular.

Moderator: Question to Michael, PayPal co-founder Peter Thiel once said that Bitcoin is a financial weapon against the US and threatens fiat money, but why don’t we see the Bitcoin central bloc of the Fed and the banks?

Michael: I think Thiel got it wrong, what he said will be the basis for the financial technology of the 21st century, the governor of the central bank of China only sees it as an asset and not a currency.

Here are my thoughts on the risk factors of gold:

Gold invites violence, there have been many wars in the world over each other’s gold over the centuries and until recently governments confiscated the gold from people, gold has a problem that one cannot be sure of the cost of The protection of gold increases with gold the value of gold in dollars. You’re trying to wonder if I send gold to 5 billion people, what will it cost? Gold is not scalable, we call the applications of gold paper gold, they do not have complete computational techniques and protocols.

Bitcoin makes the transport of transactions very efficient and inexpensive, unregulated and the same for everyone, someone with $ 100 bitcoin is just as secure as someone with $ 1 billion bitcoin and protects the owner’s interests from violence and corruption from this country. Gold invites the wicked to kill you and take your fortune.

Bitcoin protects your assets in cyberspace. The place cannot be taken by force and that promotes peaceful negotiations instead of coercion

Frank meter

Frank: You are right, there is too much war and bloodshed to protect gold and that is why people are working so hard on this one that it is not easy to just give up.

When Bitcoin reaches your proposed current capitalization of gold, it will be like a duck sitting in the field and very easily attacked and destroyed by many people, but for gold, my money is safe in the field and you cannot deny that it is a threat to fiat money.

Historic achievement

Moderator: Bitcoin has grown an average of 200% annually for the past 10 years, and Bitcoin’s greatest strength is clearly its price and performance. The risk is that the higher the price, the more Fomo. Won’t it pose a risk if the price of Bitcoin continues to rise and can be purely speculative in the future?

Michael: I think Bitcoin has been less risky in history, a year ago the Bitcoin price was up 693% compared to 4.66% of gold, a multiplier sharp relationship Its 4.7 versus 0.43 for gold. Investing $ 1 in gold for 5 years will get you $ 1.33 and $ 132 if you invest in Bitcoin.

If you choose gold over Bitcoin, you will lose 99% of your wealth

Over 10 years, Bitcoin has grown an average of 190% per year, compared to 1.65% for gold. Looking back over the past 100 years, the price of gold was $ 20 an ounce and now it is $ 1,790 an ounce and it can be said that whoa has gone up nearly 80 90 times. but you actually take a huge risk and realize that no one can get the gold back in a century, 95% of the gold has been confiscated in the past 100 years. If you do a risk-adjusted calculation, a $ 1 investment should be worth $ 100, but you lose it, not everything but 95% and you have $ 5 left.

Two thousand years ago gold was used almost 80% for money, and then it fell to 40% in the Middle Ages, and in 1940 it was 30% 20%, and today the monetary value of gold is maybe 5 trillion or half. ..