Gold vs Bitcoin
- Thread starter thomas
- Start date
My focus is on bitcoin mostly because it trades on weekends so I can keep my finger on the pulse when other markets are closed. Also the new president is stirring the crypto pot with potentially favorable legislation and regulator picks. And then the introduction of etfs adding more money flow. It will be interesting to see how high bitcoin can go.
With gold, I see that as more a reaction to the national debt and risk of default. Trump mentioned before that a debt default wouldn't be such a bad idea and we could see a battle in congress over the debt limit soon, and those risks could drive gold higher. That will also be interesting to watch.
Also dedollarization could be driving both gold and bitcoin higher as other nations tired of being bullied.
With gold, I see that as more a reaction to the national debt and risk of default. Trump mentioned before that a debt default wouldn't be such a bad idea and we could see a battle in congress over the debt limit soon, and those risks could drive gold higher. That will also be interesting to watch.
Also dedollarization could be driving both gold and bitcoin higher as other nations tired of being bullied.
Winterwood
Member
Thought I'd missed the boat with Bitcoin when it was at $10,000 . How wrong was I. Bullion is less stressful in that it doesn't have Crypto's risk of dropping to zero, but unlike Crypto it won't make you rich quick.
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SilverSurfer
Member
I think Bitcoin being called digital gold is probably accurate. When Satoshi disappeared over a decade ago it basically became a digital commodity. And with the Bitcoin Halving Cycles, it might even be somewhat similar to the gold mining supply and demand in the early days. But I think Bitcoin has more upside than physical gold at this stage, because we're moving further down the road of digital transactions, digital assets, NFT's, etc.
Unless or until there's a major Solar Storm/EMP.. then the pendulum swings back.
Unless or until there's a major Solar Storm/EMP.. then the pendulum swings back.
SilverSurfer
Member
I agree. I think gold is more of a hedge against geopolitical risks. And Bitcoin is more of a hedge against inflation.
I have doubts that the US would ever default. Most governments just keep inflating their currency, which devalues the debts. And most financial institutions in the US are required by law to purchase those same US bonds. But most of those same fanancial institutions are protected under Too Big to Fail policies. And that revolving door just keeps going around. I think an eventual hyperinflation is a more likely event.
Interesting thoughts, SilverSurfer!
Jim Rickards often claims the US has defaulted a few times in the past in support of his argument that it's not such a far-fetched idea, though I can't remember the specific details. We were close in 2011 when congress waited until the 11th hour to finally raise the debt ceiling, which resulted in a debt downgrade for the US. I could easily see that happening again with the way Trump uses threats to get what he wants. I think he honestly believes defaulting on the debt would be a good idea because it's worked so well for him. And I've known people who run up their debt, file bankruptcy, wait a couple years and do it again. Could the US get away with it? I don't know enough to say. I think Trump would back down at the last minute, but not before some faith is lost. But either way, the risks are increasing, and that's what is driving gold.
I asked google if the US has ever defaulted and this came up https://thehill.com/opinion/finance...ted-on-its-debt-except-the-four-times-it-did/
The increasing risks of default and the weaponization of the dollar are probably the biggest reasons central banks are loading up on gold.
On the topic of inflation, the "inflation tax" goes to shareholders as corporate profits, so it seems the best hedge against inflation is to own the shares where the inflation tax is going. I think bitcoin "can" be a perceived hedge against inflation, but there is no direct mechanical link as with stocks. If enough people "believe" it is a hedge, then it can be a self-fulfilling prophecy, which is what I think is happening, and will continue to happen. Bitcoin is fashionable right now. If every millionaire wanted one bitcoin, just for giggles, there wouldn't nearly be enough.
SilverSurfer
Member
Good points Aureo. Maybe there could be a default in the sense of the petrodollar de-pegging from the the oil market, as a next phase of the gold/silver notes no longer being redeemable like it mentioned in that link. That's already happening somewhat, with some countries accepting oil payments in currencies other than the dollar.
Or eventually a revaluation of the currency as some other countries have done. There are more US Dollars held outside the country than there are within the country. So if those dollars quickly started flowing back into the US, i could see something like an overnight revaluation or similar.
But I think the debt ceiling brinkmanship is probably with us for awhile unfortunately. They've been doing that ever since the 2008 GFC and it doesnt seem to be slowing down any time soon. I have a feeling even if they went past the debt ceiling, in the short term, they would just classify it as something like a Pause or delayed payment, instead of a Default. That might sound crazy now, but remember how Standard & Poor's was talked about after the US credit was downgraded after the GFC. They floated ideas like.. the US shouldn't be subject to an outside credit rating agency as well as the national security risks associated with that. Just some food for thought.
I mainly think of Bitcoin as an inflation hedge in the sense of a low interest rate environment. The "easy money" or "risk on" environment that has been created by perpetually low interest rates ever since the response to the Dotcom Bubble. Now that they've bought themselves some wiggle room with relatively higher interest rates for a couple years, they have more runway to start lowering again after the next financial intervention. Maybe the uninverting of the yield curve
?
Or eventually a revaluation of the currency as some other countries have done. There are more US Dollars held outside the country than there are within the country. So if those dollars quickly started flowing back into the US, i could see something like an overnight revaluation or similar.
But I think the debt ceiling brinkmanship is probably with us for awhile unfortunately. They've been doing that ever since the 2008 GFC and it doesnt seem to be slowing down any time soon. I have a feeling even if they went past the debt ceiling, in the short term, they would just classify it as something like a Pause or delayed payment, instead of a Default. That might sound crazy now, but remember how Standard & Poor's was talked about after the US credit was downgraded after the GFC. They floated ideas like.. the US shouldn't be subject to an outside credit rating agency as well as the national security risks associated with that. Just some food for thought.
I mainly think of Bitcoin as an inflation hedge in the sense of a low interest rate environment. The "easy money" or "risk on" environment that has been created by perpetually low interest rates ever since the response to the Dotcom Bubble. Now that they've bought themselves some wiggle room with relatively higher interest rates for a couple years, they have more runway to start lowering again after the next financial intervention. Maybe the uninverting of the yield curve
?I think I remember the gov fining S&P $1 billion or so shortly after that. Retaliatory lawfare. But their point was valid: the gov kept the world in suspense until the 11th hour and that behavior isn't worthy of a AAA rating.
"Two weeks after the August 2011 S&P downgrade, the SEC and Department of Justice announced that S&P was under investigation. Columnist Bob Sullivan of NBC News asked if "the ratings downgrade from Standard & Poor’s [could] be viewed as a shot back at a government that's been taking plenty of shots at the ratings industry lately."[42] Two years later in 2013, S&P "blasted a $5 billion fraud lawsuit by the U.S. government as retaliation for its 2011 decision to strip the country of its AAA credit rating."[43]" https://en.wikipedia.org/wiki/Unite...ential_consequences_to_credit_rating_agencies
Fitch downgraded in 2023:
In response to the 2023 United States debt-ceiling crisis, Fitch placed its AAA rating on a negative watch on May 24, 2023, warning that "risks have risen that the debt limit will not be raised or suspended before the x-date and consequently that the government could begin to miss payments on some of its obligations."
On August 1, 2023 Fitch downgraded USA long-term credit rating to AA+ from AAA.[39] Following the downgrade, economists argued that higher interest rates will result in higher mortgage rates[40] and also assert that relying on foreign financing can have risky economic implications.[41]
Here's a list of countries by credit rating https://en.wikipedia.org/wiki/List_of_countries_by_credit_rating
Debt ceiling showdowns are so commonplace now that it's like a sporting event you could plan to watch and place bets on lol, so it's probably just a matter of time before more downgrades come.
I remember in 2022 when bitcoin went from 64k to 16k everyone was making fun of it being considered an inflation hedge. Inflation was skyrocketing while bitcoin was falling off a cliff. But so was gold and stocks and pretty much everything except the USD and toilet paper lol. Once it became clear the fed was going to cut rates regardless of inflation that's when everything really took off. I can't believe there are some who think the fed could possibly resume hiking. Inflation would have to be skyrocketing again with robust employment for them to do that. No, they're going to latch onto any excuse they can find to resume cutting. The excuse is just the public excuse, not the real reason. On top of that, Trump wants them to cut. So, idk, it seems to me gold et al can only go up.
"Two weeks after the August 2011 S&P downgrade, the SEC and Department of Justice announced that S&P was under investigation. Columnist Bob Sullivan of NBC News asked if "the ratings downgrade from Standard & Poor’s [could] be viewed as a shot back at a government that's been taking plenty of shots at the ratings industry lately."[42] Two years later in 2013, S&P "blasted a $5 billion fraud lawsuit by the U.S. government as retaliation for its 2011 decision to strip the country of its AAA credit rating."[43]" https://en.wikipedia.org/wiki/Unite...ential_consequences_to_credit_rating_agencies
Fitch downgraded in 2023:
In response to the 2023 United States debt-ceiling crisis, Fitch placed its AAA rating on a negative watch on May 24, 2023, warning that "risks have risen that the debt limit will not be raised or suspended before the x-date and consequently that the government could begin to miss payments on some of its obligations."
On August 1, 2023 Fitch downgraded USA long-term credit rating to AA+ from AAA.[39] Following the downgrade, economists argued that higher interest rates will result in higher mortgage rates[40] and also assert that relying on foreign financing can have risky economic implications.[41]
Here's a list of countries by credit rating https://en.wikipedia.org/wiki/List_of_countries_by_credit_rating
Debt ceiling showdowns are so commonplace now that it's like a sporting event you could plan to watch and place bets on lol, so it's probably just a matter of time before more downgrades come.
I remember in 2022 when bitcoin went from 64k to 16k everyone was making fun of it being considered an inflation hedge. Inflation was skyrocketing while bitcoin was falling off a cliff. But so was gold and stocks and pretty much everything except the USD and toilet paper lol. Once it became clear the fed was going to cut rates regardless of inflation that's when everything really took off. I can't believe there are some who think the fed could possibly resume hiking. Inflation would have to be skyrocketing again with robust employment for them to do that. No, they're going to latch onto any excuse they can find to resume cutting. The excuse is just the public excuse, not the real reason. On top of that, Trump wants them to cut. So, idk, it seems to me gold et al can only go up.
SilverSurfer
Member
All good points Aureo. I think the Fed will probably start cutting rates again soon too.
I believe cryptocurrencies and gold are at pretty much opposite ends of the investment scale.
Since the rejection of the gold standard, gold has been relegated back to being a currency, but the OG global currency that is not affected by the investor's confidence in the controlling nation state.
If you believe the Euro is going to replace the greenback as the global standard, you sell your USD and buy Euro.
If you believe everything is going to shit, then you buy gold on the assumption that it is a neutral currency that is relatively immune to the negative effects of global turmoils. (Then there is a demand and everyone wants it so it becomes more of a commodity)
Bitcoin, however, started life as a useful currency that unfortunately quickly became an unregulated, high risk commodity.
If you want to park your investment during times of strife and maybe make some minimal gains, buy gold.
If you like going all-in on black, choose crypto.
jamesgoldman
Member
gold, I recently found out have £3k in Ripple/XRP that I lost access to years ago (bought it for £400 but I traded that from a single £10 minimum deposit)
once bitten, twice shy
once bitten, twice shy
