Bulldozer00's Blog

In the long run, Bitcoin can succeed either:

1. As a convenient global currency of exchange (in parallel with inflation-prone national fiat currencies),
2. As a store of “perceived” value (serving as a hedge (like gold) against fiat currency devaluation or outright collapse)
3. Both 1. and 2.

Of course, BTC itself can collapse at any moment to zero; nada; goose-egg-city.

BD00 thinks that if Bitcoin does indeed succeed, the odds are better that it will do so as 2 over 1, or as 2 over both 1 and 2. And if it does, it may steal some market share from gold.

To further explore the assumption of success “as a store of perceived value“, consider the approximate numbers in the box below. Based on these numbers, Bitcoin’s market capitalization is currently a minuscule fraction of gold’s market capitalization: .1 percent.

Next, consider the following table:

If Bitcoin manages to “steal” 5% of the gold market (meaning that 5% of all gold holders decide to exchange their gold for BTC), each $500 BTC you own today will be worth $25,000 when the 5% market share threshold is crossed.

So, what advantages does BTC offer over gold to entice the goldbugs to convert?

1. BTC is infinitely more transportable than gold, especially in larger amounts, from any location in the world to any other location in the world. All one needs is an internet connection to execute a global transfer much faster, and at a lower cost, than shipping physical gold artifacts.
2. BTC is much more accurately divisible than gold: 1 satoshi = .00000001 BTC
3. Even though gold is scarce, BTC is more scarce. After the 21 millionth BTC is minted sometime in the year 2140, that’s it. Fini. No more BTC will be mined.
4. You can store and guard your BTC yourself (if you choose to) in lieu of paying a “trusted” third party to store and guard your physical gold bars. It’s also much easier to guard a tiny BTC cold storage device in your possession than a cache of weighty gold bars.

Based on reasoning similar to that given in this post, Bitcoin advocate Wences Casares recommends people consider investing 1% of their savings in BTC. As you might surmise, BD00 also recommends the same advice. That way, if you lose your entire BTC investment, you won’t be itching to hire an assassin to inflict a slooow and painful death upon me.