To clarify: Fed Reserve Banks hold 261 million ounces of gold marked at $42. They are not selling. They are just marking them to market and recognizing the unrealized gain. They are not going to sell, just create the credit to buy the bitcoin. It is almost like printing the money, except this time they have the collateral to justify it. They will still own the gold. Great question on how the government would buy that much BTC without moving the market massively. Let me go ask Michael Saylor…
Worries about fiat currencies are quite rational right now but… wouldn’t the value of gold fall precipitately if the US government began liquidating even a fraction of its holdings as part of a strategy to reinvest it in Bitcoin, and the price of Bitcoin shoot up, before much could be bought? Arguably this would support its value growth story but too quickly to be useful for the purpose. And isn’t BItcoin much like gold anyway? Finite rather than limited in volume, less bulky but, as you say, with its own issues, and also limited in practical terms as a medium of exchange. And does credit die under Bitcoin? Who would borrow in a currency which is expected to grow at 28%?
I enjoyed this Neil! Good overview. Stuff has value because people believe it does. Until they change their minds. I think you are 100% right that the problems with fiat currencies - inflation particularly - are driving this. The world order that our parents and grandparents created continues to decay and decentralize. Currency is just one aspect.
Thanks. The purchasing power analysis is revealing. Adding BTC to an investment portfolio will substantially increase volatility and risk. Maybe Eric has a view on how you could sell some of that volatility through puts and calls.
To clarify: Fed Reserve Banks hold 261 million ounces of gold marked at $42. They are not selling. They are just marking them to market and recognizing the unrealized gain. They are not going to sell, just create the credit to buy the bitcoin. It is almost like printing the money, except this time they have the collateral to justify it. They will still own the gold. Great question on how the government would buy that much BTC without moving the market massively. Let me go ask Michael Saylor…
Worries about fiat currencies are quite rational right now but… wouldn’t the value of gold fall precipitately if the US government began liquidating even a fraction of its holdings as part of a strategy to reinvest it in Bitcoin, and the price of Bitcoin shoot up, before much could be bought? Arguably this would support its value growth story but too quickly to be useful for the purpose. And isn’t BItcoin much like gold anyway? Finite rather than limited in volume, less bulky but, as you say, with its own issues, and also limited in practical terms as a medium of exchange. And does credit die under Bitcoin? Who would borrow in a currency which is expected to grow at 28%?
Or am I taking this all a bit too literally?
I enjoyed this Neil! Good overview. Stuff has value because people believe it does. Until they change their minds. I think you are 100% right that the problems with fiat currencies - inflation particularly - are driving this. The world order that our parents and grandparents created continues to decay and decentralize. Currency is just one aspect.
Thanks. The purchasing power analysis is revealing. Adding BTC to an investment portfolio will substantially increase volatility and risk. Maybe Eric has a view on how you could sell some of that volatility through puts and calls.