[learnstats2]

Here Ray Dalio says he views Bitcoin as a gold-like asset.

This is the first time I have felt that Bitcoin has some value: as a commodity that wealthy people put their wealth into when they have nothing better to do with it. People are not buying gold because they ever plan to use the gold.

[loceng]

The only, and it is a major problem with unavoidable pitfalls that shouldn't - can't be in our systems - is that Bitcoin is an MLM scheme and thus it is aligning people through financial gain, creating a religion of "HODLers" who are already a mob of varying levels of self-control and critical thinking. And as Dalio says, those who speak a counter-narrative to Bitcoin are rightfully "a few scared souls cowering in a corner;" so he's in fact acknowledging this mob without actually directly stating it. He's being very careful with his words to avoid being a target.

[learnstats2]

I would agree, and this matches it to gold, also from Ray Dalio's perspective.

Ray Dalio invested heavily into gold, and has since repeatedly press released that he had done so. It's the same characteristics as an MLM scheme.

[loceng]

Apples to oranges comparison: gold actually has a use, and its value is kept in check by that - it's tied to the physical world, to reality, and gold also wasn't/isn't an attempt to replace a transactional layer. I'm sure there are more differences that make it incomparable - certainly that pro-Bitcoiners will simply dismiss the differences saying they're unimportant, irrelevant.

Edit to add: qualitative comments rebutting my argument points would be greatly appreciated.

[gruez]

>Apples to oranges comparison: gold actually has a use, and its value is kept in check by that

Is it? According to one source[1], the overwhelming majority of the gold use is for speculation (investment/central banks) or quasi-speculation (jewelry).

[1] https://www.statista.com/statistics/299609/gold-demand-by-in...

[loceng]

If gold was dirt and had no fallback value, would it . Interestingly the marketing that gold is so valuable, more so diamonds, to artificially inflate its price mimics Bitcoin well. Bitcoin's also called a Ponzi-like scheme because in the end, if everyone in society adopts Bitcoin, it actually has no additional value to the last one stuck holding the bag - you've just transferred all wealth through a system that unnecessarily, unreasonably, transfers wealth weighted towards earlier adopters from later adopters.

[specialist]

What is money? Commodity, a measure of value, or a record of a debt. Sometimes all three.

In this article, Dalia has the commodity view towards money, gold, and by extension bitcoin. In this paradigm, cryptocurrencies are collectibles.

One great use case is as an escrow.

I'm dubious of the store of value use case. Bitcoin is just a currency. Whereas gold bullion is minted into coins, electricity is minted into bitcoins. The cost of production is only loosely correlated to the market (strike) price.

What gives money its value? A MMT-like theory is that fiat currencies have their well defined value because government accepts them to pay taxes.

I'm a bit more cynical. I think money, fiat currencies like the USA dollar, has it's value established at the point of a gun. That dollar represents the military might of the USA and that government's insistence that you agree.

What backs the value of bitcoin? Anything tangible? Nope. Just everyone's shared belief. Per Random Walk Down Wall Street, it's just castles in the sky. And like all bubbles, that belief system pops in a panic.

For rich people like Dalio, collectibles like gold, art, and real estate are probably a good idea. After the crash, someone somewhere will probably accept those collectibles, those assets, for payment or collateral.

In any scenario where gold or art will be used as collateral, who's gonna accept bitcoin?

[dpoochieni]

Yeah just like owners of real estate are "hodlers" right? Keep pooring it on

[colincooke]

I agree, there was a nice article in the economist about this concept (bitcoin as a store of value) [0]. More specialized than gold, investors have realized that bitcoin acts as a great hedge on uncertainty. When the market is uncertain to it's future (initial lockdowns for example) bitcoin goes up. It also goes up for less direct reasons (at least that I'm aware of). This makes it a less than ideal traditional store of value, but as a slice of a portfolio it is a nice asset due to the potential upside.

[0] https://www.economist.com/leaders/2021/01/09/what-explains-b...

[leereeves]

Another way of saying "gold-like asset" or "store of value" is that Bitcoin codifies wealth inequality in an algorithm with a rigidity similar to physical assets, creating mathematical obstacles to block democratic attempts at redistribution away from an elite class of early adopters. Thus "protecting wealth" from the rest of humanity.

However profitable, useful, or entertaining one might find that as a fringe commodity, it's an atrocious basis for an economic system that would ultimately lead to depression, then war, just as money tied to the gold standard did a hundred years ago.

Money was detached from the gold standard almost everywhere in the world for excellent reasons. Recreating money with properties similar to gold would be a step backwards.

[samvher]

This is one part that I feel doesn't get talked about enough. A future where people move to bitcoin does extremely weird things to wealth distribution, where wealth is basically a function of the point in time of a person's switching to bitcoin more than anything else. I don't see how such a dissociation between wealth and effort/value/productivity could ever do good things for a society.

I'm also confused about how people think and talk about the market cap. My sense is that the total economic value of bitcoin holders can't be much more than what they have collectively put in as dollars minus what was spent on mining, which is only a fraction of the market cap. If it's more you get a weird kind of inflation where it's not a central bank printing money, but where "value" seems to spring out of thin air just because the masses are attracted to bitcoin (with FOMO as the main reason).

I can't quite wrap my head around all of this. I've been interested in blockchain for quite a while and have been keeping up with what's going on, but many things about the cryptocurrency market just don't make fundamental sense to me. (Another example - Ether basically being the denomination for transaction prices on the Ethereum network, meaning the higher it's priced, the less useful the network is, which seems like a conflict.)

I'll keep paying attention and see if I can learn a thing or two about real world (irrational?) economics.

[Sargos]

>wealth is basically a function of the point in time of a person's switching to bitcoin more than anything else

This isn't any different from other periods of great change in the past. A good chunk of the wealthy in the world are made up of those early to the industrial revolution, computer revolution, and internet revolution. This is just another step.

Eventually people will stop being early to Bitcoin and things will just be "normal" again until the next big change comes along.

[leereeves]

The industrial revolution, computer revolution, and internet revolution brought real value to everyone's lives. Even people who didn't own Netscape or Google stock benefit from the Internet.

Who would benefit from a Bitcoin revolution, other than early adopters?

Ransomware authors, perhaps.

[Sargos]

This comment feels eerily like what people said at the beginning of the internet. It's useless and hard and doesn't do anything we can't already do. "I already have a radio". https://www.youtube.com/watch?v=gipL_CEw-fk

If you can't understand the value of cryptocurrencies that doesn't mean they are valueless. It'll be easier and more obvious to notice as these systems mature.

[jdmoreira]

I don’t understand why you are being downvoted because in my opinion you are right. Fiat money is the real trick that removes people from poverty and increases everyone's standard of living.

This is really easy to understand from first principles. If the total value of the world increases and there is only a fixed amount of either gold or bitcoin, or any finite thing to represent it, it's obvious that whoever has that asset today has to do nothing for it to grow. Just sit on it indefinitely and people will give you more value for the same amount.

On the other hand if the value of the world is represented in USD and the feds keep print more money, you can’t just sit on the money you have today and expect it to be worth more. You have to put it back in the value creation system for it to grow in value.

Bitcoin and gold suck at representing value. Fiat currency is much better because you can print more money to keep up with the world's total value.

[chordalkeyboard]

> Fiat money is the real trick that removes people from poverty and increases everyone's standard of living.

This is actually completely backwards. Fiat money decreases standard of living by encouraging consumption and discouraging savings and investment.

> This is really easy to understand from first principles. If the total value of the world increases and there is only a fixed amount of either gold or bitcoin, or any finite thing to represent it, it's obvious that whoever has that asset today has to do nothing for it to grow. Just sit on it indefinitely and people will give you more value for the same amount.

Yes, as opposed to a depreciating currency where people continually give you less and less value for the same amount.

> On the other hand if the value of the world is represented in USD and the feds keep print more money, you can’t just sit on the money you have today and expect it to be worth more. You have to put it back in the value creation system for it to grow in value.

So people have to keep increasing their prices or they starve to death, how is this supposed to help the people with the least amount of money?

> Fiat currency is much better because you can print more money to keep up with the world's total value.

Thats why the poor stay poor and the rich keep getting richer. The rich own the assets, and the poor get these checks of decaying currency.

[marcrosoft]

Wealthy people hold gold as a hedge against hyper inflation and currency risk. Ray wrote in his outlook that currency risk is the biggest risk at this time due to low interest rates and government spending.

[nine_zeros]

For the wealthy, it's truly a hedge or an insurance policy. Even if America and the dollar collapses, bitcoin will keep the elites rich.

[MrMan]

I don’t think it will, if things get like that. They will need to find a safe place to hide, which Bitcoin cannot provide