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by Ologn
4432 days ago
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> Bitcoin is easy to understand - it's like gold, which derives its function as money from its scarcity, transferability, fungability, and verifiability. Most of the same holds true for bitcoin. Not exactly. Gold is a commodity that has a useful value. It can be used by my dentist to fill my teeth, it can be used to conduct electricity, as well as do other things. Then - it is also scarce, easily transferable, fungible, verifiable. Thus it makes a good currency. But underneath all of that there is value. Bitcoin has no value. It's why the price can halve in five months. If gold's price halved in five months (of course that would not happen) electronic manufacturers would buy gold like crazy and the price would go up. Bitcoin is dependent upon the last sucker that will be holding the bag. |
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But gold actually does suffer very similar huge declines in value[1], in similar time frames: 50% in less than 1 year in the early 1980s, 30% in 9 months last year. (The actual 'loss' was much larger, because the total 'market cap' of all gold is currently about 1000x that of bitcoin).
Gold is prone to these huge swings in value precisely because its 'useful value' is a small fraction of the market price. The intrinsic value is generally estimated at below 15% of the price[2].
Therefore, the main factors influencing gold's price are not industrial and commercial use, but speculation, as well as transferability, fungibility, and verifiability -- in this it is quite similar to... guess what? Bitcoin.
[1]http://www.macrotrends.net/1333/gold-and-silver-prices-100-y...
[2]http://www.forbes.com/sites/louiswoodhill/2011/05/11/what-is...