“Bitcoin is a myth of sorts, rooted in ones and zeroes. Nothing tangible.”

____________

Indeed!

Now, consider this.

What is fiat currency?

Is it not a myth of sorts, also?

If we have the physical paper, it is essentially a ‘certificate’ representing a government IOU, backed by the full faith and credit of an illegitimate and unelected regime that is $33+ trillion dollars in debt.

Not exactly a confidence booster.

If the fiat currency is in our bank accounts, then it too is rooted in ones and zeroes on a digital ledger, nothing tangible. Just like Bitcoin.

The physical paper fiat currency accounts for only a percentage of the total amount of U.S. fiat in existence.

According to https://www.uscurrency.gov/life-cycle/data/circulation, “As of December 31, 2020, there was $2,040.7 billion in circulation”, which is a little over $2 trillion dollars in face value, if I understand correctly.

All of the rest of the U.S. fiat currency, in the whole world, exists as 1s and 0s on computer (bank) ledgers, Treasuries, etc.

So this raises the question, why does either the paper currency OR the 1s and 0s on bank ledgers have any value, as a medium of exchange?

There has to be an answer to that question.

The only good one I can come up with, is because everyone (more or less) decides to agree that it has value as a medium of exchange.

After all, a $100 bill doesn’t have any more paper or ink in it than a $1 dollar bill, and it doesn’t take any more work or effort to print a $100 bill than it does a $1 or a $5 or a $10 or a $50 dollar bill.

It’s just a number printed on a piece of paper, like a receipt, and we all agree what the piece of paper with “$100” printed on it is worth one hundred of the papers that only have “$1” printed on them.

It’s literally just like Monopoly money.

Except U.S. fiat currency is backed by an entity far less credible or trustworthy than Parker Bros. or Hasbro.

So fiat currency is garbage, it’s a ‘note’ or a receipt for an IOU backed by the Brandon administration, an organized crime outfit.

But it works, for the time being, because everyone agrees to use it.

So let’s consider ‘real money’, i.e., gold.

Why is gold a store of value?

It’s yellow, but that’s not the reason. I suspect blue is a much more popular color than yellow. Probably green and red are, too.

It’s shiny, it doesn’t tarnish, it’s reasonably hard unless it’s .9999 pure, it conducts electricity, and it’s dense (heavy). It can be used for jewelry and to fill cavities in teeth.

But none of those are very good reasons to explain gold’s status as a store of value, or as ‘real money’.

One might say people just naturally like gold, but do they? Or is that something which is learned?

Is there any particular reason why a baby would favor a gold colored rattle toy more than a rattle toy of any other color?

I don’t think so.

It seems that the attraction most adults have to shiny gold metal is a learned response. There is nothing inherent about shiny gold metal that causes the synapses in a human brain to fire in a particular way, causing the brain to interpret the shiny gold metal as a ‘store of value’, so it must be something we are taught.

So why are we taught such a thing?

There has to be a reason.

Gold wasn’t just randomly chosen as a store of value, it was chosen because it has certain characteristics which make it useful for that purpose, and presumably those characteristics were more suitable as a medium of exchange and store of value than any other possible option.

So what are those characteristics of gold which have made it the best choice as a store of value for the past 5,000+ years?

Gold is immutable, that’s very helpful. But it can also be counterfeited, and that’s not very helpful.

Gold is portable, but you don’t want to have to carry a lot of it, at least not very far.

Gold is transactable, most easily if you are carrying it on your person. If you have to send it anywhere, it’s expensive to do so, because it’s heavy and it requires security measures.

Gold is divisible, sort of. You don’t really want to cut up a coin into smaller pieces, but you can make the coins in different sizes according to weight (if you trust the minter’s scales or that nobody has cut off the outer edge of the coin), or you can measure gold dust precisely, but determining purity of gold dust becomes an issue. So it is divisible, but imperfectly so.

Gold is verifiable. If it’s .9999 pure (like American Buffalos), you can do like in the old movies, and bite it, to see if your tooth leaves an indentation (I presume, I’ve never actually tried it 😁).

If it is an alloy of gold and copper (I think), to make it harder and more durable (like American Eagles), it will require some other means of verification. Likewise gold bars. They have to be assayed to verify their authenticity and purity. So it is certainly possible to verify and authenticate gold, but it requires some know-how and tools, and to really do it right (assay), it requires considerable effort and money, which is not ideal.

Gold is fungible, in that any verified or authenticated ounce of .9999 pure gold is interchangeable with any other verified .9999 pure ounce of gold, not considering factors like rare coins, the majority of whose value is in the rarity, not in the gold itself.

Gold is not immune to seizure, because the physical nature of gold means it can be taken by force — and often has been, by criminal regimes, just like our own:

Ancient Rome, 14AD to 37AD: Tiberius enforced strict regulations to prevent hoarding and private accumulation of gold and silver to stabilize Roman currency.

England, 1663, 1797 to 1821: England introduced the gold guinea coin to stabilize the currency, but later suspended gold payments, forcing citizens to use paper money instead.

France, 1790: French gov’t issued assignats and confiscated gold and silver from citizens to finance its expenditures during the French Revolution.

Soviet Union, 1917: Following the October Revolution, the Soviet gov’t nationalized all gold mines, reserves, and privately-owned gold (bummer).

Portugal, 1931 to 1974: the Portuguese gov’t banned private gold ownership during he Estado Novo regime to help maintain control over its currency

Czechoslovakia, 1934, 1945 to 1953: the Czech gov’t banned private gold ownership during the Great Depression and post-WWII years.

Spain, 1936 to 1939: the Spanish gov’t banned private gold ownership during the Spanish Civil War to fund the war effort.

Germany, 1939 to 1945: the German gov’t banned private gold ownership during WWII, requiring citizens to surrender their gold to the Reichsbank. Nazi bastards.

United States, 1933 to 1974: Executive Order 6102 and Gold Reserve Act. In a lawless and outright theft by the criminal regime of the time, the U.S. gov’t criminalized gold possession, nationalized gold holdings, and devalued the dollar. Bastards.

Australia, 1959 to 1975: Bankruptcy Act Amendment. The Australian gov’t restricted gold ownership by prohibiting possession of gold bullion or coins.

United Kingdom (a.k.a. England, again), 1966 to 1979: Exchange Control Act of 1947 Amendment. The UK gov’t prohibited citizens from owning more than four gold coins or investing in gold.

India, 1968 to 1990: the Indian gov’t restricted private gold ownership and heavily regulated the gold industry.

France (again), 1945, 1968 to 1974: French gov’t implemented gold controls, limiting gold transactions and establishing a monopoly on gold trading.

South Africa, 1961 to 1994: During the apartheid era, the South African gov’t heavily regulated the gold market, controlling gold production and exports as a means of maintaining its economic dominance.

Italy, 1970s: the Italian gov’t imposed restrictions on gold trading and ownership, limiting purchases to small quantities. No doubt, the Vatican was excluded… far above any such restrictions or laws 😂

Russia (a.k.a. Soviet Union again), 1928 to 1993: Soviet gov’t monopolized gold trade, severely restricting private gold ownership and transactions.

Turkey, 1990s: Turkish gov’t imposed restrictions on gold trading and ownership, implementing strict import and export controls.

china, 2002: chineez gov’t partially relaxed gold trading restrictions, allowing citizens to purchase gold through select channels.

Venezuela, 2011: Venezuelan gov’t nationalized gold mines and limited gold trading, restricting access to gold for citizens.

United States (again), 2011 to the present: Expansion of bogus Anti-Money Laundering Regulations – AML regulations extended to gold dealers, increasing compliance burden and reducing anonymity.

India (again), 2016 to the present: Indian gov’t disrupted cash-based gold market and increased taxes on gold imports/trading.

Europeeing Union, 2021 to the present: AMLD5 extended the bogus anti-money laundering regulations to cover precious metals, increasing reporting requirements. Gov’t officials are of course free to launder as much money as they want, under the traditional ‘rules for thee but not for me‘ memo of understanding.

Clearly seizure, confiscation and other ‘controls’ are a legitimate threat, due to the thieving nature of criminals who buy, beg or blow their way into positions of power.

So that’s not good.

But that still doesn’t answer why gold has been settled upon as a store of value, or ‘real money’.

Could it be due to scarcity, in addition to being fungible, somewhat divisible, portable, durable, transactable and somewhat difficult to counterfeit?

It is certainly possible to calculate the amount of time, effort (work), money, etc. it costs to dig up, refine and ultimately produce a commercially acceptable gold bar or coin. The current global mining industry average cost, or AISC (all-in sustaining costs) was US $1,315/oz in Q2 2023.

So the value (measured in debasing U.S. fiat currency units) is unlikely to go much below that amount for any significant length of time, because the miners would be less likely to sell below their production cost.

If the price of gold declined below their cost of production, they would shutter less profitable mines, supply would decrease, and if demand remained constant (or rose), price would once again increase.

But WHY, ultimately, was it decided that gold should be the ‘gold standard’ for a store of value or medium of exchange?

All of the reasons discussed already also apply to silver. The primary difference between silver and gold, from a scarcity standpoint, is that gold is something like 8 to 15 times more scarce than silver. Even though the current gold/silver ratio is totally out of whack, with gold currently priced at 83 times the value of silver.

Beyond scarcity, what else is there?

Could it be an unwritten social contract?

If you look at gold under an electron microscope, you won’t see dollar signs at the molecular level. There is no ‘inherent value’, absent what human beings attribute to it.

You can’t even eat it. If you set some gold down in front of animals, and also some food, the monkeys might play with the gold for a while, but all of the animals would eventually fight over the food. Gold has zero value to any animal besides humans.

So ultimately, gold is only useful as a medium of exchange and a store of value because people decided to use it for that purpose, and do so. It’s a tool.

We create our own reality (and tools) in all sorts of ways, including with gold.

People agree that gold has value, based on all of the factors above, and therefore markets exist to trade or exchange gold.

It’s PEOPLE who decide that some thing has value, based on a variety of factors, and then markets are created to determine the value of the thing, priced in fiat currency units.

People could decide that colored glass beads are a medium of exchange and a store of value (and have done so before).

Anything can be a medium of exchange and a store of value, so long as enough people agree to it, and in order for people to agree to it, ideally there should be reasons to agree to it, and at least one of those reasons should be scarcity — otherwise the Spanish will make tens of millions of glass beads for next to nothing, and trade them to you for all of your good stuff.

Bastards.

So where does that leave us?

Fiat currency is worthless, a complete and total con-artist’s game, that only works because the People agree to keep playing along. For now.

Gold and silver have various characteristics which provide reasons for people to decide to use them as mediums of exchange and stores of value. But they don’t have any inherent value in and of themselves, at least not in the sense that you can derive any direct benefit from them, like eating them.

If life has inherent value, then an apple has inherent value, because an apple can directly sustain your life for a while, if you consume it.

Gold can’t do that. Gold is just a tool that can be exchanged for an apple (preferably a bunch of them), which you can then consume.

Just about every aspect or characteristic of gold also applies to Bitcoin, and for many of them (e.g., divisibility, transactability, immutability, verifiability, portability, etc.), Bitcoin is actually better.

Bitcoin is also more scarce.

The earth will never run out of gold, and so long as the price makes the effort worth it, people will explore, discover, mine and produce whatever amount of gold is needed to satisfy demand.

But with Bitcoin, there will only ever be 21 million Bitcoins mined, and that’s it. At present, about 19 of the 21 million have already been mined, and of those 19 million, an estimated 4 to 5 million have been lost.

Gold has in inexhaustible supply, the only caveat is that the price of gold in U.S. currency fiat has to be high enough to make digging gold out of the ground worth the effort.

Fiat currency units have an infinite supply.

Bitcoin has a fixed supply. Even if the price of Bitcoin in U.S. currency fiat goes to $1 Billion per coin, or $100 Billion per coin, all the Bitcoin miners in the world, combined, can only produce 900 Bitcoins per month, at present.

And in April 2024, the amount that Bitcoin miners can produce is cut in half, it drops to 450 Bitcoins mined per month, world wide. No matter how high the price goes, the supply is capped.

In 2028, the supply will drop to 225 Bitcoins mined per month, world wide.

Bitcoin only gets more scarce as time goes on.

If the Bitcoin spot ETFs are approved between now and January 10th, that will be a signal to the entire planet that Bitcoin is a new mainstream asset class in world finance.

Bitcoin has traded on exchanges since 2009.

Bitcoin already trades on the Futures markets in the U.S. since 2021.

Bitcoin spot ETFs already trade in other countries (e.g., Canada and some European nations, and elsewhere).

But the 800Lb. gorilla is still the USA.

The global financial system is dominated by the USA, because the world reserve fiat currency unit is still the U.S. dollar.

So in the world of consensus, in a world where People need to agree that some thing is a store of value or a medium of exchange in order for that reality to manifest, it makes a big difference whether the USA is part of that consensus.

It makes a difference whether Wall Street says something is a store of value, and whether the U.S. gov’t regulators and courts agree.

By January, if approved, Bitcoin spot ETFs will be traded on the U.S. stock exchanges.

It will be the U.S. worldwide stamp of approval.

It legitimizes Bitcoin as a new mainstream asset class.

We don’t have to accept it or believe it. It doesn’t even have to make sense to us.

But enough other people will believe and accept it, to support a global market with enough liquidity for large institutional investors.

Technically, that situation already exists, based on Bitcoin spot ETFs available in other countries.

What the major institutional investors and sovereign wealth funds are waiting for is the USA’s stamp of approval, along with the just recently revised FASB accounting rules, and other U.S. regulatory clarity.

That stamp of approval, in the form of at least 12 Bitcoin spot ETFs, is expected to arrive on or before Wednesday, January 10th, 2024.

They could pull a fast one, and kick the approval can down the road, but ultimately, they can’t stop it. By blocking it, all they do is hurt Americans and help those who embrace this new store of value abroad.

Whether the SEC approves the Bitcoin spot ETFs by January 10th or not, the halving is coming in April 2024, regardless.

Global Bitcoin supply will be cut in half.

It’s not far away, it’s close.

Public awareness and interest is higher now than it has ever been.

So we’ll see what happens 👍🙂