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Why gold is not the safe haven you think it is.

Today I just read a top post on r/investing telling “gold is a safe heaven and Bitcoin is not”. I want to contradict the general notion that gold is always safe, because gold has risks as well.

Let me first clearify I am not against gold. Actually i believe myself too be a goldbug, because gold has been the safest store of value for the past millenials. I also believe that getting rid of the gold standard was one the worst decisions in US history.

Maybe it has lower overall risks than Bitcoin, because the legal framework is already made and the track history is much longer. We can also look at the volatility of gold and bitcoin and clearly gold is much less volatile.

I believe in gold more than I believe in fiat, but there are some risk with trading gold as well – it’s not just a free lunch and paper-gold is clearly not a safe haven even if it’s told enough times.

1. My first argument is that most sold paper gold doesn’t exist other than on paper, because bank can sell the paper with no actually value and get away with it. We have the same issue with all the Fiat money you have in the bank, those money doesn’t exist either, because banks have fractional reserve banking – they can lend most of it out and in case of they go bust they don’t have to give you all your money back.

Don’t believe me. There are many articles on the topic:
https://www.huffpost.com/entry/gold-silver-trading-bigge_b_706594

2. Even gold bars can be fraudulent:
Another prime example with gold fraud is that many of the gold bars that are being sold is not 100% gold. Gold bars sometimes have added copper or other metals inside the bars to increase the profit margin. Or other metals mixed into the melted gold when the bars are made.

Here is another post:
https://www.google.com/amp/s/finance.yahoo.com/amphtml/news/kingold-jewelrys-fake-gold-bars-093000408.html

3. Conclusion: Bitcoin is maybe not a safe haven, but it solves both of these issues.

Why? Because you cannot make fake Bitcoins. The only way is for you to capture 50% of the mining rigs used to mine bitcoin in order to be able to change the code. You can also verify all bitcoin transactions on the network. Bitcoin has never had a double spend in it’s entire history. Also it’s much easier to exchange Bitcoin – you don’t have to make a paper contract or carry around bars.

Bitcoin is clearly not a safe haven yet, but the SEC and the European union wants to make the legal framework for having cryptocurrencies. They are not looking into banning it. Bitcoin could still go to zero yes, but I think it’s more likely that we will see much volatility like we saw with gold in the 70’s and 80’s when it was taken of the gold standard – the asset was much more volatile than today, because people didn’t know how to price gold. Longterm I think we will see rising prices as adoption and legitimazy contiues.



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13 Comments

  1. Bitcoin is safe.

    **Bitcoin Compared to Gold**

    Gold is expensive to store securely.

    Gold is extremely expensive and slow to transport securely, especially large amounts.

    Gold is heavy, it takes up space.

    You can’t walk very far carrying a lot of gold. You can’t swim at all with more than a few coins of gold.

    Gold can be confiscated. Gold has already been confiscated by the US government.

    Highway robbers, corrupt border guards, pirates, and others can merely kill you, then take any gold you were transporting.

    Tungsten’s density is very close to that of gold. There are now gold-coated tungsten bars in circulation. It requires special equipment and know-how to detect gold-coated tungsten.

    + + + +

    Bitcoin is easy and inexpensive to store securely.

    Bitcoin is inexpensive to transport, and compared to gold, transporting Bitcoin is ‘instantaneous’.

    Bitcoin weighs nothing and takes up little, if any space.

    Bitcoin cannot be detected and can pass right through any border or airport.

    Bitcoin won’t stop refugees from walking long distances, nor from swimming across rivers.

    Bitcoin cannot be confiscated. Robbers, pirates, corrupt cops, soldiers, etc. won’t know you own any (unless you tell them), and they cannot merely kill you and take your Bitcoin.

    Bitcoin can be sent across the Internet.

    Nobody spends gold as money these days.

    People have been using Bitcoin as money, and as a store of value.

  2. What makes gold safe or not? Gold is much safer in the way that you can hold it in your hand but at the same time is can more easily be stolen if not properly protected. If you hold it there is no counter party risk but it probably doesn’t have as much potential upside as Bitcoin. Bitcoin is nearly impossible to steal or be confiscated if stored properly, but obviously needs electricity and internet for the average person to use. Yes i know if the power goes out the Bitcoin doesn’t go anywhere but most average people won’t have the means to access it or transact with it.

  3. Gold price has done literally nothing in 10 years. With inflation, you’ve definitely gone backwards. It baffling how anybody can look to it as an investment.

    Gold is great for jewelry and electronics connectors, not as a store of value.

What do you think?

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