Based in Las Vegas, Douglas french writes about the  economy and book reviews. 

Bitcoin Bugs become Gold Bugs

Bitcoin Bugs become Gold Bugs

Where does a cryptomillionaire run to when the price of Bitcoin is halved? Some made wealthy in gold 2.0 are converting their entries on the blockchain into the periodic table’s AU. Bloomberg reports, “Yesterday was a hell of a crazy day,” Daniel Marburger said from Frankfurt. “Emails and phones did not stand still with customers asking how they could turn their crypto into gold.”

Eddie Van Der Walt and Samuel Potter get to the nub of the matter in hasty fashion.

The current price swings across seemingly every cryptocurrency are bringing to the fore a question that has loomed over the industry since its inception: to what extent can a virtual asset be a store of value? By swapping out of digital gold and into the real thing, some investors may be providing an answer.

London gold dealer Ross Norman saw an entrepreneurial opportunity and  “started exchanging gold for bitcoin via an intermediary three months ago.”  He told Bloomberg, “We’re seeing trades north of a million pounds every couple of weeks. It’s been a welcome addition to our business in a period when physical demand from more traditional sources has been subdued.”

Van Der Walt and Potter write, “Customers as young as 25 come in carrying laptops holding bitcoin they accumulated when it traded at $1 or below. One, Norman said, had 1,000 bitcoin he intends to turn into physical metal.”

Carl Menger couldn’t have imagined cryptocurrencies when he wrote concerning the origins of money,

Putting aside assumptions which are historically unsound, we can only come fully to understand the origin of money by learning to view the establishment of the social procedure, with which we are dealing, as the spontaneous outcome, the unpremeditated resultant, of particular, individual efforts of the members of a society, who have little by little worked their way to a discrimination of the different degrees of saleableness in commodities.

Money is by definition society’s most saleable commodity. Mr. Norman cleverly calls into question Bitcoin’s saleableness.  “Bitcoin is a bit of a lobster pot -- it’s easy to get in, but hard to get out,” Norman said. “Gold also offers investors 4,000 years of history as a store of value, and that’s looking quite appealing right now.”

Menger continues,

What therefore constitutes the peculiarity of a commodity which has become money is, that the possession of it procures for us at any time, i.e., at any moment we think fit, assured control over every commodity to be had on the market, and this usually at prices adjusted to the economic situation of the moment; the control, on the other hand, conferred by other kinds of commodities over market goods is, in respect of time, and in part of price as well, uncertain, relatively if not absolutely.

The 4,000 years of history Mr. Norman speaks of is addressed by Menger, the founder of the Austrian school of economics,

The reason why the precious metals have become the generally current medium of exchange among here and there a nation prior to its appearance in history, and in the sequel among all peoples of advanced economic civilization, is because their saleableness is far and away superior to that of all other commodities, and at the same time because they are found to be specially qualified for the concomitant and subsidiary functions of money.

Mark O’Byrne told Bloomberg, “We think increasingly people are realizing that these digital assets have much higher risk levels than the traditional safe haven asset.” After all, with gold, there are  “no passwords you can lose, the volatility is much lower, sustainable growth and in the end you can hold your investment in your hands,” he said.

Laptop not required.


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