Gold vs Bitcoin: Which is Best for 2018?

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This article explains why bitcoin compared to gold market cap argument is utter nonsense. The flawed reasoning is bitcoin compared to gold market cap follows: This terminology is borrowed from equities, where the market cap of a company is the price per share x number of shares outstanding. So, you divide by the number of bitcoins But this argument is wrong. The marketplace for financial assets including bitcoin can be described by an order book: Traders use order books for price discovery and for executing trades — you can see the cheapest price someone is willing to sell bitcoins for, and the highest price someone is willing to pay for bitcoins.

The order book currently looks blank, like this:. Well, since there are no prices and no bitcoins have changed hands, the market cap is undefined at the moment. Now, say, you want to buy a bitcoin from one of your friends. The order book now looks like this:. If they want to sell more than 1 BTC, then they are out of luck: These are wildly different numbers!

But as the order books fill up ie more liquidity is availablethe best bids and best offers start to converge. Also, no trades have happened yet at all, and you and your friends are just suggesting prices you are willing to trade at. We can continue to build up this order book, and the best bid price and best offer price will converge.

Here is the order book a few minutes later:. And the market cap of bitcoin could be described as any of:. Note that these are different to the previous market caps when the order book was emptier. So the market cap s can change even without any trades taking place. The gold argument says that money could flow out of gold and pumped into bitcoin, increasing its market cap, and therefore increasing the target value of a bitcoin.

So now we have an actual traded price! And the market cap of bitcoin could be best described using the last actual traded price instead of theoretical prices:. How much money do they need to spend?

And bitcoin compared to gold market cap does the order book look after this trade is executed? According to the gold argument, what would the expected price of a bitcoin be? Market prices bitcoin compared to gold market cap therefore bitcoin compared to gold market cap cap can also change without any trades taking place. She cancels the order. These market cap numbers are very bitcoin compared to gold market cap to the numbers before those two orders were submitted.

All of the market caps except last have changed… without any trading taking place at all! So the market cap can change without any trades taking place. This happens in practice. This means that the bid, offer, mid market caps can change significantly without any trades.

So the market cap is derived from the market prices bid, mid, offer, lastand the market prices can change without any trades happening. And even a very small trade at a new price can alter the market cap last.

Having said that… yes of course, bitcoin compared to gold market cap there are more buyers with a greater desire to buy and pay whatever it takes to accumulate BTC, then the prices bid, mid, offer, last should increase. A great article and not something most people involved in Bitcoin understand. It is important to learn that, as otherwise the HFTs and Prop Traders will have full control of the market. How about valuing bitcoin this way. Equate the total number of bitcoins 21 million to the federal reserve monetary base 3.

You can equate the total number of bitcoins to anything stars in the galaxy, grains of sand on bitcoin compared to gold market cap beach and come up with ridiculous numbers. How do you justify equating them to the federal reserve monetary base? I have read all your articles, fantastic reading to get a thorough understanding from soup to nuts!

You are commenting using your WordPress. You are commenting using your Twitter account. You are commenting using your Facebook account. Notify me of new comments via email. Order books The marketplace for financial assets including bitcoin can be described by an order book: The order book currently looks blank, like bitcoin compared to gold market cap The order book now looks like this: What is the price of Bitcoin?

So a market cap of bitcoin, based on the bid price is: So the market cap of bitcoin could be described as any of: And now the market cap of bitcoin could be described as: Here is the order book a few minutes later: And the market cap of bitcoin could be described as any of: Pumping money into bitcoin The gold argument says that money could flow out of gold and pumped into bitcoin, increasing its market cap, and therefore increasing the target value of a bitcoin.

And the market cap of bitcoin could be best described using the last actual traded price instead of theoretical prices: Total cost to buy 14 BTC: Prices can also change without trades taking place Market prices and therefore market cap can also change without any trades taking place.

So how does the order book look after your trade? Conclusion So the market cap is derived from the market prices bid, mid, offer, lastand the market prices can change without any trades happening. I appreciate your simple way of explaining complicated matters.

Keep up the good work! No money coming or going argument. It puts things in perspective. Thank you for your comments though.

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I mean it should right? The answer is simple: Bitcoin, and crypto-currencies in general, are becoming mainstream and lots of the new money that used to come into safe haven assets is going into crypto now. The more time passes and the longer these coins survive, the more trusted they become, the more people find out about them and use them as a store of value and an easy way to transfer money across the Internet, as well as for the many other applications that are coming in the future.

Gold keeps stagnating as Bitcoin prices go up. Image courtesy of http: The costs of storing it, holding it or transferring it actually make no sense to new generations. When I played the video the first thing I see is a Charlie Shrem comercial about Bitcoin, granted, this is likely based on my viewing habits but still epic!

The comments on his videos are really amusing, people are making trolling Peter a new internet sport, similar to trolling Shia Labeouf a few months ago…. Does he not realize the more he talks about it, the more his followers will discover Bitcoin and cryptocurrencies and choose to diversify their holdings?

Also, the more he gets triggered by trolls, the more they will come to his channel to get funny reactions from him and his followers. If we compare Crypto and Gold market caps to communicating vessels, we see that Crypto still has a long way to go. What will likely happen is that volume rushing in will surpass the medium level and fluctuate back and forth until they reach an equilibrium, so we could see even more than 50x increases in price for a while.

Google Trends comparison A Google Trends comparison shows Bitcoin searches are still small compared to Gold but Bitcoin's long term trend is up while Gold's is either stagnating or going down. Eventually, I believe both Gold and Crypto will increase tremendously in price because we are overdue for a major financial crisis in the United States and, subsequently, the world.

Price increases will happen, not only because they will both be more in demand, but because fiat currencies, in particular the dollar, will be greatly devalued by politicians to combat the crisis in their typically keynesian ways.

Because of its abundant supply Gold will probably increase about 2x or 3x, but its purchasing power will likely remain about the same. Crypto, being less abundant the top coins , and also by stealing some of the thunder from precious metals, will likely go up 50X or more in future years as a deep crisis finally materializes after 8 years of easy FED money inflating bubbles everywhere.

What percentage should you invest in each cryptocurrency to become a multimillionaire? A guaranteed winning strategy. Market is entering a bear market. Crypto and Gold expected to soar! He is talking about this non-nuclear but incredibly powerful weapon! Tell me what you think about this post in the comments below. This is not professional investment advise. I'm not your financial advisor. Only invest money you can afford to lose! Interesting article to compare the market of gold versus to bitcoin.

Gold will not disappear and should coexist in the future with BTC. When the most successful investor around doesn't advocate gold, you know there are better places to put your money. Warren Buffet knows what he's talking about.

He learned from the best, Ben Graham, and I'm learning from both of them. Check out my strategy based on their teachings about passive indexing: Both are better than holding dollars. However gold is superior because central banks use it to back government debt. Lots of government debt out there You have completed some achievement on Steemit and have been rewarded with new badge s:.

Award for the number of upvotes Award for the number of upvotes received. Click on any badge to view your own Board of Honor on SteemitBoard. For more information about SteemitBoard, click here. If you no longer want to receive notifications, reply to this comment with the word STOP. By upvoting this notification, you can help all Steemit users.

Click here to read more! The comments on his videos are really amusing, people are making trolling Peter a new internet sport, similar to trolling Shia Labeouf a few months ago… Does he not realize the more he talks about it, the more his followers will discover Bitcoin and cryptocurrencies and choose to diversify their holdings?

Communicating vessels analogy If we compare Crypto and Gold market caps to communicating vessels, we see that Crypto still has a long way to go. Google Trends comparison A Google Trends comparison shows Bitcoin searches are still small compared to Gold but Bitcoin's long term trend is up while Gold's is either stagnating or going down Financial Crisis will bring Gold Bugs and Crypto investors together Eventually, I believe both Gold and Crypto will increase tremendously in price because we are overdue for a major financial crisis in the United States and, subsequently, the world.

Most Gold bugs will eventually capitulate and diversify into crypto, including Peter Schiff… Check out my previous posts: Authors get paid when people like you upvote their post.

I like the humor in your article. You may have a point but gold has and always will be seen as real money, good read cheers. I'm not saying Gold will go away. It will always stay around but so will the blockchain.

Both gold and crypto is great choice among all this worthless paper! BTC took gold easly. Now, 11 days later is 3 times more in value: That's exactly what I think. Gold bugs and Crypto investors are in this together.

When the most successful investor around doesn't advocate gold, you know there are better places to put your money http: You have completed some achievement on Steemit and have been rewarded with new badge s: Award for the number of upvotes Award for the number of upvotes received Click on any badge to view your own Board of Honor on SteemitBoard. For more information about SteemitBoard, click here If you no longer want to receive notifications, reply to this comment with the word STOP By upvoting this notification, you can help all Steemit users.

Why is it always 'Goldbugs'? I never hear the term 'Cryptobugs': Because I haven't heard the term yet. Wanna coin it for posterity?

We can make a post about it and share it with the world.