Reading time: 5 – 8 minutes

Bitcoin is currently trading at US$388.40. The next 12 months should see a massive rise.

Anytime one discusses the price of Bitcoin they are wise to keep in mind the Cohen-Seidenburg theorems because of the wildly fluctuating nature of humans since it seems everyone loves to chase the rabbit. And just because you chase the rabbit doesn’t mean you will get it!

PAST CALLS ON VALUATION

Four days ago I received an email from a reader and friend that asked:

My response? “We are already well into the next bull market. Read my article from 2012 to understand why.”

On 31 Dec 2012 when most people did not even know what a Bitcoin was, including my friend who recently emailed me, and the price was around $13.20 I wrote the article During 2012 Fiat Currencies and Gold Collapse Against Bitcoin. There really are a lot of gems in the article for anyone who is seriously looking at Bitcoin.

DEMAND FOR BITCOIN

The interesting thing about science and real economics instead of political dogma is that the principles apply across time.

In that article I thoroughly discussed how the price of Bitcoin is determined. Since the supply is known the exchange rate of Bitcoins is composed of (1) transactional demand and (2) speculative demand. I even had a fancy little graph with a quote to really get the attention of readers for this section:

The above chart shows the total transaction fees Bitcoin miners received on a daily basis and is normalized to a 200 day moving average to filter out the daily noise. As the chart plainly reveals Bitcoin is rapidly being adopted and used on a daily basis.

Bitcoin users incur about US$400 of daily transaction fees to send approximately 50,000 daily Bitcoin transactions with optionally included fees. And that is just transactions where people are actually sending Bitcoins and want priority processing. From my own experience I pay for priority processing in less than 10% of transactions and I do not engage in many Bitcoin transactions because Bitcoin is used merely as a settlement currency and is not yet widely adopted by all the merchants who I purchase goods and services from.

WHERE BITCOIN IS TODAY

When I started publicly talking about and recommending Bitcoin it was around $0.25. Then it had a major run in mid-2011 to $32.00 and crashed to around $2. Some of us took that opportunity to get some USD liquidity and make venture investments to build the ecosystem.

In my case I wanted to build out infrastructure for the first order network effect of speculation and second order network effect of merchant adoption. Thus, the projects I funded included Armory (most secure and private wallet), Bitpay (largest merchant processor) and Kraken (largest EUR/ETH/BTC exchange).

During 2012 there was about $2m of venture capital investment for the entire ecosystem. That is not entirely accurate since some of us made substantial investments that were not reported publicly.

Since then there were publicly reported investments of $95m in 2013, $362m in 2014 and $482m in 2015 for about $1B total. For example, Bitpay has raised an additional $30m and competitors like Coinbase or Circle have raise over $100m. There is a real and legitimate ecosystem and industry forming around the core Bitcoin protocol.

And all of these companies are building software to satisfy use cases and add value. All of this activity entrenches the fifth order network effect of developer involvement. There are now a ton of ways for individuals to use Bitcoin. Thus, the $100B question is: Are people willing to spend money to hire Bitcoin?

CURRENT TRANSACTION FEES

So, how much are people paying to hire Bitcoin and how does that compare to the past?

Transaction fees are the barometer for how much value the Bitcoin network adds to society because it shows how much people are willing to pay to use it.

OPINIONS VERSUS MONEY

Everyone has opinions. Not everyone has money. What opinions matter? What opinions do people really care about? The ones money gets staked on. The more money at stake the more important the opinion.

Think the scaling Bitcoin discussion could pose a threat to Bitcoin’s price? Then sell your bitcoins (if you have any); it is that simple. Or, even better, if you are able then short Bitcoin. Some people like bear roadkill. After all, the market will determine who was correct.

If block size, block interval or any myriad of other reasons were the driving cause for people hiring Bitcoin (buying and holding; not spending which is actually firing) then we would see a lot more activity in the price of Litecoin, Dogecoin, Ether, XRP, etc. But we do not see that price activity and Bitcoin’s market capitalization is about $5.9B of $6.47B or 92% share. The market is speaking.

This is why the experiments need to happen in those projects playing second fiddle on the junior varsity team instead of in the real professional project. Plus, in the extremely unlikely event that any of those playing second fiddle [why are they playing second fiddle in the first place?] are able to develop a significant innovation then Bitcoin, where the professionals with the brainpower are, will most likely be able to incorporate the change(s) and foreclose the ability to supplant the other network effects to such a degree that it poses any material risk to Bitcoin. Thus, it is better to do it right than do it first.

CONCLUSION

That big giant increase in the curve during 2012? Now it is a hardly noticeable bump and a lot of Bitcoin’s competitors are in the dustbin of history. Plus, that is what the big giant increase in the curve during 2014 is going to look like in a few years. Why? Because network effects.

The bear market of the past two years has been brutal, hard, necessary and good. But now it is time to strap in!

No tips yet.
Be the first to tip!

Support Run To Gold - Tip With Bitcoin

1DJCYbU7sVT42N6tyiBWkZ9Uj3Y5PJowE1

Find this post helpful? Please consider tipping with Bitcoin. Each article gets a unique Bitcoin address so by tipping you help make Run To Gold sustainable and give valuable feedback on which content is most appreciated!

Reading time: < 1 minute In this two part interview with Max Keiser hear the discussion about how the United States, Russia, China and tax havens can use Bitcoin to influence the geopolitical chessboard. Part one lays the foundation but part two is where things really start to get interesting. One commenter on Reddit said, "You were a torrent of facepalm-inducing truth." Enjoy! PART ONE (Starts at 12:56 of 25:45)

PART TWO (Starts at 12:00 of 25:45)

No tips yet.
Be the first to tip!

Support Run To Gold - Tip With Bitcoin

1Md3MVzbuw3JQGonyj2xLpkG5GqwPuvmpN

Find this post helpful? Please consider tipping with Bitcoin. Each article gets a unique Bitcoin address so by tipping you help make Run To Gold sustainable and give valuable feedback on which content is most appreciated!

Reading time: < 1 minute ataraxia_hbd

2 tips so far
0.00256884 BTC
(avg tip 0.00128 BTC)

Support Run To Gold - Tip With Bitcoin

18hpaPLY1aJkkZbNKZaQb3K1GsJYuXsiGy

Find this post helpful? Please consider tipping with Bitcoin. Each article gets a unique Bitcoin address so by tipping you help make Run To Gold sustainable and give valuable feedback on which content is most appreciated!

Reading time: 9 – 14 minutes

You see, for an investor or speculator a 100x return is oftentimes the stuff of legends. Sure, you can get lucky once and maybe even twice. But with the arrival of Bitcoin four years ago a new category of currency was created. And like Babe Ruth ‘calling the shot’ I am finding these investment grand slams are getting more common. The rate at which capital is being created, generated and transferred is astounding.

While some people, like Chris Duane, whine about it the wise are knocking in runs to tally points on the scoreboard. So, roll the Q1 and Q2 2013 replays!

What is an investment grand slam? I like to consider four particular elements: (1) ability to quickly settle into a non-seizable asset, (2) privacy, (3) moral or ethical and (4) a ROI in USD greater than 1,000% in less than 12 months.

Liquidity and censorship-resistance. Liquidity is extremely important so I am looking for assets that have market capitalizations in excess of $20m and weekly volumes greater than $1m. Unlike a bank or brokerage account so long as the private keys are protected it is almost impossible to seize or confiscate the assets. In an era of deposit confiscation for bail-ins like in Cyprus, rampant theft of customer segregated assets like MF Global and general financial pandemonium therefore I want investments and assets that can quickly and easily settle into something like Bitcoin which is held in personal possession and is neither seizable nor subject to counter-party risk.

Pseudo-anonymity. Privacy is increasingly becoming a rarer and rarer commodity. After all, it was on How To Vanish where I first recommended Bitcoin on 17 Jan 2011 and started seriously stirring the discussion in the blogosphere. Bitcoin is not anonymous but pseudo-anonymous. Additionally, there is no account like with a bank or brokerage. This means there are no form TD-F 90-22.1, an FBAR, FACTA reporting requirements, 1099s, AML/KYC compliance or any other pesky price floors, in terms of privacy, being placed on me or my assets. The bottom line is that although tax liability may still accure, I recommend everyone pay what they legally owe because there is really no reason to be looking over your shoulder for these costumed thugs, and the actual payment is more consensual.

Moral superiority through express voluntary and consensual relationships. Violence or coercion interferes with the pricing mechanism and economic calculation of market participants. This leads to misallocations of capital and wealth destruction. The State is great at introducing these types of annoyances into the otherwise peaceful associations of individuals. By contrast, Bitcoin is used by voluntary mutual consent by market participants. Unlike record or movie companies, pharmaceutical companies, patent holders, etc. there are no price floors that rely on the violence of the State. Consequently, wealth creation and generation can happen in a much more predictable environment.

1,000% ROI in less than 12 months using the USD as numeraire. This should be pretty self explanatory. In other words, it means you make a crap-ton of money really, really fast. But keep in mind that you make money when you buy not when you sell.

Current market capitalization is around $1B with daily volumes around $5m.

As already mentioned, I first publicly recommended Bitcoin around $0.25. Currently it is trading around $92. That makes the return about 36,800% in about three years.

But what about lately? Well, on 23 Feb 2013 I did an interview that was published 7 March 2013. Around 11:40, when Daniel wants to close the interview, I go out of my way to make a Bitcoin price prediction and talk about one of the investment grand-slams Satoshi Dice.

“This time we might see it run from $2 up to $300 and then it might crash down to $20.”

Sure, at the time of the interview Bitcoins were trading around $30 so there is only about a 300% return in three months. But on 31 December 2012 I wrote an article recommending buying bitcoins due to undervaluation and they were around $13.40. With plenty of opportunities to sell at $134 or higher making the 1,000% return in less than six months definitely possible.

And it is Bitcoin’s increasing use as a settlement currency that is deepening the crypto-currency capital pools.

LITECOIN

Current market capitalization is around $50m with daily volumes around $2m.

In the previous interview it showed the Bitcoin Special Report that could have been purchased by the Future Money Trends guys for $10. In that report they quoted me extensively and actually recommended Litecoins. At the time Litecoins were trading around $0.10. Today they are trading around $2.85. That makes the return about 2,850% in about three months.

SATOSHI DICE

Current market capitalization is around $20m with weekly volumes only around $50-500k. This is the weakest case of the four investment grand slams but it still adds materially to the scoreboard.

In the previous interview I recounted the Satoshi Dice example. On 4 January 2013 I wrote a brief financial analysis of Satoshi Dice which trades on the Bitcoin stock exchange MPEx.

At the time, it was trading at 0.0037 BTC per share which was about $0.0496. Shares bought then would have yielded about 0.00041730 BTC in dividends; just look at the little circles in the chart.

While it is currently trading around $0.187 the price has ranged from 0.0075 to .0020 bitcoins with plenty of opportunities to sell for at least $0.50. But the returns for people who did act on my brief financial analysis and have not recognized their gains is still about $0.235 or about 373% in about six months.

[NOTE: 17 days after publishing this article Satoshi Dice bought out for $12m or 0.0035 bitcoins per share or about $0.35 or about a 650% return in about six months.]

ASICMINER

Current market capitalization is around $160m with daily volume around at least $400k. I have not publicly recommended ASICMINER so I may just be a spectator.

ASICMINER is an interesting company with a fairly low profile and lacks an official website. Friedcat, the pseudo anonymous operator from China, just keeps throwing up points on the scoreboard. It is a leader in the ASIC mining technology and sells out massive amounts of hardware.

Some people bought their ASICMINER shares around $0.10 in mid-2012. But with the GLBSE nonsense and other issues we will just use the price from early March when it started trading on the passthroughs for about 0.65 BTC or $26. Each of those little circles represents a dividend, about 0.112 bitcoins in June or approximately $1m of dividends per week, which are paid on a weekly basis in bitcoins. Currently, it is trading for about $425 per share.

That makes for a return, not counting dividends, of about 1,500% in about three months.

On another note, an interesting phenomena is happening with Bitcoin as it is increasingly being used as a numeraire to perform economic calculation by market participants because of the rapid and substantial developments happening in the mining sector. This is revealing a more advanced evolution of crypto-currency which indicates a very promising portent to economic strength.

CONCLUSION

Bitcoinlandia is a place of mythical investment grand-slams that turn into reality. So a review of some of the runs recorded on the scoreboard during Q1 and Q2 of 2013.

If you are new to Bitcoin then you may want to get a copy of my Free Bitcoin Guide. This is a market like none other that is creatively destroying the currency and financial markets.

Another interesting point is that reserve currencies force themselves onto the world stage by sheer economic power resulting from sound fundamentals and global reach. I have not really considered Bitcoin a contender for the world reserve currency. At best, perhaps in 20 years, it would sit alongside a Yuan, Yen, Dollar, Euro and South American currency.

But all of those competing fiat currencies have significant problems with stifling monetary innovation. Not only are the fiat currencies technologically inferior but they and service providers are trammeled with regulation. It is like a baseball game where one side can only use their arms instead of bats.

In spite of regulators threatening to use violence against innocent people engaged in freedom of speech; Bitcoin and the crypto-currency economy has, through sheer force of will, clawed out mythical investment returns.

We are only four years into this censorship resistant crypto-currency experiment. The types of investment returns being recorded on the scoreboard are legendary. This is how intergenerational wealth can be created. Where Bitcoin and the crypto-currency market and economy go from here is anyone’s guess. But I am willing to bet that a lot more runs are going to get recorded on the scoreboard!

4 tips so far
0.13 BTC
(avg tip 0.0325 BTC)

Support Run To Gold - Tip With Bitcoin

15X1zUmMSCEmywva6r3kYCAp9CR4ozVaCT

Find this post helpful? Please consider tipping with Bitcoin. Each article gets a unique Bitcoin address so by tipping you help make Run To Gold sustainable and give valuable feedback on which content is most appreciated!

Reading time: 5 – 8 minutes

Mr. Pento really should have read Murray Rothbard who, in The Death Wish of Anarcho-Communists, wrote:

It is no crime to be ignorant of economics, which is, after all, a specialized discipline and one that most people consider to be a ‘dismal science.’ But it is totally irresponsible to have a loud and vociferous opinion on economic subjects while remaining in this state of ignorance.

MICHAEL PENTO ON CNBC

Whenever I hear someone who is negative towards Bitcoin it makes me wonder if they have even made a single transaction.

Based on the sheer numbers of mistakes, logical fallacies and other foolish things in this interview I have to conclude it was an April Fools joke. Surely Michael Pento is smarter than that.

Really, appealing to the authority of his IT department? That is too funny. After all, if his IT department had any monetary sense then they would have been involved in Bitcoin a lot sooner and have plenty of resources where they would not need to be working for Mr. Pento.

In 1994 I had already been using the Internet for several years so I was ahead of the curve. One aspect of technology is that it takes intellectual capacity along with consistent and diligent effort to become competent. Those who have failed to engage in technological preparation are at a severe disadvantage to those who have.

Mastering Information Age tools, like Bitcoin, gives one a huge advantage over those merely using Industrial Age tools just like the Steel and Bronze Ages. And the longer one procrastinates adopting the new technology the further and further they fall behind those who do. Bitcoin merely monetizes the individual’s success or failure with adopting a new technology.

This morning I received an email from a friend who wrote:

Well, I kinda wish I had not gotten discouraged with the computer problem I had when we were looking at Bitcoin a few short months ago [NOTE: November 2012] when it was $10 [Current price around $108].  Where do you think this thing is going from here?

I responded:

Yes, it does have some learning curve to it. But I suppose that is why luck is when preparation meets opportunity.

THE INTERNET IN 1994

Do not laugh too hard at Bryant Gumbel and Katie Couric. It is easy to forget how relatively recent a phenomenon the Internet is for most persons who use it today!

Just like the @ symbol in email, based on the Simple Mail Transfer Protocol, SMTP, so likewise Bitcoin is a new phenomenon on the Internet and understanding what a bitcoin address is in the Money Over Internet Protocol, MOIP, as implemented in Bitcoin is going to become common knowledge.

After all, BitPay added 1,300 merchants in March and processed over $5.2m in transactions which is up significantly from their previously highest month of about $700k. Over 243,000 copies of the Bitcoin client were downloaded in March. And that does not count easier to use options like Blockchain.info.

Cyprus has been a wake-up call for people about their money, currency and banking relationships. With the Bank of Canada and Bank of England floating similar ‘bail-in’ schemes, which poses a grave threat to businesses, depositors should get increasingly cautious about where they keep their capital.

CONCLUSION

This new technology of Money Over Internet Protocol is going to continue getting easier to use and more widely spread. This is going to greatly increase transactional demand. And that means higher prices. So the wealth transfer continues from people like Michael Pento and his clients to holders of bitcoins. If you plan on protecting, preserving and growing your wealth then you need to get with the times and not listen to ignorant fools. So get a copy of the Free Bitcoin Guide to learn how to get started.

No tips yet.
Be the first to tip!

Support Run To Gold - Tip With Bitcoin

1PhNyMMvni5QFYS3kxb3MLLhwVY9NWmUq6

Find this post helpful? Please consider tipping with Bitcoin. Each article gets a unique Bitcoin address so by tipping you help make Run To Gold sustainable and give valuable feedback on which content is most appreciated!

Reading time: 11 – 18 minutes

As a result, the price of bitcoins has melted up from $48 to $68 in a few days. But the meltup has just started and probably has a long ways to go.

Meanwhile, due to last minute changes and because I would already be in Europe and thanks to Chalie Shrem, CEO of BitInstant, I had the opportunity to give an hour long objective presentation on Bitcoin to a group of significant players in the payments space including members of the Federal Reserve, Bundesbank and major banks or other service providers from the US, Europe and other parts around the globe.

PREVIOUS BITCOIN PREDICTIONS

Let us put into perspective how the past performance of gold’s complete collapse relative to Bitcoin could affect your net worth.

17 January 2011 we recommend using Bitcoin to protect your privacy in Bitcoin – The Best Financial Privacy Is Probably Here … Probably. If you had traded one ounce of gold for bitcoins then today you could trade those bitcoins for 150 ounces of gold.

19 December 2011 in Solid Bitcoin Consolidation Finally Bears A Bitcoin Breakout I stated:

Taking the current price of $4.00, the 200 day moving average of about $8.50 and extrapolating this upleg with a 12x 200dma top we could see a price of around $80.00 per BitCoin. Is this speculative? Yes. Would I bet on seeing $80 per BitCoin by around June or July? Maybe if the odds are around 5%. But I would take a bet for BitCoins to hit $7.50 by June or July at around a 50-70% probability.

If you had traded one ounce of gold for bitcoins then today you could trade those bitcoins for 21.3 ounces of gold.

31 December 2012 in During 2012 Fiat Currencies And Gold Collapse Against Bitcoin I wrote:

Therefore, holders of bitcoins continue to be beneficiaries of a tremendous wealth transfer from holders of fiat currencies, gold, silver, real estate, stocks, bonds and pretty much every other asset. Bitcoins have already turned out to be the trade of the decade for many of our readers and may likely be THE trade of the 21st century before these massive worldwide currency wars and collapses play out.

If you had traded once ounce of gold for bitcoins then today you could trade those bitcoins for 5.32 ounces of gold.

FinCEN GUIDANCE

On 18 March 2013 FinCEN released guidance on how to treat virtual currencies. It should be kept in mind that this guidance is neither an administrative ruling nor determinative. In other words, it is not binding. But it does inspire confidence in VCs to make investments into the Bitcoin space because Bitcoin has undefined legal issues which cast a pall of potential litigation resulting in a chilling effect on investment.

Given the rule of lenity and this guidance therefore VCs can make investments with greater certainty that what they build will not be shut down, raided, seized or confiscated with the founders thrown in jail and prosecuted with no prior warning or due process. The guidance has distinguished groups, users, exchangers and administrators and outlined which rules, such as Money Service Business, applies to which groups and why.

All indicators of Bitcoin growth point to significant adoption. There are all time highs with (1) Google searches, (2) Wikipedia traffic, (3) Reddit activity, (4) new wallet accounts being created, (5) MtGox having 4,000+ potential customer accounts awaiting AML/KYC approval while processing about 400 per day and (6) the 200 day moving average of transaction fees paid in USD.

All of this has filtered through to the exchange rate. Bitcoins are trading around an all-time high of $68. But despite the rise in price the wise investor would focus more on value as asked in whether bitcoins are cheap or expensive?

What is happening right now is that the positive feedback loop is starting to gain massive energy and momentum. This is leading to Bitcoin being able to begin teleporting on its own energy.

For example, Bitpay raised about $500,000 in January in a seed round. Assuming these funds were allocated into Bitcoin and this startup started hiring new staff, moved offices, bought supplies, etc. then it would not be unreasonable to expect that despite spending funds to build out infrastructure, like the Bitpay Fulfillment By Amazon plugin (which was my idea by the way!), that Bitpay would actually have about $2m in the bank.

As the Bitcoin price rises it transfers wealth to holders of bitcoins and provides them with the capital needed to fund development which will provide more utility to Bitcoin and result in a greater value proposition for users.

BITCOIN PRICE MELT-UP

The price of bitcoins has risen extremely quickly over the past week from about $45 to nearly $70. Is this an unsustainable bubble, based on funds flow, or has Bitcoin been tremendously undervalued and the price is rising to a more fairly valued level?

In my opinion, on 1 Jan 2013 the fair value of bitcoins was around 30 bitcoins per ounce of gold based on the fundamentals and were undervalued because it took about 125 bitcoins to buy an ounce of gold. But that ratio closed to about 35 before Cyprus and the FinCEN guidance.

However, with the more predictable legal environment there will be a lot more capital allocated to this space. VCs will be buying more bitcoins and investing in more Bitcoin startups. These startups will build tools and infrastructure and products which will make Bitcoin more useable and a greater value proposition for consumers.

I am very grateful for the opportunity to attend the conference and mingle with the leaders of the payments space. They were all extremely friendly, professional and gracious. For example, there were no tables free at breakfast and the Federal Reserve’s legal counsel invited me to join him and we had an cordial discussion that followed up on his presentation about Cyber Security; issues actors in the Bitcoin space have had significant experience with.

And I even got to have about a four hour discussion with one of the Federal Reserve attorneys over dinner. It was so interesting that we grabbed some drinks afterwards at the hotel to continue it. Given how complicated the Bitcoin subject is and how it is outside the realm of his usual experience therefore I was quite surprised at how well he understood it along with many of the economic implications. Clearly he is doing his job better than his 33 counterparts at the SEC.

But I can tell you from my two days at the NACHA conference with senior bank executives and members of central banks that the payments space is completely stuck in the mud. If anything I come away having a little more sympathy for the bank manager when my expectations are not met. I suppose the conference helped me lower my expectations on what to expect from them.

They have all types of problems and Bitcoin solves nearly all of them but is nowhere close, from a technical standpoint, to being able to be adopted by them. If anything they should use the technology for intra-bank settlements but there is so much inertia that will probably not gain any traction.

For example, there were very heated round table discussions about cross-border payments and legal or compliance issues. One representative from a large bank in the US complained about how there are no rules for the EU to which one of the EU people said we have very defined rules (like when settlements must happen by, fees, taxes, etc.) just that they are different for all 32 countries and in some cases in languages different from English. So the issue was not that there were no rules but that they were hard to find. In contrast, with Bitcoin the open-source software is easily discoverable and the mathematical rules of the software are easily implemented by the software developers who want to use it.

Another significant issue raised by one participant is that Fedex can track a $5 package but we cannot track a $500,000 wire. They want to provide real-time status on currency flows like bank wires, international ACH or debit services, mobile payments, cross-border transactions, etc. But there is tons of regulation, some of which attacks fees, and the end result is that a 500 year old money substitute and value transfer system is hobbled by regulation resulting in a lack of financial innovation despite the possibilities the Internet enables.

And then there is Bitcoin. The gracious program director asked that I show them how Bitcoin works and not be too salesly. So I started out my objective presentation by explaining how public key and private key asymmetrical encryption works and had BrainWallet.org on the projector.

Bitcoin is very abstract so the easiest way to get it is to use it. So after about 90 seconds of encryption explanation then the next step was to do a transaction in front of them. So I brought up an address on the projector using Blockchain.info, scanned the QR code with my iPhone, signed the payment and sent it. Within about 3 seconds it popped up on the projector as an unconfirmed payment.

I explained how it (1) went from my iPhone out to the Bitcoin network, routed around any possible censorship due to running at a lower level in the Internet where its traffic is indistinguishable from their encrypted traffic, (2) anyone could track the payment via the blockchain (3) it was non-revocable and (4) cost no fees to send.

Other parts of the presentation focused on backwards compatibility with ACH via Coinbase and with cash via Local Bitcoins or BitInstant. They found it fairly humorous when I said I would have to reevaluate my position on fulfilling orders in light of the FinCEN guidance. They were greatly surprised that in the last two weeks I had about ten orders from people who wanted to meet at Starbucks and buy $40,000 worth of bitcoins.

I showed them this chart of new wallet openings.

I explained the reason for the change in growth rate. Paypal started blocking legal file sharing websites so they started accepting bitcoins. I let them know that since Bitcoin is open-source that no users can be blocked and consequently Bitcoin would gladly accept with welcome arms any merchants they did not want to serve.

Then I showed them the 200 day moving average of Bitcoin’s USD market cap.

This chart sure got their attention. One person questioned about the crash. So I explained how Senator Schumer brought attention to Bitcoin by explaining how it can be used to anonymously buy drugs online and called for a ban of the site Silk Road and an investigation.

Then I quipped, “We sure saw how that turned out. And since Bitcoin cannot block any particular users, like Paypal or Visa, that I did not appreciate Sen. Schumer’s free advertising, despite bringing in plenty of users, because it made my job harder when dealing with people like yourselves and discussing how to use Bitcoin legitimately in the financial world.”

Overall, I think they had a favorable sentiment towards the Bitcoin technology with a deer in the headlights type of impression. I do not really have any expectations for any of them adopting it anytime soon and I told them that it was not really in a position for that anyway. Bitcoin is still beta software after all and needs more work done before it can be ready for these types of organizations, institutions and enterprises. But the potential is there and the Bitcoin tsunami, while still far from shore, is racing with increasing speed and size.

CONCLUSION

So there is a lot going on in Bitcoinlandia. Based on current growth rates, resulting in increased speculative and transactional demand, the price needs to rise by about $3 per week compounded. How the inadvertent hard fork was resolved lends great confidence to the Bitcoin community. With the Cyprus and FinCEN news I think the general environment for the space has significantly changed in a way to provide greater confidence for VCs.

And greater confidence for VCs means higher Bitcoin prices. So where should the next target be? Well, given the fundamental state of the space as it currently is along with current growth rates therefore I think a fair value price for bitcoins is around 3-7 bitcoins per ounce of gold. It will be fun to watch the price melt-up to that over the short to medium term so get out the popcorn to watch this rocket. And if you still have not gotten familiar with Bitcoin then perhaps you should checkout the Free Bitcoin Guide which has had some significant updates lately.

NOTE: Due to time constraints and a meeting to attend I have published this quickly without the usual proofreading. So if you see any errors then please help me out by leaving a comment so I can fix it. Thanks!

No tips yet.
Be the first to tip!

Support Run To Gold - Tip With Bitcoin

1NqbDRLFXpqUgSg8pP9g4PinEaPfTK2uCE

Find this post helpful? Please consider tipping with Bitcoin. Each article gets a unique Bitcoin address so by tipping you help make Run To Gold sustainable and give valuable feedback on which content is most appreciated!

Reading time: 5 – 8 minutes

Editor’s Note: James Cox has written three good articles for GoldMoney. For some reason they rejected this well written and balanced article not on its merits but because it is too sensitive. Here are RunToGold the things we are most sensitive about are (1) our net worths in terms of gold ounces and (2) our freedom of speech; not whether seashells, metallic atoms or organized cryptographic hash are the best forms of money or currency.

Since gold has collapsed relative to Bitcoin for four consecutive years therefore we feel it not only important to discuss this new crypto-currency but vital to the financial safety and sensitivity of our readers. Bitcoin will not be ignored; the balance sheet demands it be paid attention to. Enjoy!

Bitcoin Versus Gold By James Cox

If you are reading this article you are almost certainly familiar with the fact that the life expectancy of any fiat currency is 27 years. Any given monetary system has a lifespan of 30-40 years. This current one started in 1971. So the gold and silver bugs, of which I count myself, happily point out that gold and silver are money and have been so for 5,000 years.

However, you may or may not be so familiar with Bitcoins. A decentralized censorship-resistant digital peer to peer currency created by Satoshi Nakamoto in 2009. Users of this currency can buy goods and services over the Internet, without having to pay bank fees or governmental tax. The transactions are anonymous other than a very long piece of code.

CENSORSHIP-RESISTANCE

This has given to the rise of the ‘Silk Road’, which is the Internet’s black market. Whilst it is largely believed that Nakamoto is a pseudonym, the theme of anonymity is crucial to its success. In terms of music sharing, Napster failed because it had a centralized location where the authorities could address their response; whereas subsequent decentralized censorship-resistant file sharing systems like BitTorrent have succeeded. The same has accounted for previous digital currencies.

This above logic brings with it a difficult conundrum with regards to gold and money. Over the eons, bullion warehouses would keep gold and silver for their clients for a storage fee and provide a warehouse receipt for their customer’s wealth. This was abused by the Medici family in the 14th century and later mutated into the massive fraud of fiat currency and fractional reserve banking of today.

ALLOCATED GOLD STORAGE AND DIGITAL GOLD

Apologists for this debt based fractional reserve monetary and financial system point out that gold cannot be forced down a wire. But given the birth of the Internet this is no longer relevant as it can be digitally allocated within a vault like in GoldMoney. Which brings us back to the subject of trust.

For a sound money banking system to succeed then every ounce of gold must be accounted for and be physically held somewhere secure and the service must be honest, transparent and offer the chance of physical redemption at anytime. Currently, the best and most trustworthy institution that offers this service is GoldMoney.

ECONOMIC CENSORSHIP

However, given that the financial and political elites have a fanatical dislike of gold and a fixed physical address for such a service then it becomes apparent that they also have the ability to hinder the institution with infinite restrictions and rules. These rules, constituting economic censorship, are usually not applied to the state favoured fractional reserve banks. Even in the cases of serious misconduct such as the LIBOR scandal the rules of fair conduct are simply overlooked by regulators. Consequently, this regulatory capture along with tax policy and legal tender laws puts sound money institutions at a huge disadvantage.

MARKET SOLUTIONS

As a result, the current monetary system is so inefficient, expensive and egregiously unfair that the market craves an alternative. Bitcoins provide a creative and sophisticated solution that satisfies capitalism’s most desperate need – free money. Bitcoin allows the movement of any amount of money to anyone at anytime from anywhere and cannot be impeded, frozen, seized or confiscated.

This new monetary system is set to effectively stop supply at 21 million Bitcoins. This should happily dispel the belief that a currency needs to be constantly inflated to allow for market growth. Bitcoin is only 4 years old and gains people’s confidence with every passing day and some suppose that it may meet meet massive opposition from the governmental and financial elites should it manage to gain any additional traction.

A fascinating similarity between gold and bitcoins is that they both must be mined. With gold individuals mine through dirt and stone seeking particular atoms that are distributed based on an financial algorithm (ore grade) determined mainly by energy input costs and has resulted in a largely consistant annual increase in supply. With Bitcoin a software algorithm means that no matter how many people attempt to mine for the ‘blocks’ and receive the 25 bitcoin reward and results in a predictable increase in Bitcoin supply.

CONCLUSION

The moral of this story is that the free markets crave a solution to the pricing mechanism of economic calculation. Sound money, such as gold, remains a caged lion lashed about with regulation resulting in economic censorship. Even if censorship-resistant Bitcoins fail, and they could, they will still have played a part in this great saga of power versus market.

Bitcoin has demonstrated that the free markets demand a fixed and free currency supply. Bitcoin is forcing the elites to reconsider gold as a monetary system component in which they are still included in the narrative and not completely routed around.

They may see their frightening alternative as alluded to by the European Central Bank’s report on Bitcoin. If they do not comply with this market demand then their power base, derived from their ability to issue fiat currency, may be completely eroded and therefore their entire existence could be replaced at the click of a button by billions of individuals.

After all, who wants to buy a buggy whip, telegraph, 8-track tape, Tower Records or newspaper?

No tips yet.
Be the first to tip!

Support Run To Gold - Tip With Bitcoin

1KtCsVYjm7dSBejGSvMu22Avq9sFdd6vuS

Find this post helpful? Please consider tipping with Bitcoin. Each article gets a unique Bitcoin address so by tipping you help make Run To Gold sustainable and give valuable feedback on which content is most appreciated!

Reading time: 8 – 13 minutes

Bitcoin, a censorship-resistant crypto-currency, will absorb any regulatory interference and only grow stronger as a result. Blowback baby! The cost of using credit cards is being dragged out of the shadows. Germany has demanded their physical gold be moved back to the Homeland in anticipation of a currency crisis and capital controls. And the Bitcoin juggernaut continues to gain mass and momentum having reached $21.43 today.

Jon Matonis recently wrote how a government ban on Bitcoin would fail miserably. Sebastian Shaw is a mutant villain in X-Men: First Class and leader of the Hellfire Club. Shaw has the mutant ability to absorb energy or force and then focus it in a counter-attack.

Thus, the idle threat of force from regulators at 0:17 ‘Put that man down or we will open fire.’

If there were proposed regulation I can already see Bitcoin’s smirk coupled with the satirical response, ‘Promise?’

I would go into more depth about why this is the case but I should give you some reason to attend on May 17-19th, with about 1,500 others, the Bitcoin Conference 2013 in San Jose, California. Plus, Jon Matonis has graciously invited me to give a presentation on Bitcoin: Regulation, privacy and taxes. It should be fun and interesting!

Gold, a physical element, is the same today as it was 500,000 year ago. But Bitcoin is so much more than it was a mere four years ago when first released to the public!

By analogy, the blockchain is like DNA and the market participants of the open-source Bitcoin community are like ribosomes that read the DNA in order to craft proteins necessary to adapt to and function within whatever environment or circumstance are encountered. This organic proliferation of software code by crypto-warriors who are changing the world is a beautiful thing and a simple time function with exponential effects.

Crypto-Ancapistan is already here. It seems most do not recognize it though because it is neither across an ocean nor does it have borders. Its citizens neither secede nor declare independence plus there are no permanent residence visas or passports required. They build this new virtual nation line of code by line of code. There are even some publicly traded companies with $10m+ market capitalizations; two which earned 5k and 17k bitcoins in Jan. Cipherspace is a place where heroes live and where people who want to be heroes live.

THE COST OF USING CREDIT CARDS

Yesterday I flew around a volcano in southern Chile. I even saw magma! Then it came time to settle the bill so I got out a credit card. The proprietor stated, ‘Using a credit card will be an extra 5%.’ For a 200,000 peso flight that comes out to about $21.33!

Tonight I enjoyed a delicious congrio dinner. The waiter brought the handwritten bill. So I got out the credit card. He responded fairly vehemently, ‘No tarjeta. Pesos or dollares.’ So I scraped together a few pesos.

Well, get used to it. Many credit card merchant agreements included a clause that prevented merchants from charging a fee to use credit cards for payment. But as part of a $7.3B class action settlement starting 27 JAN 2013 merchants can begin adding a surcharge for using credit cards.

The IRS and gas stations have done it for year. Now it will likely be coming in force to merchants near you. And if your favorite merchants do not then ask for a discount if you pay with cash. After all, there is a sweet sound of cash and a reason why we offer products at about a 40% discount if paid with Bitcoin. So encourage your local merchants to talk with BitPay about accepting bitcoins.

On 16 JAN 2013 Telegraph reported that Germany would repatriate 674 tons of physical gold to the Homeland because ‘A growing chorus of lawmakers in the Bundestag has demanded a return of all Germany’s gold in case the financial crisis escalates.’ Germany can sense that the capital controls are going to intensify.

Argentina has already shown by example why one should look for ways to avoid credit cards. Jon Matonis wrote about how ‘A 15 percent tax surcharge will close some of the gap between the regulated official rate and the black market rate’. So, if you have an Argentinian bank issued credit card and use it outside Argentina then the Argentine government has a 15% tax tacked onto your bill.

As the currency wars escalate the currency controls will get increasingly onerous. If a currency or payment method is censorship-prone, like Argentinian bank issued credit cards denominated in Argentine pesos, then it will be subject to such controls. This means you could take a large financial loss.

Historians really have it pretty easy since they read about what has already happened. But to be a monetary visionary requires so much more.

James Turk, founder of GoldMoney, is one of the more prominent monetary historians. In this interview on 17 JAN 2013 Mr. Turk referenced my work on the tangibility of Bitcoin but oddly did note give proper credit. Why a monetary historian would not give proper credit to a monetary visionary baffles me. But James is just one of many I have directly influenced since I began publicly recommend Bitcoin in its infancy.

For examples from articles, interviews and etc., Robert Wenzel of Economic Policy Journal, Chris Powell of GATA, Lew Rockwell, Anti-War.com, Jeff Berwick of The Dollar Vigilante,The Silver Vigilante, John Rubino of Dollar Collapse, Jason Burack of Wall Street For Main Street, BrotherJohnF, Michael of The Daily Paul, Max Keiser, James Turk of GoldMoney, Kerry Lutz of the Financial Survival Network, Daniel Ameduri of Future Money Trends and many others off record have all been influenced early on by myself and persuaded to use and accept bitcoins.

But the point is that four years (someone may want to tell Mr. Turk who stated two years in the interview … maybe that was the first time he heard about it) after Bitcoin was released to the public GoldMoney has finally started to mull Bitcoin integration. Sure, a true monetary visionary would already have the gold vaulting service integrated with Bitcoin. But historians are good at stating facts from the past and not creating the future.

Because what customers need is to have their bullion integrated with a censorship-resistant currency that will be much more malleable as currency controls are ratcheted up. You can bet that more restrictive currency controls and capital controls will be placed on gold if a real monetary crisis appears. A crisis Germany is preparing for by taking physical possession of the gold.

CONCLUSION

Bitcoin, with a pitbull like grip, has attached itself to Leviathan’s carotid artery. Bitcoin, a sophisticated cryptographic protocol and the largest distributed computing network in the world, is immune to force. Threats of regulation, which are really just threats of force, are idle because of these Sebastian Shaw-like characteristics.

Germany is preparing for a major currency crisis by repatriating 674 tons of physical gold. Currency controls will only raise the cost of using credit cards which are currently far more expensive than Bitcoin in terms of time, money and privacy. And when currency controls are ratcheted up it will be Bitcoin that allows holders of capital to have monetary sovereignty and portability.

Sure, gold is collapsing against Bitcoin but the real question is why are Bitcoins trading at a mere $21. Perhaps the monetary visionaries need to do more work teaching, training and influencing the monetary historians and others? To start, check out pages 72-78 of the February edition of Open Skies, the Emirates Airlines magazine. You will get to read it before millions of wealthy businessmen stuck on transoceanic flights who are used to being economically censored.

Get a copy of the Free Bitcoin Guide (recently updated), see you in San Jose and bring quesitons!

No tips yet.
Be the first to tip!

Support Run To Gold - Tip With Bitcoin

1JbW4UVuK3tTr1rh41hs9oDG8gt7T5fe1u

Find this post helpful? Please consider tipping with Bitcoin. Each article gets a unique Bitcoin address so by tipping you help make Run To Gold sustainable and give valuable feedback on which content is most appreciated!

Reading time: 14 – 23 minutes

Being a strong supporter of the Second Amendent and long-standing ally of GATA I am personally interested in their ability to continue speaking; despite whatever petulant little (morally) Establishment goons have done physically assaulting Bill Murphy. True, they did not come in guns drawn like with Kim Dotcom. And at least a federal court, perhaps as a backhanded insult, made the Federal Reserve write GATA a check!

On 18 Sep 2012 I wrote Why Bitcoin Acceptance Should Be A Litmus Test Of Liberty Proponents. Then WordPress started accepting bitcoin on 15 Nov 2012. They get it. Less than two weeks later Anti-War that started accepting bitcoins. They get it. A month later LewRockwell.com started accepting bitcoin. They get it.

But Bitcoin can be an intimidating subject for those not so technically inclined. This is a reason I created the Free Bitcoin Guide and assisted GATA in accepting bitcoins. Like WordPress, Anti-War  and LewRockwell; GATA gets it. I want to protect our freedom of speech and am willing to actually do something about it.

ECONOMIC CENSORSHIP AND THE CURRENT MONETARY SYSTEM

The current monetary and payment systems are increasingly being used to engage in economic censorship of voices opposed to current immoral Establishment policies. This is because without free markets in currencies we will eventually lose free markets in everything else.

FIRST, was the retaliation in the form of a banking blockade against Wikileaks for leaking the Collateral Murder video showing the intentional targeting, killing and coverup of two Reuters journalists. Plus, now the US government is targeting and assassinating children for political speech.

First, was Len Sassaman on 3 July 2011 who was as Jon Matonis eulogized, “a brilliant cryptographer and a true champion for privacy rights and privacy enhancing technologies”. Bitcoin block 138725 on 30 July 2011 contains this transaction which decodes to this tribute to Len Sassaman:

Second and third, were popular political blogger 43 year old Andrew Breitbart on 1 March 2012 from a heart attack while jogging and then on 20 April 2012 ‘Michael Cormier, a respected forensic technician for the Los Angeles County Coroner died under suspicious circumstances at his North Hollywood home April 20, the same day Breitbart’s cause of death was finally made public.’

Fourth, Diaspora Co-Founder Ilya Zhitomirskiy on 12 Nov 2012, strong privacy advocate and a Co-Founder of Diaspora which is a peer-to-peer encrypted social network with privacy built in by default. Think, Facebook but without being so useful to the CIA and FBI.

Fifth, was Reddit Co-Founder, Internet giant and freedom of speech advocate Aaron Swartz on 11 Jan 2013. Aaron was instrumental in protecting Internet freedom by getting SOPA and PIPA stopped through a massive viral campaign.

Sixth, the gun advocate and gun dealer owner Keith Ratliff on 8 Jan 2013 who was a YouTube star with about 3.5 million subscribers and over half a billion views and owner of FPS Industries which provides customized weaponry.

Decentralized censorship-resistant digital currency, private decentralized social networking, crowdsourced news and customized weapons. Coincidence, right? Of course; just like WTC 7.

If Obama wields what the New York Times calls the ‘kill list’ to target children then it is only reasonable to assume that the kill list will be wielded to silence change agents. That is what Bush and countless others have done throughout history. Who is next, Matt Mullenweg of WordPress?

But perhaps ‘our lives are not our own. From womb to tomb, we are bound to others. Past and present. And by each crime and every kindness, we birth our future.’ At least Matt, Chris and Bill know when they go to sleep that they are waking up in the right side of history and future.

NEXT, Paypal, without any court orders or other legal process but instead of their own volition, has begun (1) targeting particular types of businesses from file sharing services to Internet Service Providers, (2) refusing to process their payments, (3) seizing their funds and (4) freezing their accounts. Of course, they blame it on the copyright and try to pass laws like SOPA and PIPA.

LASTLY, on 7 Jan 2012 Bank of America froze the accounts of American Spirit Arms, a federally licensed and legally compliant gun dealer because the bank believes they “should not be selling guns and gun parts on the Internet.”

Consequently, the Establishment is wielding politicized currency to engage in economic censorship of the freedom of speech and the right to bear arms. Because of GATA’s work the world has changed for the better and that speech needs to be protected and not economically censored.

POLITICIZED CURRENCY

Dr. Edwin Vieira, the renowned expert on American monetary jurisprudence and author of the penultimate book Pieces of Eight, gave a speech at GATA’s 2005 conference about politicized currency.

Eight years ago he prognosticated how political currency would be used to further eviscerate checks and balances in the political machinery along with the threat politicized currency poses to our right to bear arms.

But there was one thing Dr. Vieira did not prognosticate: Bitcoin – the world’s first decentralized censorship-resistant digital crypto-currency. But freedom, particularly monetary freedom, is only going to be reclaimed if it bubbles up from the individual. So, if you want monetary freedom then follow GATA’s example to come and claim it.

CENSORSHIP-RESISTANT CURRENCY

Gold is still a censorship-resistant currency of tremendous stature; think of all the stories of escaping Vietnam with a few taels, gold coins hidden from Nazi’s or countless others over the millennia. Even in my own heritage are ancestors who sewed silver coins into the hems of their clothes to escape violent political and religious persecution with some savings.

And a great thing about gold is it can never become worthless because it is a tangible and corporeal asset. But that very benefit becomes a liability; does it get seized at customs in Mexico and how do you pay for web hosting services in Iceland where there is an extremely protective freedom of speech law written by a Wikileaks proponent?

Or more importantly, as GATA has tirelessly trumpeted, this weakness of corporeality has allowed central banks to target and economically censor gold through legal tender laws, tax policy, the central bank gold price suppression scheme, invasion and occupation.

The currency wars are raging with increasing ferocity, the Germans getting only as much gold as the Federal Reserve says they can have, and as Hiroshima and Nagasaki demonstrated that innocent civilians, men, women and children, have been and will be targeted and vaporized by the State if they demand anything more.

There are many things that make Bitcoin amazing although it does have some weaknesses. Sure, even though bitcoins are tangible they are non-corporeal and, at worst, could become worthless. But if such a catastrophic bug or attack vector is discovered then it will be patched and if abused enough to destroy Bitcoin 1.0 then the weakness will be fixed and Bitcoin 2.0 will be released.

Keep in mind that in most cases the operating system versions are Windows 8 and Mac OS 10. Such software code is not built at once but is an evolutionary process and if you wait to adopt it when finished; well, you would never be reading this because it is never finished.

Thus, gold and Bitcoin are not really competitors but tremendously complimentary monetary tools. And against all odds, like the ring-bearer Frodo, the nascent Bitcoin juggernaut is becoming more acceptable as a medium of exchange and settlement currency and is increasing in economic mass, store of wealth gravity and social momentum to return an economically censorship-resistant currency to individuals.

GOLDMONEY AND BITCOIN

The European Central Bank wrote a 55 page report on Bitcoin for a reason. Are you in favor of being able to easily integrate with a censorship-resistant currency so you can support the charities and businesses that are or may be politically or economically persecuted? Well, James Turk is a GATA advisor and Chairman of the Board at GoldMoney and since GoldMoney is considering integrating with Bitcoin and are asking for customer feedback in their 2013 Annual Survey now is a chance to let your voice be heard in favor of monetary freedom.

And in the meantime, with gold collapsing against bitcoin a wealth transfer is going on to holders of bitcoin and away from holders of gold and other assets. While this fight for freedom and liberty is not about merely making money I would still prefer to see the primary beneficiaries in this shift to censorship-resistant crypto-currency be people of good moral character.

Not only is it the right thing to do but there is a ton of money to be made running an underground railroad from fiat currencies and over-leveraged politicized banks to non-politicized decentralized digital censorship-resistant currency. Just think if those customers, who currently hold $2.2B of assets with GoldMoney, were able to instantly buy bitcoins. A $2.2B market cap for bitcoin implies a price per bitcoin of about $200 or a gain of about 1,400% from current prices.

CONCLUSION

This means that by accepting bitcoin donations GATA is staking out sovereign territory that will allow them to stand free and independent of any politicized currency or payment processors and are immunizing themselves against potential economic censorship. Likewise, should the need arise they can pay with bitcoins for services like webhosting with Iceservers which is based in Iceland or the VPN Private Internet Access.

So, consider taking some time to explore the Free Bitcoin Guide, buy some bitcoins and send some bitcoin donations to GATA. To fund and continue with current lawsuits and to keep fighting for free currency markets we need to raise at least $15,000 (click here to check the current Bitcoin balance and click the little green box to see the USD amount). And consider letting GoldMoney know how you feel in their Annual Survey.

1GATA3hUsxq3DmAhpACBHvB4r7u32xBRur

Plus, do you see the irony of the Federal Reserve writing GATA a check or in you sending GATA a donation in Federal Reserve Notes with a credit card? It is almost an insult.

It was not firehoses and vicious dogs in the streets but the bus boycotts that exerted the economic pressure to change the atrocious Civil Rights situation. What better way is there to screw the central banks than to boycott, to the extent possible, their fiat paper franchises and politically compromised payment systems? Previously there has not been an economically viable substitute. With Bitcoin there is. For the central banks gold is their Achilles heel and Bitcoin a kryptonite dagger.

COMMENTS PLEASE

These topics are extremely important to each and every one of us. Even if you are a low paid Internet shill, because we know you hate your job and want something more worthwhile to do than troll Bitcoin articles all day long.

So please leave some comments about how you feel and share this with your friends, family and favorite organizations like gun dealers, human or civil rights organizations, file sharing companies, open-source software proponents, freedom of speech advocates, doctors, etc. who may be targets of economic censorship. They need to know why they should accept bitcoins.

BON JOVI

SOME HELPFUL GATA VIDEOS

This interview took place at the 4-5 AUG 2011 GATA conference in London. Since I make price predictions around 2:16 it is fun for historical context to recall the price of gold was $1,665 and the price of silver was $41.04. Once again, I was right.

This interview took place on 9 October 2009 on Business News Network. For fun historical context the price of gold was around $1,050 and once again I was right.

WARFARE, WELFARE AND THE STATE – ROBERT HIGGS

(good part starts around 9:20)

HOW EASY IT IS TO USE BITCOIN

REAL IS GOING TO CHANGE

BANK 2.0 – MODALITY SHIFT

Bitcoin can easily be used with mobile devices with the Blockchain.info mobile apps and SMS wallet managers like Coinapult.

RIP – AARON SWARTZ

BITCOIN’S MASCOT – THE FINANCIAL HONEY BADGER

No tips yet.
Be the first to tip!

Support Run To Gold - Tip With Bitcoin

1BMurHp9JCq3tEPhzAzPUxDLtBUueM9zHk

Find this post helpful? Please consider tipping with Bitcoin. Each article gets a unique Bitcoin address so by tipping you help make Run To Gold sustainable and give valuable feedback on which content is most appreciated!

Reading time: 8 – 13 minutes

NOTE: In the first 8 hours since this article was published bitcoins have climbed from $13.75 to 14.30 or up 4%. If you are a Bitcoin supporter, whether a GoldMoney customer or not, then please submit the survey to show potential market demand.

Near the end of the survey I came across significant areas regarding Bitcoin and its potential integration with GoldMoney. Since I started publicly recommending Bitcoin in 2010 and have been a GoldMoney supporter longer therefore it makes sense that they may be reading my articles or Jon Matonis’s What’s Your Bitcoin Strategy?.

THE GOLDMONEY ANNUAL SURVEY

The annual survey requests:

Please take the chance to tell us what you expect from us in the future by clicking on the following link to access the GoldMoney Annual Survey 2013. It takes just 3-5 minutes to complete and will be accessible until 31 January 2013. …

12. How much are you interested in using Bitcoin for online transactions? …

13. Please specify below which Bitcoin functionality you would like to use:

Use Bitcoin to buy precious metals with Goldmoney

Use GoldMoney to store Bitcoins in a secure wallet

Other

On 20 Dec 2011 I received an ominous email from GoldMoney announcing the economic censorship of the payment mechanism.

Due to this growing trend of regulation we have decided to suspend the following services until further notice with an effective date of the 21st January 2012:

* The facility to make and receive payments in precious metals to or from other GoldMoney Full Holding customers.

* The facility to convert directly between the various currencies.

Based on the survey requests it seems obvious that GoldMoney is completely missing the point of Bitcoin. Bitcoin is the first digital currency that is censorship-resistant. In other words, if for whatever reason, justified or unjustified, some petulant brat in a costume provides a sheet a paper with an order on it to take all the gold, silver, etc. that previously was titled to you then GoldMoney will rollover and give them the gold.

To put it simply: Your gold, silver, platinum and palladium held via GoldMoney can be frozen or confiscated. However, when you properly store bitcoins, and I teach you how in The Free Bitcoin Guide, they can never be frozen or confiscated.

But if GoldMoney allowed you to buy bitcoins and withdraw them then your metals would no longer be at much risk because within about 24 hours you could exchange them into bitcoins and withdraw to a wallet. Then the value would be immune to freezing or seizing.

Ironically, the questions in GoldMoney’s survey imply they are looking at this issue of integrating with Bitcoin the wrong way. There is another option which would be the least expensive way to integrate Bitcoin, would add the greater value to customers and generate tremendous revenues for GoldMoney.

GoldMoney should not be seeking to bring bitcoins into GoldMoney customer’s holdings to buy metals. For several reason, GoldMoney should be looking to free customers by allowing them to withdraw bitcoins from their holdings to wallet’s outside GoldMoney’s control.

First, the customer is king and people want to be free with their money. They want the option to stand free and independent without any third-parties or middlemen between them and it. They want it to be sovereign. This is the allure of gold and the old saying, “If you don’t hold it you don’t own it.”

Not only is it the right thing to do but there is a ton of money to be made running an underground railroad from fiat currencies and over-leveraged politicized banks to non-politicized decentralized digital censorship-resistant currency. Just think if those customers, who currently hold $2.2B of assets with GoldMoney, were able to instantly buy bitcoins. A $2.2B market cap for bitcoin implies a price per bitcoin of about $200 or a gain of about 1,400% from current prices.

Second, the main issue with bitcoins for a company like GoldMoney or any bank has to do with the source of funds. GoldMoney already performs all the necessary Anti-Money Laundering and Know Your Client due diligence required by regulated financial institutions.

If GoldMoney starts off only allowing customers to buy bitcoins and withdraw bitcoins they buy from GoldMoney then they do not need to worry about the source of funds because the only way to fund the holdings is with wire transfers where GoldMoney is already incurring the AML/KYC fees. GoldMoney can acquire bitcoins from a few trusted sources, like the large exchanges, and remain within the safest legal areas without incurring any additional costs.

Third, despite gold collapsing against Bitcoin in 2012 they still remain an extremely speculative asset. Sure, they have performed extremely well but that is no guarantee of future performance. Although bitcoins, like gold, are not subject to counter-party risk the holding bitcoins is not necessarily a very safe strategy. Bitcoins could become completely worthless. After all, that is why one buys gold instead of silver; gold is the penultimate store of value.

Fourth, the payment business is heavily regulated and those regulations are constantly changing. As GoldMoney has already discovered, that industry is a real pain in the rear end because of economic censorship.

But there is one person who gets it; Erik Voorhees, who was invited in Sept. 2012 by the Brazilian Central Bank to present about Bitcoin and other attendees such as several Federal Reserve officials, the SWIFT Director of Brazil’s office, Santander, BM&F Bovespa, PNC Bank, National Bank of Canada, HSBC, and a high-level representative from Chile’s equivalent of the ACH system.

My take away from this last session was the revelation that Bitcoin eviscerates entire statutes of law. Bitcoin will result in a number of “legal impotencies,” while simultaneously offering an alternative to the business and money that is being stifled by these same laws in the normal economy

Then in Oct 2012 the European Central Bank released a 55 page report and focused about half of it on Bitcoin. It appears that this scrappy upstart censorship-resistant digital currency is sure getting more attention than it deserves.

Fifth, bitcoins are currently legal in all countries and have not been made illegal by any. A French court has even ruled that a bank must reinstate banking services to a Bitcoin exchange after the bank froze the account because they did not want to be facilitating money laundering.

How particular businesses interact with Bitcoin can result in some interesting legal uncertainties and these likely will not be resolved for a long time. But the suggested method of moving forward for GoldMoney would not be materially different from current practices.

Allowing customers to buy bitcoins and withdraw them is not materially different from GoldMoney’s current business of allowing customers to buy gold and take physical possession. After all, the customers own title to the gold and can take possession at will (perhaps to only a specific address previously authorized for the account via a signed document sent by the customer to prevent any potential fraud, compromise, etc.) and so likewise would presumably own title to the bitcoins and should be able to take possession at will.

Sixth, once customers have bitcoins in their possession then they can avail themselves of the Bitcoin payment mechanisms. Just like Erik explained to the Federal Reserve attorney presenting on Dodd-Frank bill Section 1037 so likewise this strategy would allow GoldMoney to disentangle from the payments related regulation.

Think of all the attorneys that will be out of work when GoldMoney no longer needs to worry about thousands of pages of relevant law in many different countries that is constantly changing.

CONCLUSION – WHAT YOU CAN DO

So, this email requesting input for the Annual Survey was very encouraging. If GoldMoney integrated with Bitcoin then it would likely be the ultimate tool for standing free and independent with your money. Plus, it would give them a competitive advantage over BullionVault and its other competitors.

Really, you would think anyone who claims to be an expert in money and currency would immediately see the potential synergies and therefore it is really surprising that GoldMoney has not already integrated with Bitcoin.

What can you do? Well, the Annual Survey is anonymous, takes about 3-5 minutes to complete and does not close until 31 JAN 2013. So, I would recommend you complete the survey along with the suggestion to “Integrate with bitcoin and begin by allowing me to buy bitcoins and withdraw them to a wallet.”

If you are not currently a GoldMoney customer then I suppose you can still complete the Annual Survey because it is anonymous. Plus, you can always open a GoldMoney holding for free and send the customer support a question about when they will integrate with Bitcoins.

SOME INTERESTING BITCOIN RELATED VIDEOS

15 SEP 2012 – I discuss some of the basics of Bitcoin.

20 SEP 2012 – James Turk discusses Bitcoin and gets hung up on whether Bitcoin is tangible; which it is, just not corporeal.

25 NOV 2012 – Chris Odom discusses how Bitcoin is universal glue.

No tips yet.
Be the first to tip!

Support Run To Gold - Tip With Bitcoin

1AtKPXkHgvytczduUqTQFYDspQ4wtM7Yws

Find this post helpful? Please consider tipping with Bitcoin. Each article gets a unique Bitcoin address so by tipping you help make Run To Gold sustainable and give valuable feedback on which content is most appreciated!

Reading time: 19 – 32 minutes

With Bitcoin now entering its fourth year the numbers speak for themselves. All major currencies are rapidly collapsing against Bitcoin. Ominously, under International Accounting Standard 29 there is a case that even gold is in hyperinflation relative to Bitcoin as the presentation currency under IAS 1, 19.9 and IAS 21. And Bitcoin is just getting started.

With Bitcoin performing so well many are probably wondering: “Bitcoin is still around, what the hell is going on?” So let’s take a look at where the money is being made.

This chart displays the 200 day moving average of Bitcoin’s market capitalization. This is important to discern the long-term secular trend with regard to Bitcoin and effectively filter out the daily noise. The Bitcoin market capitalization is a function of (1) the number of bitcoins in circulation multiplied by (2) the exchange rate which depends purely on the demand for bitcoins because supply is publicly known.

The number of bitcoins in circulation is constantly expanding but at a predetermined rate. During the first four years the rate was 50 bitcoins every 10 minutes. But then in late November 2012 at block 210,000 the block reward was slashed to 25 bitcoins every 10 minutes. Thus the supply of bitcoins is known and any future expansion has already been discounted by an efficient market into the current exchange rate.

BITCOIN DEMAND

Thus, with supply known the exchange rate of Bitcoins is composed of (1) transactional demand and (2) speculative demand.

Transactional demand is very interesting because bitcoins are a medium of exchange vehicle resulting in an oddly positive elasticity of demand because there are lower embedded costs in terms of time, fees and privacy relative to substitutes or alternatives such as bank wires, checks, Visa, Mastercard, Paypal and etc. Consequently, the price of bitcoins is irrelevant to the transactional demand component. Whether bitcoins are $0.05 or $1,000,000 and because they are divisible without cost to 21 quadrillion atomic units therefore they perform and deliver equally to the user the value of transaction value exchange services.

Speculative demand is from individuals who desire to hold bitcoins in anticipation of a rise in price relative to other assets. Because bitcoins are a sterile asset, like gold, any rise in price functions as a wealth transfer from other assets in the economy to holders of bitcoins.

Make no mistake about it, Bitcoins add incredible value to users because it is censorship-resistant or in other words non-politicized currency. It allow users to send any amount of money to any other person instantly without a fee to anywhere in the world without any restrictions whatsoever. E-Gold, GoldMoney (payments have been restricted to only among Jersey based holdings), Liberty Dollar and even gold through confiscation by FDR, Stalin, Hitler and Mao were all censored.

But Bitcoin is a completely different and wholly new rapidly metastasizing beast: the censorship-resistant digital financial honey badger.

WHAT ARE BITCOIN TRANSACTION FEES

As many who invested during the Internet bubble of the early 21st century came to understand many metrics can be ‘puffed up’ or faked. This is certainly true with regards to the Bitcoin economy and one reason I like to monitor total transaction fees.

When bitcoins are sent the sender can optionally include transaction fees to benefit from faster processing and confirming by the Bitcoin network, the largest distributed computing network in the world. Transactions without fees will still be confirmed it just may take extra time and really is not a big deal at all. By including a fee then hungry Bitcoin miners prioritize the transaction and include it in a block resulting in faster confirmations of around ten minutes at most.

The prioritizing of Bitcoin transactions takes place automatically in an auction type market. If Bitcoin ever grows in scale to a size like Visa with 12 billion transactions in Q2 resulting in $2.2B of net operating revenue then this is how scarce resources would be rationed. But currently that is not a concern because there is a ginormous amount of excess mining capacity for current usage levels.

Thus, the current average transaction fee of 0.0005 BTC, with a cost of about $0.00675 or a little more than half a penny, will result in the highest priority and extremely quick confirmations.

WHY BITCOIN TRANSACTION FEES ARE IMPORTANT

The above chart shows the total transaction fees Bitcoin miners received on a daily basis and is normalized to a 200 day moving average to filter out the daily noise. As the chart plainly reveals Bitcoin is rapidly being adopted and used on a daily basis.

Bitcoin users incur about US$400 of daily transaction fees to send approximately 50,000 daily Bitcoin transactions with optionally included fees. And that is just transactions where people are actually sending Bitcoins and want priority processing. From my own experience I pay for priority processing in less than 10% of transactions and I do not engage in many Bitcoin transactions because Bitcoin is used merely as a settlement currency and is not yet widely adopted by all the merchants who I purchase goods and services from.

For example, I only need to buy VPN services from Private Internet Access once per year (tip: always use a VPN and never trust a VPN that does not accept bitcoins).

So, despite the usage base still being relatively small and niche there is obviously a significant amount of actual economic activity going on under the hood of Bitcoin. As adoption increases beyond the currently niche base the network effects will really start to take hold making it even more useful and valued.

PAYPAL – THE INTERNET CURRENCY KING

The current King of the Internet payments ecosystem is Paypal. It has 117 million activity registered accounts in 190 markets, had $1.37B of revenues in Q3 2012, represnts 40% of eBay’s revenues which has a $67B market capitalization (40% would be $26.8B), had ‘$4,423 in Total Payment Volume every second in Q3’ in 6.4 million payments per day. Paypal expects to process $10 billion in mobile payments in 2012.

Paypal is clearly the golden goose of eBay and wields monopoly power which it has used to the chagrin of some users who started the website Paypal Sucks. Lately, it has begun to target particular types of businesses, like those with millions of users such as MediaFire, Putlocker and DepositFiles, and stop processing payments.

One of these large file upload sites recently integrated Bitcoin as a payment option and the effect on new wallets being created has been noticeable adding more users in two weeks than GoldMoney has in total.

Where could Bitcoin prices go? Really, really high. Or they could become worthless overnight. After all, even though Bitcoins are tangible and therefore immune to counter-party risk like gold they are illusions because they are non-corporeal. Perhaps there needs to be a new category of currency as discussed in The Great Credit Contraction; illusory tangible money. But how high is really, really high?

First, let’s put into perspective how the past performance of gold’s complete collapse relative to Bitcoin could affect your net worth.

17 January 2011 we recommend using Bitcoin to protect your privacy in Bitcoin – The Best Financial Privacy Is Probably Here … Probably. If you had traded one ounce of gold for bitcoins then today you could trade those bitcoins for 31.6 ounces of gold.

19 December 2011 in Solid Bitcoin Consolidation Finally Bears A Bitcoin Breakout I stated:

Taking the current price of $4.00, the 200 day moving average of about $8.50 and extrapolating this upleg with a 12x 200dma top we could see a price of around $80.00 per BitCoin. Is this speculative? Yes. Would I bet on seeing $80 per BitCoin by around June or July? Maybe if the odds are around 5%. But I would take a bet for BitCoins to hit $7.50 by June or July at around a 50-70% probability.

If you had traded one ounce of gold for bitcoins then today you could trade those bitcoins for 3.25 ounces of gold.

Obviously, over the past couple years gold has completely collapsed relative to Bitcoin; gold’s performance relative to Bitcoin is worse than the Argentina Peso against the USD.

Second, Bitcoin is still in beta version 0.7.2. This is still experimental software. As more features get built and released it will be even more powerful and network effects will take even greater hold.

Third, buying a Bitcoin (Money Over Internet Protocol) is like buying stock in the Internet, Email or VOIP. Imagine if you could have bought stock in HTTP (Hyper Text Transfer Protocol), SMTP (Simple Mail Transfer Protocol) or VOIP (Voice Over Internet Protocol) and you received value every time every website is ever visited, every email ever sent or every call ever made over the Internet whether through Vonage, Skype, etc. and just like there are businesses built completely around HTTP, like Google or Yahoo, or VOIP like Skype (founded in 2003) so likewise there are companies built completely around Bitcoin. Microsoft purchased Skype in May 2011 for $8.5B.

Fourth, Bitcoin makes payment of taxes more voluntary because the probability of being caught is decreased and even if caught it is impossible to seize the bitcoins without the private key. Plus, their flexibility allows them to be used in many creative ways by estate and tax planners or asset protection specialists. Bitcoins have not been made illegal in any jurisdiction and some jurisdictions like Sweden or France have granted significant protections to Bitcoin entrepreneurs. Plus, there are no silly FBAR or FACTA reporting requirements for bitcoins held in a bitcoin address not held with a third party.

Fifth, the 22nd largest site on the Internet, WordPress, which creates the open-source software that powers over 100 million blogs, announced on 15 November 2012:

PayPal alone blocks access from over 60 countries, and many credit card companies have similar restrictions. Some are blocked for political reasons, some because of higher fraud rates, and some for other financial reasons. Whatever the reason, we don’t think an individual blogger from Haiti, Ethiopia, or Kenya should have diminished access to the blogosphere because of payment issues they can’t control. Our goal is to enable people, not block them.

Bitcoin is a digital currency that enables instant payments over the internet. Unlike credit cards and PayPal, Bitcoin has no central authority and no way to lock entire countries out of the network. Merchants who accept Bitcoin payments can do business with anyone. …

With Bitcoin we join a new digital economy that doesn’t leave anyone behind, essentially making financial transactions open source — something WordPress.com is behind 100%. We’re proud to support bloggers from all over the world by providing a Bitcoin option.

A McKinsey Research report found that the Internet accounted for about 3.4% of total GDP, contributed to 20% of GDP in mature countries and ‘The Internet economy, now larger than that of Spain, surpasses global industry sectors such as agriculture and energy.’

Sixth, the FDIC insures $9T of bank deposits. Of course, with such counter-party risk how good is that guarentee? Additionally, there are approximately $20-30T of bank deposits in offshore tax havens.

Eighth, companies can drastically reduce their expenses by accepting Bitcoin. According to the National Retail Federation ‘Credit and debit-card fees have tripled over the past 10 years, to about $50 billion a year. That money comes straight out of retailers’ profits’ and in this economy both consumers and merchants are looking to cut costs anywhere they can. Think about it, every gallon of gasoline has embedded a $0.25 fee to the credit card company.

For example, Amazon had net income of $631M on $48.1B of revenue. Assuming they pay 0.5% transaction fee to accept credit cards, which would be extremely low compared to the 2-4% most small businesses pay, then that would add $240.5M to the bottom line; an increase of 38%!  And Amazon is just one potential company to accept Bitcoin.

Plus, many of the small businesses that currently accept bitcoins keep those proceeds stored in Bitcoin instead of exchanging them for fiat currencies. This increased demand for bitcoins and decreased demand for fiat currencies has a tremendous leveraged effect on the fractional reserve banking.

Ninth, a significant amount of capital is held by corporations on their balance sheets as working capital and generally classified as current assets. For example, on 16 December 2008 I wrote about how Oil Majors Should Just Buy Real Gold and revisited the topic on 28 November 2009 in Gold And The Oil Majors Revisited.

On 8 December 2008 gold closed at $772.25 and by 27 November 2009 gold closed at $1,177, a 52.4% gain. …

In 2008 the five oil majors repurchased about $54.2B of stock.  Exxon with $35.4B, Chevron with $6.8B, Total with $1.3B, British Petroleum with $2.6 and Conoco Phillips with $8.1B.  The average price of gold in 2009 through October was about $941.

So let me get this right. Instead of holding increasingly worthless colored coupons the oil majors could have diversified their currency holdings to ensure they could make payroll and with about a third of what was spent on the share repurchases could have bought the entire annual production of platinum and the entire above ground stockpile of silver.  Or assuming the average price of gold they could have bought about 1,791 metric tons of gold.

Tenth, Bitcoin would make a wonderful settlement currency for a small country which could primarily export information technologies. For example, Iceland has an extremely protective freedom of speech legislative environment where the statutes were crafted by Wikileaks members who were targeted with a Banking Blockade because of political speech. Icelands wants to use its extremely cheap geothermal power to run data centers.

Ice Servers is a pround Icelandic company that sells webhosting services, accepts bitcoins and takes advantage of these three competitive advantages: (1) better legal protections for website owners, (2) cheaper power and (3) great geographic location for US and European markets. This is a prime example how the Icelandic economy which is currently about twice the size of the Bitcoin economy can integrate with it.

So, Bitcoin is cheaper, faster and more private that fiat currencies, bank wires and credit or debit card payment systems. Bitcoins are not subject to counter-party risk so holders do not need to worry about their bank or financial institution failing like Wachovia, Fanny Mae, Bear Stearns, Lehman Brothers, MF Global, etc. and need a bailout that comes from printing fiat currency out of nothing.

So, really, there is no limit to the upside potential of Bitcoin as it continues to suck in capital resulting in an expanding financial event horizon. Gold, with no counter-party risk, is a refuge from the current unstable and failing fiat currency fractional reserve banking and financial system. But Bitcoin is not just a refuge but also a solution to that zombified system. It would be ironic if the massive wealth transfer the gold bugs have predicted goes not to holders of gold but to holders of bitcoins.

And the market has a way of financially rewarding the solutions, instead of refuges, because they add more value to society. And that is what gold’s currency collapse relative to Bitcoin is signaling; a massive wealth transfer has started from holders of assets in the traditional fiat currency system, gold, silver, etc. and other assets to holders of bitcoins.

Keeping those thoughts in mind then let’s consider some potential bitcoin prices in comparison to other data points within the worldwide economy.

CONCLUSION

The Great Credit Contraction continues as holders of capital will increasingly seek safe and liquid assets. The currency wars are heating up and the foreign exchange oceans of capital are getting increasingly tumultuous due to politicization of the medium of exchange.

Bitcoin’s liquidity has greatly increased during the past year and can allow the creative user to completely disinter-mediate from the current fiat currency system. All major fiat currencies have continued declining relative to gold. But gold has completely collapsed relative to Bitcoin.

Therefore, holders of bitcoins continue to be beneficiaries of a tremendous wealth transfer from holders of fiat currencies, gold, silver, real estate, stocks, bonds and pretty much every other asset. Bitcoins have already turned out to be the trade of the decade for many of our readers and may likely be THE trade of the 21st century before these massive worldwide currency wars and collapses play out.

To learn how to greatly reduce your learning curve and safely buy or store bitcoins consider reading The Free Bitcoin Guide. If you want to acquire more than $50,000 of bitcoins then I can likely assist you for a small fee for the time to train you on how to safely and securely store them and help in the acquisition. You can contact me here.

USING BITCOIN AT A RESTURANT WITH A MOBILE PHONE

EXPANDING THE BITCOIN BUSINESS COMMUNITY

For those interested in the expanding Bitcoin business community then I recommend watching this presentation.

REAL IS GOING TO CHANGE

No tips yet.
Be the first to tip!

Support Run To Gold - Tip With Bitcoin

17vMDi1Mv5DD6Dv9QvuNPbLVxe1rGyW637

Find this post helpful? Please consider tipping with Bitcoin. Each article gets a unique Bitcoin address so by tipping you help make Run To Gold sustainable and give valuable feedback on which content is most appreciated!

Reading time: 17 – 28 minutes

Some supposed monetary theorists assert that Bitcoin is not tangible. This is no doubt a problem due to the prison house of language the human mind dwells in when trying to convey ideas. But this conclusion is either the result of confused definitions or incorrect being based on several faulty premises and flawed logical reasoning. Bitcoins are tangible assets.

In The Great Credit Contraction, which was written in 2008 before Bitcoin was invented, on page 12 I attempt to provide some definitions to lubricate the discussion for practical purposes and distinguish between money, money substitutes, illusions and currency.

Currency can be either money, money substitutes or an illusion and is the instrument or tool we use to perform ordinary daily transactions. “Money must have intrinsic value by being a tangible asset. … An illusion is a negotiable instrument that promises nothing and has no intrinsic value.”

The use of the adjective intrinsic is in the sense of belonging naturally or being essential and not that is has a particular value because value is subjective based on human action. This is used in contrast to an illusion which has extrinsic value.

To further clarify the characteristic, the market tends to place value on currency because of its scarcity and the issue is whether that scarcity is intrinsic or extrinsic. For example, gold is intrinsically scarce based on the laws of physics and chemistry whereas FRN$ or Euros are extrinsically scarce based on the laws of men with regards to counterfeiting, etc.

One common analogy I like to use when explaining Bitcoin is that Bitcoin is to gold what math is to physics or chemistry. Money fashioned from gold is composed of atoms while money (not just currency!) fashioned from math is composed of numbers.

TANGIBILITY AND CORPOREALNESS

A few years ago I was in Tampa Bay, Florida having dinner with Eric King of King World News and he said, “You are a philosopher.” Well, there is a long line of monetary scientists who were also philosophers so perhaps after reading this section you may agree that Mr. King was correct in his assertion.

Critical to this discussion is the issue whether corporealness is either an element or a factor for tangibility in the context of monetary theory. In other words, can something be tangible and incorporeal?

First, it is important to get the definitions correct. The Greek word tetagon means to touch lightly and is the root for tangible and tangent.

The word tangent was first used by the Danish mathematician Thomas Fincke in his 1583 work “Geomietria Rotundi” and meant “to touch”, obviously in an abstracted sense, and was used in the sphere of knowledge known as geometry with regards to tangent lines and tangent planes.

The etymology of tangibility shows that in the late 14th century it was used as a “tangible thing, something perceived or presented to the senses”.

Second, it was not until hundreds of years later that the word tangibility was also used to describe corporeal items which could likewise be physically touched. But even the distinguishment between the corporeal and non-corporeal gets fuzzy at the quantum mechanic level because of Planck’s constant. And this branch could lead down a very deep rabbit whole with: Dubito, ergo cogito, ergo sum.

Consequently, it appears from historical usage that corporealness is not an element for tangibility.

And I would argue, while begging the question what is real, that (1) anything real or definite is tangible and (2) that tangibility can operate on a sliding scale with some things being more tangible than others over the time continuum axis.

So, there are figments of the imagination like flying spaghetti monsters which are not tangible. Then there are extremely tangible things, or in other words having a long time decay period, like hydrogen or gold and concepts or processes like gravity, electricity, algebra, geometry and calculus. And finally there are tangible things which have a short time decay period like currency from Yugoslavia where the tangibility is much more limited in the space-time continuum.

And what would be supremely tangible truths of the universe? Numbers, if they can be perceived or presented to your senses. For example, a gold coin or fish food would be tangible to a goldfish but numbers would not because the goldfish is incapable of perceiving numbers. Mathematical law is based on purely logical proof where as even Newtonian physical law may be subject to revision based on additional theory or observation like with Einstein’s relativity.

In this exchange, Felix de la Cova, who is Spanish so his use of English words may be limited due to it not being his native language, cross-examines James Turk of GoldMoney in regards to Bitcoin, gold, GoldMoney’s payment system and Information Age transactions.

3:31 – James Turk: I will bring up something a little bit more fundamental. First of all, I recognize the points that you are making and I do think that preventing the double spend is a brilliant advancement in the nature of currency. … Where I have issues is that Bitcoin is not a tangible asset. If I have a piece of silver or a piece of gold in my hand it is a tangible asset and if I use that to purchase from you an asset or good or service the exchange is extinguished at the moment that those assets are exchanged for one another because you are giving a tangible asset in exchange for a tangible asset. But what has happened in the last few hundred years is that currency has moved from being a tangible asset to being a financial asset. A financial asset has counter-party risk; there is someone’s promise that this currency will have value in the future.

4:38 – Felix de la Cova: Of course, but how can you use a tangible asset online?

4:42 – James Turk: Well, you use them online with GoldMoney where the tangible asset stays in the vault and the ownership of that tangible asset transfers instantaneously when you click it from your holding to someone else’s holding which is the nature of the patents that were eventually granted to me. Because what we have done with digital gold currency is create a new type of currency that enables gold to circulate without having the payment risk that is associated with a currency that is itself not a tangible asset. And that is the issue I have with Bitcoin.

This is a fairly interesting exchange from a monetary theory viewpoint but Mr. Turk is baited into the Information Age by Mr. Cova’s question and quickly sinks into a logical fallacy. The irony is that Mr. Turk’s error in logic because it is GoldMoney Goldgrams which are of limited tangibility, which can be arbitrarily changed like with removal of the payment system resulting in extremely reduced liquidity, and Bitcoins that are tangible. Bitcoins, like gold, are equity based monetary instruments and not financial assets with counter-party risk.

Yes, gold is a tangible asset which is intrinsically scarce by chemical law. But legal rights resulting in ownership, are they tangible? Yes, but only in a sliding scale through the time continuum and based on the time decay period dependent upon the particular costumed criminal gang being in power. This may be why in most legal systems legal tender is treated as tangible property. The delusion is palpable.

Goldgrams, the currency that circulated and is the subject of the patents Mr. Turk references, are merely legal claims to gold held in vaults and fashioned from numbers. Thus, Goldgrams are not money but money substitutes. There is a difference between gold and a legal claim to gold. The only substantive difference between a US gold certificate and a Goldgram, which are both money substitutes, is that one can still be redeemed for physical gold. But for how long?

Thus, one issue becomes how real or definite, or in other words, how tangible those legal claims are. This is directly related to the time decay period of the legal jurisdiction where the bullion is stored. Yes, I think they are much more tangible than other gold related instruments such as the GLD ETF, safety deposit boxes or Germany’s gold held at the NY Fed. After all, that is GoldMoney’s business model: to store your bullion in the safest geographic areas. Nevertheless, there are risks because a legal claim to gold is not as tangible as gold itself because it is based on the laws of men and not natural law.

Understanding the risks associated with any asset or investment is critically important for investors. Especially so when the legal underpinnings are increasingly being compromised and currency wars escalate.

For example, both the records and precious metals in the vault could be compromised through fraud, the vaults could be compromised by violence such as war, civil war, radioactive contamination (like in Goldfinger!), a sophisticated cyber attack or terrorism. Additionally, holdings can be frozen, seized or confiscated through legal channels. Worse GoldMoney has and will rollover like a submissive little poodle in obeisance to these laws of men.

Meanwhile Bitcoin has its risks but none of those. Consequently, I highly recommend all government bureaurats to get out the machine guns and shoot the math problem known as Bitcoin until it complies with subpoenas or other control freak demands. And while you are at it pass a law that stops massive damage from storms like Hurricane Sandy by causing them to dissipate. Most importantly Bitcoin allows for honey badger-like financial disintermediation.

DIGGING INTO THE GUTS OF BITCOIN

So, let’s start digging into the guts of Bitcoin. There is no reason to be afraid of the math; numbers do not bite. Let’s bring in Prof. David Evans who holds too many degrees from MIT.

How many times can Bob spend the coins? 0, 1, 2 or as many as he wants.

How the Bitcoin Network Provides Scarcity

Solution to how the Bitcoin network provides scarcity:

How the Double Hash provides scarcity:

Solution to how the double hash question:

The Longest Blockchain Rules

With gold bars it can be cumbersome and expensive to verify both the quantity and quality. There are service providers, like the GoldMoney Standard, which seek to make this process faster and cheaper.

So likewise there are tools which make it very easy to quickly verify the quantity and quality of bitcoins in a particular wallet address. For example, as of 7 Nov 2012 there were about 50,000 BTC leisurely relaxing in this wallet [tip: when viewing the wallet click the green box to see the current value in FRN$]. And since Bitcoin is a mere four years old, compared to four thousand years with gold, and cheaper, faster and more private than centralized currencies therefore it is reasonable to prognosticate that there will be more tools developed that will make Bitcoin easier to use which will make it more accessible to larger demographics.

BITCOIN PRICE PREDICTIONS

On 19 December 2011 in the Solid Bitcoin Consolidation Finally Bears A Breakout I wrote:

Taking the current price of $4.00, the 200 day moving average of about $8.50 and extrapolating this upleg with a 12x 200dma top we could see a price of around $80.00 per BitCoin. Is this speculative? Yes. Would I bet on seeing $80 per BitCoin by around June or July? Maybe if the odds are around 5%. But I would take a bet for BitCoins to hit $7.50 by June or July at around a 50-70% probability.

Once again, I was right with the $7.50 price call. Those who took my advice 11 months ago have had ginormous returns of about 175% return in FRN$ and 156% in gold. Not too shabby! Any donations would be greatly appreciated and you can send bitcoins here:

1RTGQXW6Vb6L9DUHhVJ3Rdriz2b21X9e1

So, where is the price of bitcoin going from here? Well, because of the wealth transfer and wealth generation effects therefore I think it is headed up in terms of both gold and FRN$.

First, there are a lot of uncertainties with the Federal Reserve and ECB. By analogy, once they pull the plug on the bathtub, you need to be able to calculate the difference between the water coming into the tub (QE) and the water going down the drain (balance sheet shrinkage from maturity) before you can know if the current water level (Adjusted Monetary Base) will be maintained, increase or decrease.

Second, due to this uncertainty I see reasonable arguments for the gold price to either decline or advance by around $500. Yes, we could see $1,200 gold within the next 12 months although I think there is a higher probability it will be around $2,100 by May. But this volatility does not impair the usefulness of gold as numeraire.

Third, The current price, which I keep updated with all the Key Ratios, is about 157 BTC per ounce of gold.

Fourth, let’s put some supply and demand numbers in comparison. There will eventually be at most 21 million bitcoins in 2010 with about 10.5 million currently and I estimate about 2 million destroyed where the private keys have been lost. With about five billion ounces of gold above ground that equates to about 230 ounces of gold per bitcoin and about 485 ounces of gold per bitcoin if you count those ounces still in the ground.

Fifth, there is huge demand for safe and liquid assets in The Great Credit Contraction as capital burrows down the Liquidity Pyramid. As already established Bitcoin is clearly a tangible asset because it is real and definite being fashioned from numbers.

Just a few of the potential sources of demand, besides just those holders of capital looking for safe and liquid assets, are (1) tens of trillions of dollars in offshore bank accounts looking for a safe haven from tax authorities with all the expanding Tax Information Exchange Agreements and nasty reporting requirements like the FBAR and FACTA [friendly reminder that you better report your GoldMoney holdings; meanwhile Bitcoin private keys would not be reportable], (2) the $10 Tillion System D economy, (3) tens of thousands of people who think Paypal Sucks and (4) Visa, MasterCard and Paypal have blocked Wikileaks from receiving donations and showed the world that even without a court order the major payment processors will greatly hinder political speech therefore posing a tremendous risk to civil rights.

If FRN$ or gold are the blood with Visa, Mastercard, banks, etc. being the veins then Bitcoin is both the blood and the veins. Despite its incorporeal nature it is already backed by the largest distributed computing network in the world with about 310 petaflops and therefore is one of the safest and most liquid ways for capital to be held. So, Bitcoin increases the monetary offering in terms of safety and liquidity while lowering the costs in terms of time, money and privacy. What a competitor!

Hopefully Mr. Turk was inadvertently confused about Bitcoin or still had not thoroughly thought it out despite knowing about it for at least a year and was not intentionally ‘talking his book’ by disparaging this great new and ultimate ‘last plane account‘ called Bitcoin to the detriment of those paying attention. But you should keep this potential bias and conflict of interest in mind when assessing advice from anyone else such as trust and estate attorneys, asset protection experts, offshore entity formers, etc. because Bitcoin eviscerates entire volumes of legal statutes rendering them inert. And whether a merchant accepts Bitcoin is a great litmus test of their sincerity in helping you take control of your freedom instead of just trying to charge you fees.

Even the European Central Bank has admitted on page 47 of a 55 page report focusing on Bitcoin that:

However, it can reasonably be expected that the growth of virtual currencies will most likely continue, triggered by several factors: a) the growing access to and use of the internet and the growing number of virtual community users, b) the increase of electronic commerce and in particular digital goods, which is the ideal platform for virtual currency schemes; c) the higher degree of anonymity compared to other electronic payment instruments that can be achieved by paying with virtual currencies; d) the lower transaction costs, compared with traditional payment systems; and e) the more direct and faster clearing and settlement of transactions, which is needed and desired in virtual communities.

For all of these reasons, I think that over the next 18 months we will see the price of bitcoins move to at least around 50 bitcoins per ounce of gold. Then over the next 5-10 years we will see an inversion in that price where it will take at least one ounce of gold to buy a bitcoin. And these targets are likely understated given Bitcoin’s potential to go viral.

CONCLUSION

Bitcoin is no longer an imaginary currency in some science fiction novel. Bitcoin is a real tangible non-corporeal functioning protocol based on industry standard cryptography. Bitcoin is a financial black hole where visible capital goes in and does not come out. Bitcoin has attracted the attention of the most powerful monetary interests in the world resulting in a very serious 55 page report. Bitcoin is very likely not going away anytime soon. Bitcoin is the opening of Pandora’s Box and it is going to change things, big time.

Competently driving a car or flying an airplane requires both book knowledge and practical skill. This is why there is a written test and then a performance test before being credentialed. So likewise, one major problem I see with so many of the people ignorantly pontificating about Bitcoin is that they have never used a bitcoin to buy anything. That is like someone who has never driven a car giving advice on how to drive a car. Why believe them? They do not have any practical experience or knowledge driving cars. They do not have a clue what they are talking about!

This is one reason I put together the Free Bitcoin Guide. It will drastically reduce your learning curve, help you get your first bitcoins and make your first purchase. You could get the Bank Privacy Report and Get Your Gold Out Of Dodge for about $30 in BTC instead of the $65 normal price thus experimenting with Bitcoin for a mere $40 or so. Sure, it could be easier but more developments will come with time. After all, I started recommending bitcoins when they were around $0.05 each and the learning curve and available tools were nascent. But that is part of the reason those who followed my advice then have reaped 200x rewards instead of a mere 1.75x which is still orders of magnitude higher than the 0.0025x you can expect from Treasuries, etc..

Plus, having an economy where the average IQ and tech savviness is two standard deviations above that of normal society is very helpful when it comes to relative productivity. Do not skate where the puck is; skate where the puck is going to be. Welcome to the new world, welcome to the Awakening!

No tips yet.
Be the first to tip!

Support Run To Gold - Tip With Bitcoin

1P2D4NCJdjDs2JKkWvrFrycv4Ur9jusBpJ

Find this post helpful? Please consider tipping with Bitcoin. Each article gets a unique Bitcoin address so by tipping you help make Run To Gold sustainable and give valuable feedback on which content is most appreciated!

Reading time: 7 – 11 minutes

All of this is just The Great Credit Contraction playing out. Those who have properly positioned themselves are having wealth transferred to them in ever increasing amounts.

BITCOIN BREAKOUT

In December 2011 with bitcoins around $3 I wrote about a solid Bitcoin breakout with the prognostication “But I would take a bet for BitCoins to hit $7.50 by June or July at around a 50-70% probability.” Once again, like with platinum, oil majors versus gold and the recent dollar downleg; I was right. Bitcoin hit about $7.00 in July and has powered higher to $12 currently.

For those who took my advice in December 2011 they are up about 400% in FRN$ terms and about 350% in gold terms. The market is telling the gold bugs their purchasing power is moving to bitcoin holders. Wealth transfer at work, baby!

Mr. Casey has a keen economic and financial mind and always seems to have something entertaining to say so I wandered over to the recent Casey conference and ran into the guys from Future Money Trends. We did an interview on Bitcoin which, to toot my own horn, I think turned out pretty well. Our interviewer showed one of the most important traits an investor can have: skeptical humility.

The irony is not lost though that Doug Casey, like David Kramer, gave an opinion last year on Bitcoin which betrayed a complete lack of technical understanding. It seems there are clear divisions within the sound money niche on Bitcoin.

For some Bitcoin may seem complex. Let me assure you that just like with email or Internet browsing you do not need to understand how this magic Internet money, the Bitcoin Protocol, works at its core to derive value from using it just like you do not need to understand how Internet Message Access Protocol or Hyper Text Transfer Protocol works. You know, iPhones, text messages and movies are magic also. Bitcoin is actually pretty simple; it is just math. But then math can seem like mystery magic to some.

But if you do not comprehend or understand an XOR cipher function, Elliptic Curve Digital Signature Algorithm and some basics of Classless Inter-Domain Routing then it may be best to sit down, shut-up, listen to some people who do understand, ask what questions you can formulate based on your limited understanding, do some study and then try to form an opinion based on facts instead of facile intelligence where one thinks they have a talent for monetary science, economics and finance but do not see the need to undertake the hard labor of learning how such arguments are constructed when applied to the Bitcoin Protocol. After all, do you want to be the guy that asks, “How big is yellow?” or worse ignorantly pronounce the statement, “Yellow is really big.”

BITCOIN PRICING POTENTIAL

To be honest, I am having a very difficult time attempting to value bitcoins and prognosticate a price. Plus, there could be some type of attack on the network or other issue that could make all the purchasing power of bitcoins completely evaporate.

Nevertheless, there are number of wallet users, connected nodes, merchants that accept it, number of transactions, etc. By some estimates the Bitcoin economy GDP is about 10% the size of Uruguay or about 1% the size of Argentina.

As Mr. Shrem recently told Federal Reserve and Brazil central bank officials, “BitInstant was processing 1/5^th of the monthly payments of Chile’s internal payment system. I was thinking, Bitcoin might become a real currency before anybody even realizes it. Mark my words, sometime in 2013, the Bitcoin economy will be larger than that of a few small nations.”

But you are dealing with a community of secret keepers so getting accurate numbers is difficult if not impossible. Some people have tried to distill various metrics down and have come up with a current growth rate around .46% per day with a growth decay of .024% per day. This is what a log 10 scale chart looks like extrapolating based on actual metrics.

DISINTER-MEDIATE FROM THE FINANCIAL AND MONETARY SYSTEM

MF Global misappropriated customer segregated funds and the regulators have just twiddled their thumbs. Then PFG Best did the same thing and regulators have just continued twiddling their thumbs. Can anything be more ergerious than deeply captured regulators idly, or perhaps complicitly, allowing such nefarious behavior? How can you trust the traditional banking, financial and monetary system?

But, in a way, you have to trust it. Until now you have had no alternative or substitute. You have had to bear counter-party and performance risks. As The Great Credit Contraction continues its relentless grind these risks become ever more pertinent.

CONCLUSION

The Great Credit Contraction is in full force. Those who have moved into safe and liquid assets are having wealth transferred to them at an ever increasing rate. While I continue to be a big proponent of gold and silver I have also becoming increasingly trusting of the Bitcoin Protocol where one’s bitcoins just sit there secured by the laws of mathematics and cryptography backed by petaflops of processing power and verifiable so long as you have Internet access.

The liquidity of bitcoins is ever increasing with a debit card due in a few months. With only exchange rate risk, bitcoins make a great addition to one’s portfolio in The Great Credit Contraction, which if you have not read you can buy with bitcoins. Go ahead, get some bitcoins and give it a try. What do you have to lose, really?

I told you my thoughts. By all means, please leave your thoughts in a comment. Thanks!

No tips yet.
Be the first to tip!

Support Run To Gold - Tip With Bitcoin

15ELoUvHaq3F1DYrrdLjcb5HGXfH9a6UKw

Find this post helpful? Please consider tipping with Bitcoin. Each article gets a unique Bitcoin address so by tipping you help make Run To Gold sustainable and give valuable feedback on which content is most appreciated!

Reading time: 6 – 10 minutes

The central banks of the world are engaged in financial repression and bloating their balance sheets through quantitative easing. This deranged monetary policy is resulting in negative effects of inflation on the economy, like pink slime, and showing just how poorly famed investors like Warren Buffett have performed by destroying billions of dollars of shareholder value. This has resulted in a manipulated boom that is starting to manifest itself. The result will be that price inflation will begin rearing its ugly head in a nasty way.

JIM GRANT ON FEDERAL RESERVE INSANITY

LEGAL VERSUS ECONOMIC MONEY AND CURRENCY

Individuals acting in their own self interest determine what goods and services are available in the market. Before consumption and savings must come production. Billions of lifetimes of savings has resulted in a tremendous accumulation of capital that has been allocated to generate productive capacity which has allowed humanity’s standard of living to be lifted from the swamp to the stars. But no matter how complicated a good the space shuttle is, and it is a highly complex good, it pales in comparison to the most complex of all goods humanity has produced: money.

The Federal Reserve is interfering with the pricing of money and by consequence all other prices in the economy. The State can do this because it is such a large economic actor but it is still constrained by economic law. As Ludwig Von Mises wrote in 1912:

As a buyer or seller the state has to conform to the conditions of the market. If it wishes to alter any of the exchange ratios established in the market, it can only do this through the market’s own mechanism. As a rule it will be able to act more effectively than anyone else, thanks to the resources at its command …

The fact that the law regards money only as a means of cancelling outstanding obligations has important consequences for the legal definition of money. What the law understands by money is in fact not the common medium of exchange but the legal medium of payment. It does not come within the scope of the legislator or jurist to define the economic concept of money. [emphasis added]

The Information Age is resulting in tremendous advances in monetary evolution with things like BitCoin which is much more efficient at transferring value than fiat currency, fractional reserve banking or credit cards. These increasingly useful monetary goods will enervate demand for sterile assets like FRN$s, Euros and Yen.

WARREN BUFFETT ON GOLD

In the 2011 Berkshire Hathaway letter to shareholders Warren Buffett opined on page 18:

Gold, however, has two significant shortcomings, being neither of much use nor procreative. … Meanwhile, if you own one ounce of gold for an eternity, you will still own one ounce at its end. … Beyond the staggering valuation given the existing stock of gold, current prices make today’s annual production of gold command about $160 billion. … The 170,000 tons of gold will be unchanged in size and still incapable of producing anything. You can fondle the cube, but it will not respond. … I’m confident, however, that the $9.6 trillion current valuation of pile A will compound over the century at a rate far inferior to that achieved by pile B (all 400 million acres of U.S. cropland, 16 Exxon Mobils and $1T).

The annual production of gold around $160 billion pales in comparison to the increase in worldwide debt in the last decade from $80 trillion to $200 trillion.

JAMES TURK ON GOLD

Buffett is correct that gold is a sterile asset that does not produce anything. In fact, it is even worse than sterile in that it has a negative interest rate due to storage and insurance costs. Fortunately that interest rate is less costly than alternatives.

In a 3 Feb 2012 interview on King World News James Turk explained gold’s role as a sterile asset:

Gold doesn’t really create wealth, it’s just a sterile asset.  It doesn’t have a cash flow and it doesn’t have a balance sheet or a P/E ratio.  When the gold price is rising, what you are doing is taking wealth that’s already been created and is in the hands of people who own a fiat currency and it’s taking the wealth away from the people who own that fiat currency and putting it into the hands of people who own gold.

 So you have this wealth transfer taking place.  My expectation is that this wealth transfer is going to be one of the most phenomenal ones in monetary history.  And to be part of it you have to own physical gold and silver, this is what you need to do to take advantage of it.

BUFFETT’S SCOREBOARD

IT’S HUMILIATING

As James Grant said in the interview at 7:39:

We went back and looked at the performance of gold and the humblest of things, a cup of sugar, and a share of common Coca Cola since 1996. …
It’s humiliating, its humiliating to people who own common.

Warren Buffett should be really embarrassed. As the charts show he should have retired around the time he hit his peak in 1999 and bought a cube of gold to fondle as its non-response would be better than the loss of shareholder value in Berkshire.

To put some figures to it on 4 Jan 1999 it took 226.4 ounces of gold to buy one share of BRK-A with the gold fix at $287.15 and BRK-A at $65,000 per share. Today it takes a mere 73.7 ounces of gold to buy one share of BRK-A with the gold fix at $1,658 and BRK-A at $122,190; a 67% loss.

Before Warren Buffett denigrates gold again he should either put up or shut up because the charts show just how much shareholder wealth he is destroying. Perhaps Buffett should take a look at Anthony Weiner’s scoreboard since they both perform about the same.

But perhaps I should give Buffett thanks because the loss of wealth from his scoreboard has showed up on mine!

CONCLUSION

The Federal Reserve’s attempt to interfere with the pricing mechanism of money and currency is doomed to fail. Their suppressive manipulation of the precious metals markets in an attempt to maintain their fiat currency monopolies will only result in the transfer of physical bullion and a weakening of the central bank balance sheets. Monetary evolution is in full advance in the Information Age which is causing a loss of demand for little colored coupons. The State must conform to the dictates of the market with regard to monetary goods.

The performance of bonds, equities and real estate have all been greatly overstated as a result of this financial repression. The greatest wealth transfer in the history of the world is ongoing. One consequence over the near term will be some nasty price inflation of 5-15% which will lower standards of living due to a destruction in productive capacity of the economy. Beware of the Pink Slime which has been substituted into the CPI!

No tips yet.
Be the first to tip!

Support Run To Gold - Tip With Bitcoin

1P6kdNtDdq45NhpDxDp5Kgb6eNCmxWoi2S

Find this post helpful? Please consider tipping with Bitcoin. Each article gets a unique Bitcoin address so by tipping you help make Run To Gold sustainable and give valuable feedback on which content is most appreciated!

Reading time: 2 – 2 minutes

The 200 day moving average acts like the pull of gravity on prices. The FRN$ is currently very expensive while gold, silver, platinum and palladium have presented great buying opportunities. As the fiat currency and precious metals reassert their positions based on the 200 day moving average it will power the next gold upleg higher.

The USD is posed for the next downleg which will help power gold’s explosive upleg dragging silver and platinum with it. FACTA will drive more demand for BitCoins. Those who took my advice to buy bitcoins last month are sitting on a 56% gain. For those who want to spend some bitcoins you can buy RunToGold and HowToVanish products with bitcoins. Good job!

Hopefully we will do as well with the precious metals in this next upleg.

No tips yet.
Be the first to tip!

Support Run To Gold - Tip With Bitcoin

15A5jmJzhdjUeLHMDUvELYwnsyLpkbwdnf

Find this post helpful? Please consider tipping with Bitcoin. Each article gets a unique Bitcoin address so by tipping you help make Run To Gold sustainable and give valuable feedback on which content is most appreciated!

Reading time: 6 – 9 minutes

Few assets are as volatile as BitCoins have been. Over the past 365 days they have ranged from about $0.05 to over $30. After a solid consolidation BitCoins have now broken out and the next upleg appears to have appeared with a 35% rise in the past 10 days.

Back in June 2011 I wrote about how I supposedly missed the trade of the year where I could have “with a completely non-levered investment that would have turned [$5,000] into slightly over $550,000 in 8 months. $550,000 in a completely anonymous account with neither a paper or audit trail nor a 1099 and the asset would have been purchased with $5,000 of physical cash.”

Some say hindsight is 20/20, but I do not think so, because it still takes the gathering, analyzing and understanding of the data before one can get a picture and sense of what has happened. Before there were no data points to use in predicting the sustainability of the unsustainable BitCoin upleg. But this time around we can make slightly more grounded prognostications.

Filtering out the daily noise of the markets is essential if one is going to hone in on the signal. One of my favorite tools to accomplish this is the simple 200 day moving average. Taking into account almost seven months of data it is long enough to filter out daily noise, like the MF-Global or MyBitCoin fiascoes, but still close enough to capture the general trend of long-term secular markets, whether bullish or bearish. To derive a relative price I take the current price divided by the 200 day moving average.

In BitCoins case we now have a tremendous upleg and crash in the history books. An analysis of the data reveals the low end of the relative price is around 0.35x (cheap) while the high end was about 12x (expensive).

BitCoins are a decentralized peer to peer digital currency. They are the most efficient and safest form of currency I am aware of. Sure, they have neither the intrinsic value nor depth of volume like gold but they are still harmonious with the regression theorem. To create the organized cryptographic hash required energy which had value in the market just like gold had value in the market for jewelery before it acquired additional value from its utility from moneyness and currency applications.

For example, I was reading a blog which recommended the application Total Finder. Total Finder allows one to open multiple tabs in the Mac Finder which makes dragging, dropping or locating folders and files much easier. It is a feature that should be built into the OS but is not so a creative entrepreneur saw a market need and filled it.

I immediately recognized that this application would save me time and decided to purchase it. The price was $18 and it is available in the Apple store. Then I did a Google search for “Total Finder bitcoin” and found the author’s article Trade Total Finder for BitCoins. As expected there was a discount, 50%. Why is that?

Because the current payment systems are too expensive. Apple takes 30%, the credit cards and processors take 1-7% and require the identity of both the buyer and seller along with sales and income taxes which are much easier to enforce plus your accounts can be arbitrarily frozen like with the Wikileaks banking blockade. By removing all these middlemen moochers and looters from the transaction both parties are better off with a 50% discount in price.

BitCoin makes this payment efficiency possible because it is based on cryptographic protocol where its security is grounded in the laws of mathematics not laws of men which may or may not be enforced profitably.

The rise in BitCoin’s exchange rate has surprised me. First, BitCoins are currently being inflated at approximately 42% per year. That is quite the increase in the currency supply. Second, early adopters are sure to control tremendous amounts of BitCoins and I would think they would be divesting themselves as the market would bear without sinking the price too drastically and third the BitCoin economy is still in its infancy.

Over the last six months I have watched the average transactions in the public block explorer grow to about $1 million per day. The exchanges have increased their trading volume from about 40,000 coins per day to approximately 200,000 on 19 Dec 2011. With about 8 million BitCoins in circulation there is plenty of volume to provide a bid for any early adopters who decided to disgorge large amounts of coins.

BitCoin is an illusion like the FRN$, Euro or Yen. The market is deep enough that I would place it in the cash portion of your balance sheet. Additionally, if you take the proper steps it is the most portable currency ever. For that element of safety and liquidity therefore I think everyone should hold some BitCoins, perhaps at least 0.1% of their net worth, in their portfolio.

CONCLUSION

Watching this breakout and ensuing upleg in BitCoins is going to be exciting. Since the last rally in June there have been real life applications developed from mobile payments to massive online stores with hundreds of thousands of items, entrepreneurs have stepped in to accept BitCoins as payment, the client has been greatly improved, exchange security has been enhanced, with proper privacy hygiene your cryptographic hash is more secure than even a gold coin and more people understand what BitCoins are, how they work and why they want some.

Taking the current price of $4.00, the 200 day moving average of about $8.50 and extrapolating this upleg with a 12x 200dma top we could see a price of around $80.00 per BitCoin. Is this speculative? Yes. Would I bet on seeing $80 per BitCoin by around June or July? Maybe if the odds are around 5%. But I would take a bet for BitCoins to hit $7.50 by June or July at around a 50-70% probability.

So, if you want to buy any Run To Gold products using BitCoins just contact me and we can make a deal with a substantial discount. If you need a place to get any BitCoins then I recommend the Tradehill exchange.

No tips yet.
Be the first to tip!

Support Run To Gold - Tip With Bitcoin

12nUdc12UjbDva1E2YWii2nBBup2RGj2pC

Find this post helpful? Please consider tipping with Bitcoin. Each article gets a unique Bitcoin address so by tipping you help make Run To Gold sustainable and give valuable feedback on which content is most appreciated!

Reading time: 6 – 10 minutes

The demand for gold is vastly underestimated. About 18 months ago I wrote about Euro Gold and the Euro Zone and Euro Evaporation Leading To Credit Default Swaps and IMF Gold. One key excerpt was:

The Euro is broken. This was its destiny. This is the destiny of all fiat currencies. These bureau-rats cannot stop this anymore than Cnut the Great could command the tide to halt.

And here we are.

THE GREAT CREDIT CONTRACTION

The Great Credit Contraction has been in relentless advance for years. This is a massively deflationary period as capital, both real and fictitious, burrows down the liquidity pyramid into safer and more liquid assets. The fictitious capital that does not move fast enough evaporates. Poof goes trillions of wealth!

Fractional Reserve Banking is the banking practice in which banks keep only a fraction of their deposits in reserve (as cash and other highly liquid assets) and lend out the remainder while maintaining the simultaneous obligation to redeem all these deposits upon demand.

Fractional reserve banking occurs when banks lend out any fraction of the funds received from demand deposits. Despite being a form of embezzlement and fraud this practice is universal in modern banking.

This mismatch between time, borrowing short-term and lending long-term, is what creates the potential for a bank run. But an even larger looming problem lurks in ‘cash and cash equivalents’. Yes, those pesky Tier I, II and III distinctions.

As a bank’s assets evaporate their ability to make new loans, even extremely short-term loans like overnight, becomes impaired. When an entire banking system knows that all the major players have assets on their balance sheets, assets which are not accurately priced or accounted for, then there is an extreme reluctance to lend.

This is what happened when Lehman Brothers evaporated. The credit markets seized up. People acting in their own self-interest according to principles of praxeology moved into safe and liquid assets and refused to lend.

Liquidity dried up overnight. Mortgage backed securities, auction rate securities and plenty of other assets which had for decades been treated as ‘cash equivalents’ were suddenly shunned. The bid evaporated from a loss of confidence, the prices plunged, investors were snookered and bank balance sheets were massively damaged.

The European banks have balance sheets with trillions of Euros in value recorded but assets which every rational non-ignorant person knows are severely impaired. The credit markets are freezing, trust is evaporating and as a result liquidity is drying up.

Sure, the central banks of the world have joined in a massive illegal effort to lubricate the system but it will fail. Years ago when QE1 was announced I wrote The Federal Reserve Will Fail With Quantitative Easing. They are still failing just on a grander scale.

To recapitalize and lubricate the European banking and financial system would take at least €25 trillion and maybe upwards of €100 trillion. The failure is a mathematical certainty. The gears of industry are seizing up.

The Greek and Italian democracies were assassinated by banksters Lucas Papademos, Mario Monti and Mario Draghi who will attempt to prolong the failed banking and financial system by privatizing the gains and socializing the losses with inflationary tactics and bailouts in a vain attempt to prevent the credit liquidation. They will only succeed in prolonging and exacerbating the necessary correction.

What holders of capital should understand is that European bank balance sheets are caught in an unrecoverable credit contraction spin, the appropriate emergency maneuver is to Run To Gold and only a few will make it with their purchasing power intact.

The vast majority of assets will become charred wreckage as their purchasing power evaporates into worthlessness. Sure, there may be a few near miss recoveries between now and the ultimate failure but why take the risk?

LATENT GOLD DEMAND

There is massive latent gold demand as a ‘cash or cash equivalent’ asset. Why should a holder of capital store their wealth in bank deposits with counter-party risk when they can completely eliminate it by moving into unencumbered physical gold bullion?

Plus, by moving into physical gold bullion they eliminate the risk associated with fiat currency becoming worthless through the deflationary event called hyperinflation. Really, hyperinflation is just the next step in The Great Credit Contraction after capital has moved almost entirely down the liquidity pyramid.

The money managers allocating trillions of FRNs, Euros, Yen, etc. have not even begun moving into the monetary metals. In most cases it is only beginning to become acceptable to speak of them. Some fallaciously argue there is not enough gold to go around.

Sure, there is enough gold for it to be used as the world reserve currency but it is only a matter of price. A price that Jim Rickards argues the case for in Currency Wars of being between $8,000 and $54,000+ per ounce.

CONCLUSION

The European banking and financial system is imploding before our eyes in a massive credit contraction which is just the latest wave in The Great Credit Contraction. The European banks are in an unrecoverable deflationary spin. There is only one acceptable emergency recovery procedure and that is to Run To Gold.

Because so few have, therefore, the real gold demand is completely hidden and obscured from view. It will come when people lose confidence in the current banking and financial system by turning to and using alternatives that do not possess the same kinds of risks. In the Information Age bank runs happen with the click of a mouse and not lines outside the physical branches.

DISCLOSURES: Long physical gold, silver and platinum with no interest in DOW, S&P 500, the problematic SLV ETF, gold ETF or the platinum ETFs.

No tips yet.
Be the first to tip!

Support Run To Gold - Tip With Bitcoin

1ChoARF8DFFwJJjqVkvUt3ZqTDdZg8NKXi

Find this post helpful? Please consider tipping with Bitcoin. Each article gets a unique Bitcoin address so by tipping you help make Run To Gold sustainable and give valuable feedback on which content is most appreciated!

Reading time: 4 – 7 minutes

THE 200 DAY MOVING AVERAGE

On 19 Sep 2011 I wrote about gold and silver consolidating, “The real value seems to be in palladium which is trading at an extreme discount of 0.9224x its 200 day moving average.” This was because statistically speaking palladium was extremely outside the standard deviations of its usual trading ranges relative to its 200 day moving average. The 200 day moving averages acts like gravity to filter out the daily machinations of the market.

In a secular bull market, like the precious metals are currently in, when silver moves below 0.95x the 200 day moving average then a buying opportunity presents itself where the probability of a gain on the position relative to the numeraire is much more likely. On 23 Sep 2011 the price of silver is $30.45 and the 200 day moving average is $35.76 which yields a relative price between the two of 0.8516x.

THE LEHMAN BROTHERS COLLAPSE

This ratio has never been lower in the past decade except shortly after Lehman brothers collapsed. Within a year the price had doubled. Within three years the price had gone up five-fold. The current correction and ensuing consolidation is setting the stage for a triple digit FRN$ silver price.

THE PROPER NUMERAIRE

But the savvy investor may ask, “But is not gold the proper numeraire?” Yes. Sure, this chart is showing silver through the FRN$ lens. The gold to silver ratio, currently around 48 ounces of silver per ounce of gold, does tell a different story. Silver is not nearly as cheap today as it was in the early part of the decade when the ratio was over 100. But as this secular bull market progresses the ratio should continue declining.

It will likely reach 16:1 and may even overshoot to 8:1 or as some rather bombastic commentators have made the case it may even go to parity, 1:1, or it may actually take more than one ounce of gold to purchase one ounce of silver. While it may seem unbelievable and in my opinion a low probability I do not think it is a completely unrealistic scenario.

Currently it takes less than one ounce of gold to buy one ounce of platinum. Platinum is much scarcer than gold, there is less platinum produced per year.

Since the Lehman Brothers collapse the gold to silver ratio has moved from about 80 to 40-45. While gold is the better numeraire; silver has been the superior speculative currency. Remember, you make money when you buy not when you sell.

GOLD PRICE SUPPRESSION SCHEME

Six years ago South African gold market analyst Peter George said at GATA’s Gold Rush 21 conference in Dawson City, “In the last 10 years the central banks have effectively shown that when there’s a real crisis, gold actually goes down, and it’s so blatant, it’s a joke.” The central bank script has not changed.

But we do know that price controls lead to shortages. Last time silver got this cheap there was silver backwardation for weeks while the price clawed higher to clear the market.

Following provident living principles I like to accumulate the precious metals on a regular basis usually in proportion to excess free cash flow. Like Rick Rule I am a fear investor regarding them and rarely do I move into them based on the greedy speculative component. There are other less manipulated assets for that purpose.

But in this case the markets have been in major liquidation mode and silver has not been spared. This has opened up a tremendous buying opportunity. But due to the large amounts of manipulation in these markets I would caution against the use of leverage. This is just the latest step in a long staircase of The Great Credit Contraction.

DISCLOSURES: Long physical gold, silver and platinum with no interest in DOW, S&P 500, the problematic SLV ETF, gold ETF or the platinum ETFs.

No tips yet.
Be the first to tip!

Support Run To Gold - Tip With Bitcoin

1JSG7gGG9bj8Z8zxPCSTqRDeucgxojJc47

Find this post helpful? Please consider tipping with Bitcoin. Each article gets a unique Bitcoin address so by tipping you help make Run To Gold sustainable and give valuable feedback on which content is most appreciated!

Reading time: 5 – 8 minutes

The next round of The Great Credit Contraction has started in Europe with Greece in the target sight. While the world scrambles for liquidity capital is burrowing into and oscillating between FRN$ and gold. This consolidation in the gold price and silver price is laying the foundation for the next major up leg.

200 DAY MOVING AVERAGES ARE RISING

The 200 DMA acts like gravity on the price of assets allowing for the relative comparison over time which helps to filter out the daily trading noise. The recent melt-up in the gold price since July has added nearly FRN$300 or  €300 that needs to be digested into the 200 day moving average. Keep in mind that 200 days ago was the beginning of March and the gold price was a mere $1,420 per ounce. The 200 day moving average for gold is now at FRN$1,511.69 and increasing at approximately FRN$1.85 per day.

The silver price is also consolidating its recent gains. With a current silver price around FRN$40 and a 200 day moving average around FRN$35.76 and adding about four cents per day. So, two more months of consolidation and then the next move up.

Gold is currently consolidating its price 10% faster than silver and is confirmed with the relative price at 1.1133 for silver as compared to gold’s relative price of 1.1771. Of all the precious metals gold appears to be the most expensive. The real value seems to be in palladium which is trading at an extreme discount of 0.9224x its 200 day moving average.

Gold has likely seen a great increase in monetary demand from Europeans who do not want exposure to counter-party risk from bankrupt and insolvent. The banking crisis is far from over and for holders of capital that is at risk it must be extremely scary. Sitting in allocated gold or other precious metals held in segregated, audited, secure and insured storage, like with GoldMoney, would be a much more comforting position than in Societe Generala, UBS, Unicredit, etc. As Bloomberg reported on 19 Sep 2011, “A gauge of banks’ reluctance to lend to each other in Europe rose for the first time in a week amid renewed concern Greece is headed for a default.”

This is likely one of the reasons platinum and palladium are priced so cheaply. Monetary demand has flowed into gold and somewhat into silver. Forecasted industrial demand is anemic. Less cars and other goods will be demanded and produced. So the price of inputs, like platinum and palladium, fall. Or so the argument goes.

Platinum and palladium are a great deal right now. Like gold and silver they can never become worthless and, if held correctly, are not subject to counter-party risk. The supply is much smaller and if there is a significant increase in demand, perhaps from investors looking to preserve capital, then their price can increase significantly. Additionally, although platinum is significantly more rare than gold it is, unusually, cheaper in FRN$ terms and palladium is currently an even better deal!

The platinum to gold 200 day moving is currently 1.19 compared to the current price of 1.00. The price of platinum in terms of gold has not been this cheap since shortly after the first round of the credit crisis when Lehman Brothers collapsed.

Palladium is a little more difficult to discern through the golden lens. Like platinum it has not been cheaper since the Lehman collapse. Currently its 200 day moving average is 0.51 compared to the current palladium price in gold of 0.40. This makes palladium slightly cheaper than platinum with the current price in gold about 78% its 200 day moving average compared to platinum’s 84%. Palladium also has a significantly cheaper relative price in FRN$.

THE SPECTRE OF PRICE INFLATION

Central banks the world over have followed the Federal Reserve and created tremendous amounts of liquidity in an attempt to stave off the first round of The Great Credit Contraction. Round two is beginning to materialize and they are continuing.

In an 18 Sep 2011 NYT editorial Paul Volcker sent a warning shot to Ben Bernanke about inflation and how once inflation becomes anticipated and ingrained its stimulating effects are lost. Consider that over the past three months the Federal Reserve has increased M1 by 36.7% and M2 by 23.3%. The specter of price inflation should begin an increasingly aggressive haunting of savers and holders of capital. One place they can seek refuge is gold and silver. Another place to go is platinum, palladium or oil.

CONCLUSION

The Great Credit Contraction is destroying wealth, both real and illusory, at a tremendous rate. The balance sheets of banks have derivative singularities sucking in any equity that passes near the event horizon. This should be the real driver for precious metal demand like gold, silver, platinum and palladium; the lack of counter-party risk.

To make matters worse the stewards of fiat currencies have infected the printing presses with their incontinence. When it comes to safeguarding price stability of fiat currencies those like Ben Bernanke who have succeeded bulldogs like Paul Volcker are lesser men of greater sires.

DISCLOSURES: Long physical gold, silver and platinum with no interest in DOW, S&P 500, the problematic SLV ETF, gold ETF or the platinum ETFs.

No tips yet.
Be the first to tip!

Support Run To Gold - Tip With Bitcoin

1967TR7NW64JnX4t4cg7a279BRN4spSQUo

Find this post helpful? Please consider tipping with Bitcoin. Each article gets a unique Bitcoin address so by tipping you help make Run To Gold sustainable and give valuable feedback on which content is most appreciated!

Reading time: 5 – 8 minutes

I recently finished two weeks in London which ended with the GATA Gold Rush 2011 conference. I was in the room during the taping of the Jim Sinclair interview. How right has he been all along!

The flat I rented in London was about two tube stops from the Tottenham riots. Now I am in Athens headed to the islands for an enjoyable two weeks. With all the turmoil I often wonder: Do the riots follow me or do I follow the riots?

One common theme on RunToGold is to assess the probability and gravity risks, analyze potential solutions or plans and then take action with provident living principles which may lead to survivalism in the suburbs or some other form of life hedge.

UNITED STATES LOSES TRIPLE A RATING

In April Treasury Secretary Timothy Geithner was asked concerning the risk of the U.S. losing its triple-A credit rating: Secretary Geithner replied, “No risk of that.”

Then the politicians bickered about the debt ceiling and came to a faux resolution. On 5 August 2011 the Wall Street Journal reported:

S&P removed for the first time the triple-A rating the U.S. has held for 70 years, saying the budget deal recently brokered in Washington didn’t do enough to address the gloomy outlook for America’s finances. It downgraded long-term U.S. debt to AA+, a score that ranks below more than a dozen governments’

Boom, Boom, Pow!

In 2009 Mr. Sinclair said of my liquidity pyramid: “A very good, simple and clear representation of the problem lacking a practical solution.” Before his interview at the GATA conference I wanted to thank him for his gracious compliment. Regarding the liquidity pyramid Mr. Sinclair remarked, “Perfect.”

PREPARATION, CONFIDENCE AND CALM

I have received a tremendous increase in comments and emails from readers and friends. They all seem to want expert advice from someone who knows what is going on. Why do you think I wrote hundreds of articles on Run To Gold? When the time for performance comes the time for preparation has passed.

I really wish I could provide some advice for those ‘caught between a rock and a hard place’ who are watching their pensions and retirement accounts evaporate. But I am off swimming in the beautiful islands of the Mediterranean Sea and do not have ready access to the phone.

Those darn crazy gold bugs do not look so crazy now. How right was Mr. Sinclair when he called $1,650 gold a decade ago when it was around $265? Good thing his thin skin is gold-plated.

But I have already written about the evaporating Euro, how retirement accounts could boost Treasuries and as I wrote in 18 January 2009 why and how the Treasury bubble will burst:

As the yields on Treasury Bills approach 0% they have the return of cash but do not have the benefits of cash as they may be impregnated with counter-party risk or have decreased liquidity.  In other words, Treasury Bills and cash have the same benefit profile but not the same safety and liquidity profile.

The Wall Street Journal reported 4 August 2011 that “Bank of New York Mellon Corp. on Thursday took the extraordinary step of telling large clients it will charge them [0.13%] to hold cash.”

Now the FRN$ moves one step closer to evaporating. Why pay 0.13% to hold FRN$ when you can pay a 0.18% storage fee to hold unencumbered allocated insured gold? Is it really wise or prudent to save five basis points to be in a potentially worthless fiat currency while being an unsecured creditor of an institution(s) that has needed trillions in bailouts? Treasuries are not looking so risk-free are they?

CONCLUSION

What is happening is no real surprise to those who understand monetary science and basic economic law. I laid out the case years ago in my book The Great Credit Contraction. Those persuaded have likely ensconced themselves within a financial forcefield of silver and gold.

As the storm rages and intensifies they feel no particular urgency or panic. They are prepared for Winter and can remain solvent much longer than the market can remain chaotic. After all, the melting point for gold is 1,947.52 °F which may be its FRN$ after this latest up leg.

For those who are new, I recommend Apmex for coins because of their A+ BBB rating and low premiums and GoldMoney if you want a third-party to store your metals.

DISCLOSURES: Long physical gold, silver and platinum with no interest in DOW, S&P 500, the problematic SLV ETF, gold ETF or the platinum ETFs.

No tips yet.
Be the first to tip!

Support Run To Gold - Tip With Bitcoin

1Hzoo5gyBBaoM9xZ6ZyJp8bWdJaUVv12cg

Find this post helpful? Please consider tipping with Bitcoin. Each article gets a unique Bitcoin address so by tipping you help make Run To Gold sustainable and give valuable feedback on which content is most appreciated!