I posted here, some time ago, on noting this substitution effect...
I didn't have or see a chart suggesting it as clearly as that one does... I just noted the behaviors I saw being diverted suggested it must be true... and, of course, that's not rocket science as the "digital gold" perception has been around a while... but perhaps without people comprehending how that becoming more true over time would change behavior... and the market value of the thing being substituted...
As this proceeds... there will of necessity be accelerations... including points at which new behaviors emerge that hadn't before... either because no one thought of it before... or we just hadn't noticed it before... or because some threshold critical to enabling some change had not been attained.
Forward impacts worth considering...
The first is... conversions occurring instead of substitutions, at some point... as often discussed here, but not nearly as likely to occur in hands of early adopters. That's likely to happen more as the value and distribution grows... so that bitcoin quits being a substitute detracting from gold demand and instead starts to drive it... but, again, there are likely to be ebbs and flows that are not linear... and its purely speculative to assume that future demand will materialize in a big enough way to balance out the other effects.
Another... is that in the degree there is that substitution effect... gold is being under-priced in result... both as an artifact of a short term market imbalance that will prove self correcting in time... but perhaps not for a long time. We're only now reaching a FIRST point at which that effect is noticeable... giving no reason to assume that it will end any time soon ? And, even when growth in BTC ends and it attains stability... when its value stops growing as it does now... that will continue as a function of future potential being limited by having a more competitive environment for "store of value" that has superior features... or at least different features.....
Have not seen much discussion of the potential that bitcoin might prove to be more of a substitute for gold than it can be for fiat... which seems it runs counter to the interest and intent of the creators... ? Tell me that discussion didn't take place before the Wall Street crowd authorized its trading with options and futures... and I'll smile.
But, will it ?
If BTC succeeds in replacing golds functions... gold might be permanently devalued...
On the hand... perhaps the perpetrators of bitcoin plans... have intended all along to patiently attain some critical mass before beginning to address the issue of price suppression in other fiat competitors ? There is no central BTC bank... and no world bitcoin bank coordinating global bitcoin deployment plans to achieve X and such... no Basel Accord operating iteratively to define the asset status of BTC relative to the newly re-anointed Basel III tier one asset that is gold. So, that aspect of future events... may be left to the whim of Robinhood daytraders... who coordinate with bitcoin holders on Reddit to simultaneously convert BTC to $ and buy silver... at the end of March ? As a dry run and source of profits to enable a similar run on gold, later ?
There are no rules that prevent people spending money on what they want to spend it on... as we've seen in the GME trade recently... that not meaning everyone spends well or wisely ? But, that being true... connects to how people decide to use bitcoin... how ?
The one certainty... is that it is disruptive... just not really that clear how it is and will be... and who will control the ways in which it is... or might be... when we see past the "bubble" in its creation and the "wild west" stage of adoption...
The goal... was... to foster disintermediation... which should have happened a long time ago already, as the existence of computers obviate most of the legitimate functions that banks used to have... that just aren't needed any more with the technology obviating their utility. That disintermediation has proceed painfully slowly... from the first creation of "discount' brokers... to commission free automated trading... But, reality is that you don't need them at all... now.
If we don't even need banks... why would we have banks deciding for us, on anything about our money ?
i don't see much evidence that is working... ? Instead of the disintermediated economy using disintermediated money... with disembodied transactions occurring over an onion router network... we see a new crop of intermediaries being created instead ? Progress, we're told... is having more than the one intermediary that this started with ? When do we get to the point of actual disintermediation... rather than substituting new intermediaries for old ones... while leaving the old ones in control and able to change the rules at a moment's notice ?
I remain skeptical... but, the longer this extends... the more the skepticism will be forced to become pessimism... which, none the less, will create a lot of interesting trading opportunities... |
