The Bitcoin is ‘as-good-as-gold’ myth is over

[GoldCore]

When you invest in gold or buy silver coins with GoldCore you are choosing to invest in an asset that has no counterparty risk.

Sadly those who have been holding their bitcoin on the crypto exchange FTX, have not experienced the same level of reassurance and service from the exchange’s management.

This event is all part of a much wider lesson about which assets really are safe havens. Also how to reduce the level of counterparty risk your investment portfolio is exposed to. 

This time last year, cryptocurrency enthusiasts were still touting “Crypto as the new gold”– crypto touted as having the same ‘safe’ attributes as gold.

The main attribute is that it is a currency that government doesn’t control. Also, it is without counterparty risk. The latest debacle has once more proved this is not always the case for cryptocurrencies.

The news that the crypto exchange FTX was filing for bankruptcy on November 5 sent Bitcoin plunging down a further 25%.

This is on top of the more than 60% Bitcoin has already declined since its November 2021 peak. This brings the total decline to more than 75%.

Bitcoin Chart

The extent of the collapse and its fallout is still unfolding as more details are uncovered. The main risk goes back to one we have discussed many times before counterparty risk.

What Happens to your Bitcoin as FTX Collapses

The FTX collapse has brought to light that the CEO, Sam Bankman-Fried, had authorized billions of dollars worth of customer assets to be lent to its affiliated trading firm Alameda Research to fund risky bets.

According to news reports Alameda Research owes FTX upwards of US$10 billion. This is more than half of its US$16 billion in customer assets!

The bankruptcy case is likely to take years to unravel. There could be more than one million creditors, and more than 100 other related corporate entities involved.

Everyone who thought they owned Bitcoin held by FTX became an unsecured bankruptcy creditor. These are the ones who must now rely upon some Court to confirm just how much, or any Bitcoin they will receive.

FTX is not the first crypto exchange to collapse – Mt. Gox, which accounted for over 75% of all Bitcoin transactions until it filed for bankruptcy in 2014 after being hacked. Hundreds of thousands of bitcoins were lost (removed from the network).

Some of these coins later recovered but withdrawals from the exchange were already stopped. It wasn’t until seven and a half years later, in November 2021, creditors and the court reached an agreement. 

The FTX web of deceit and ‘poor judgment’ in Mr. Bankman-Fried’s words, goes much deeper and is far more convoluted than the Mt. Gox bankruptcy.

Is the Dollar About To Go Digital?

Along the same lines of digital currency and counterparty risk, the Federal Reserve of New York announced on November 15 that it is “Facilitating Wholesale Digital Asset Settlement”.

The Federal Reserve of New York and a dozen major banks are launching a twelve-week test of a digital dollar. A news release on the Federal Reserve of New York website states that the test is to determine the feasibility experiment as a ‘proof-of-concept’ of transactions using a digital US dollar.

The twelve-week program will simulate digital money transactions between the participating bank customers. It then settles the transactions through a simulated Fed Reserve distributed ledger.

The experiment of ‘digital dollar tokens’ through the test program titled “The Regulated Liability Network” by banks through the Federal Reserve is to bring blockchain technology to the ‘real economy’ and speed up settlements between banks and the central bank. The FRBNY states: 

In a 12-week proof-of-concept project—the Regulated Liability Network U.S. Pilot—the NYIC will experiment with the concept of a regulated liability Network (RLN). RLN is a concept for a financial market infrastructure (FMI) facilitating digital asset transactions. This connects deposits held at regulated financial institutions using distributed ledger technology.

 

Distributed ledger technology is another name for blockchain technology and is explained by Investopedia as:

 “…a protocol that enables the secure functioning of a decentralized digital database. Distributed networks eliminate the need for a central authority to keep a check against manipulation. DLT allows for storage of all information in a secure and accurate manner using cryptography. The same can be accessed using “keys” and cryptographic signatures. Once the information is stored, it becomes an immutable database and is governed by the rules of the network.”

 

How a Shortage of Rare Earth Metals Will Impact Us All

 

While the Regulated Liability Network could be an alternative to unregulated cryptocurrencies the potential fresh problems to arise are obvious given the transaction ledger is likely transparent for FRBNY purposes. 

Only time will tell if the timing of the test (on the heels of the FTX collapse) is simply ‘bad timing’ or an omen of a system building in even more risk. Investing in physical gold and silver are still the tried-and-true alternative!  

If you would like to hear more about the benefits to investing in gold or buying silver coins then have a look at our YouTube Channel, GoldCore TV. Here we bring you a wealth of news, commentary and analysis of the precious metals markets, as well as the wider macroeconomic situation.  

[Zhorro]

Maybe they should release commemorative bitcoins in order to stimulate demand - I'm sure this is what the RM would do!

[GoldStatue]

Eventually Bitcoin will turn into a novelty item that you pull out to laugh about when people come around your house 😀

[Solachesis]

Don't keep bitcoin on an exchange, it's been said a thousand times yet people still do, it's like a gold etf or some oblique digital gold account - if you don't hold it, you don't own it. 

Also, zoom out. There's been a pandemic, war in Ukraine, spiraling cost of living and inflation, stock markets are down too, people aren't going to be putting their spare money in a speculative asset, people are struggling with money to begin with, yet bitcoin is still £14,000.

Bear and bull markets are in everything, stocks, precious metals, crypto, if you bought bitcoin this time 3 years ago, you'd still be up nearly 400%. 

Using a bull ATH with a bear bottom to make your point that "bitcoin is dead it's fallen X%, completely ignoring the huge gains by zooming out just reinforces your obvious bias. 

But your mind is already made up, so what's the point I guess.  

[Paul]

BTC doesn't do BUNC, sets, proofs, Matt, graded, ungraded, bullion, SOTD 

Based on just on pure maths and design and logic. 

It works and is worthy of investment but . . . . . . . . . . . (Reasons)

[apachebleu]

 Nah mate, go shill your your out of date, pointless metal elsewhere you won't convince anybody here that golds a worthwhile investment. 🤣

[stackerp5]

53 minutes ago, Solachesis said:

Don't keep bitcoin on an exchange, it's been said a thousand times yet people still do, it's like a gold etf or some oblique digital gold account - if you don't hold it, you don't own it. 

Also, zoom out. There's been a pandemic, war in Ukraine, spiraling cost of living and inflation, stock markets are down too, people aren't going to be putting their spare money in a speculative asset, people are struggling with money to begin with, yet bitcoin is still £14,000.

Bear and bull markets are in everything, stocks, precious metals, crypto, if you bought bitcoin this time 3 years ago, you'd still be up nearly 400%. 

Using a bull ATH with a bear bottom to make your point that "bitcoin is dead it's fallen X%, completely ignoring the huge gains by zooming out just reinforces your obvious bias. 

But your mind is already made up, so what's the point I guess.  

This.

"Not your keys, not your coins." Is how the saying goes.

Centralised exchanges are meant for moving in assets to trade, and withdrawing the exchanged assets to a privately owned personal wallet. No problems with losing crypto then 😉

[James32]

45 minutes ago, apachebleu said:

 Nah mate, go shill your your out of date, pointless metal elsewhere you won't convince anybody here that golds a worthwhile investment. 🤣

To be clear, your saying sell it all..correct? 👀 

[apachebleu]

25 minutes ago, James32 said:

To be clear, your saying sell it all..correct? 👀 

  Oh god, please tell me you didn't get up in the gold buying ponzi scheme too? 

[stackerp5]

43 minutes ago, James32 said:

To be clear, your saying sell it all..correct? 👀 

I'll take part of your gold and silver stack off your hands for £3.80 and £0.62 an ounce just to guarantee you a price you know, I'm taking all the risk here...

[James32]

Just now, stackerp5 said:

I'll take part of your gold and silver stack off your hands for £3.80 and £0.62 an ounce just to guarantee you a price you know, I'm taking all the risk here...

Sounds 

[GoldStatue]

I said it 6000 years ago and I'll say it now, gold is in a speculative bubble, you've been warned 😀

[Bigmarc]

I joined the crypto space a couple of years ago, I am down so much money that all I can do is stick it out and keep averaging in to bring my cost down. To be honest in other chats I'm in there are a lot of people in the same position and I have come to the conclusion that the whole space functions on a generation of gamblers trying to recover from a loss. 

Having said that, the headline of this thread "bitcoin is as good as gold". I not sure that anyone involved in both asset classes would say this.

[sovereignsteve]

It's like any "new thing" in the "investment" world. The early adopters make all the money. Once the crowd gets to know about it, it's time to sell.

[watchesandwhisky]

I was fortunate that I sold out of 80% of my bitcoin at 55k dollars btc to put down a sizable deposit on a flat - the remaining 20% is pure profit but has tanked hard as would be expected. 

But I am not selling, and have no panic. Bitcoin I do feel will come back with a vengeance and when it does it will go to six figures upwards. 

Edited November 18, 2022 by watchesandwhisky

[bluemoon]

It's a total ponzi scheme but that's because the speculators made it that way. It was only ever meant to be an alternative currency that can't be QE'd or otherwise fiddled with. It was never about getting rich. The "to the moon" lot made it an ugly scene. I never actually bought any bitcoin, it got too crazy from very early on.

That said, I do wish I'd listened to my friend in 2013 when he first told me about it. I'd be rich by now. On the other hand I'm glad I stuck to gold and silver.

[BDTH]

If anyone has any bitcoins please sell them at any price. dump, dump, dump. Sell, sell, sell

I will continue to buy bitcoin at any price, high or low. But I really like low, so sell, sell, sell if you no-coiners have any (I doubt it lol) 🤡

Edited November 18, 2022 by BDTH

[Bigmarc]

I have some, bought when it was $56000. 

Pointless selling it now, currently on hold for 24hrs trying to get it off an exchange. It's an absolute cess pit of degenerate individuals trying to make or steal your money. I recently bought a hard ware wallet that looks and feels like a knock off mp3 player from china. Seems weird that I am trusting 1000s on it. 

Having said that I am ploughing on with it. The youth of today with loads of disposable income are hardly going to go out and buy the latest sovereign.

[Arganto]

Wasn't the point of Bitcoin to be a viable currency system away from the established state issued fiat? I have my own personal hypothesis for Bitcoin and crypto in general, but to play the advocate I would say it needs to be conceptually divorced from the notion of being worth a dollar amount altogether. Whilst it continues to be thought of and used as a speculative investment it will continue to act as such.

 

[BDTH]

Ive been buying bitcoin since late 2017. Was told I’d missed the boat then. Don’t think so.

Still early doors. My Bitcoin holdings are in single figures but increasing weekly. Might change that to daily.

Genuinely hope price crashes hard in next few weeks as I am lining up 4 figures of useless fiat for a smash buy

each to their own!

[Bigmarc]

1 hour ago, BDTH said:

Was told I’d missed the boat then. Don’t think so.

Don't think the boat will ever be missed, just need to wait for fresh cattle to join the market and the whole cycle starts again. I will try not to be on the loosing end this time.

[apachebleu]

4 hours ago, bluemoon said:

It's a total ponzi scheme but that's because the speculators made it that way. It was only ever meant to be an alternative currency that can't be QE'd or otherwise fiddled with. It was never about getting rich. The "to the moon" lot made it an ugly scene. I never actually bought any bitcoin, it got too crazy from very early on.

That said, I do wish I'd listened to my friend in 2013 when he first told me about it. I'd be rich by now. On the other hand I'm glad I stuck to gold and silver.

This!! I like the idea of bitcoin to store and transfer money but at the end of the day it has failed in the one thing it set out to be. 

 Nobody spends it, 99% of people buy it to gamble the price goes up and they can make money so its failed as a currency, add that to the wild value swings (caused by the speculators) and its been rendered useless by its own customers.

 All of that is before we get to how damn complicated it is, maybe for those in the space it seems simple but for outsiders looking in (especially now we are told not to trust exchanges) it's a lot of hoops to jump through for something that really no longer serves a purpose.

 It's a shame because it was an interesting idea with potential and real uses but it was ruined by users. People laugh at the guy who bought pizza with what would later come to be worth 100's of thousands but that's what it was for and when we forgot that it lost its worth.

 

 To those who argue gold is just the same or that fiat is based on nothing I would counter they are backed by public belief, a proven track record of relative stability and ease of use. Gold also has ornamental value, everyone loves a bit of gold and (vulgar as it may be) displaying a lot of gold jewelry will always be a stronger flex than waving your pen drive about hoping to impress girls.

[Bigmarc]

5 hours ago, Bigmarc said:

Pointless selling it now, currently on hold for 24hrs trying to get it off an exchange

That was one exchange gateio. In the last hour I have just been told that another of my exchanges (kracken) has been hacked and the hackers have all my personal details. Now if anyone knows kyc then that's everything from passport to phone number to inside leg measurement. It's the bloody wild west, you don't get this visiting a coin fair on a Sunday afternoon. 

 

1 hour ago, apachebleu said:

All of that is before we get to how damn complicated it is

It's like a game of chess where you have to watch 100 hours of YouTube clips before every move. 

[Happypanda88]

I wonder what those people who got caught-up in the Tulip Mania in 1630s would think about today's crypto world.🤔
At least they had tulip bulbs in hand and when planted sprout lovely flowers. But the investors at FTX got nothing. 🙄

[BDTH]

99.99% of “crypto” coins are just “blockchain” fiat on steroids. Any “coin” with a CEO is an unregistered security, and the SEC might just start taking an interest after Scam Bankrupt Fraud’s FTX fiasco, that syphoned $100,000,000s to Democrats, who syphoned $Bs to Ukraine, who invested in FTX 🤡. If you are looking for the next pump and dump sh!tcoin to get rich quick, good luck!