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Why does a store of value need a compelling use-case? If you hold millions in gold it's most likely in a vault doing nothing except taking up space and storage

Why does a store of value need a compelling use-case? If you hold millions in gold it's most likely in a vault doing nothing except taking up space and storage costs alongside it's primary use case of being a store of value.

MrEldritch 8y ago
It needs to be useful for something other than just "being a store of value". Gold 'works' as well as it does because there's at least something tying it down to market fundamentals. You can make jewelry out of it, you can coat electrical contacts with it. There's reasons besides collective psychology that gold is worth something particular which isn't $0. A digital asset like Bitcoin has nothing tying it down to market fundamentals at all unless there's something else to do with it. It's a disconnected number flapping about in the wind. And as we've observed, since the value people ascribe to a Bitcoin is entirely psychological, the price can do anything. I'm not storing my value in anything I can't be fairly certain will have similar or greater value in the future. A Bitcoin that could be used as a currency would have some inherent value, because being able to use something as currency is valuable. Something has to be at least a little useful for its value to be reliable. (Having a trusted organization, which you expect to be around for a long time, that promises to exchange it for something useful counts as being useful itself.)
- csomar 8y ago
  Not looking to argue with you as it seems like you have an idea stuck to your mind. But bitcoin/crypto is very useful to tax evasion, capital flight, criminal organizations, scams, speculative trading, wealth transfer, and other stuff. Some of these are trillion dollar markets.
  - scalesolved 8y ago
    All of that is true to fiat, which of the above in your list is not possible with fiat?
    - mpfundstein 8y ago
      Just because there is a substitute doesn’t render cryptos useless. Further is it much more easy to send 1M in btc than smuggle them in a suitcase
    - eriken 8y ago
      There are plenty of people who use fiat currencies that are almost useless outside of their own nations borders, with extremely bad exchange rates. This basically binds a person to one country and hinders movement and prosperity.
      - scalesolved 8y ago
        Look at what the OP was saying, he was only listing negative things and attributing them all to something BTC excels at. I was saying that fiat is hardly a paragon of virtue :)
- scalesolved 8y ago
  > Gold 'works' as well as it does because there's at least something tying it down to market fundamentals. You can make jewelry out of it, you can coat electrical contacts with it. In the earlier phases of Gold as a store of value I'd agree that it having additional uses were a bonus but now when an institution be it private or governmental purchases millions of gold as assets for a SoV then this usage is inconsequential. Gold used to be volatile but now is a stable store of value, it retains this because the market decides a fair price, gold can theoretically go to zero, it's just had hundreds of years to achieve a more stable price/value. > since the value people ascribe to a Bitcoin is entirely psychological This is totally true of gold too, it's just embedded more into society as an element that has value. > A Bitcoin that could be used as a currency would have some inherent value, because being able to use something as currency is valuable It's cheaper and faster for me to send BTC between US/EU, volatility is an issue of course. > Something has to be at least a little useful (or else backed up by a trusted organization) for its value to be reliable. I'm not sure many of the 'trusted' organizations are that trustworthy, look at the 2007 crash, massively over leveraged assets with complex rules/instruments and collusion (that resulted in the UK with no one being prosecuted). There a few ways where I see BTC having an advantage as a SoV over gold. * Portability (transferring any amount of BTC is limited only by transaction cost). * Scarcity (The number of BTC is capped at 21 million ever on the network, gold will still be found and mined). * Divisible (BTC can be divided to small amounts that would make it more useful for smaller purchases where gold is not practicable).
  - MrEldritch 8y ago
    >In the earlier phases of Gold as a store of value I'd agree that it having additional uses were a bonus but now when an institution be it private or governmental purchases millions of gold as assets for a SoV then this usage is inconsequential. Nearly 70% of the demand for gold is for jewelry, electronics, and other non-financial/SoV applications. The market value of gold is dominated by its practical and aesthetic uses. https://www.statista.com/statistics/299609/gold-demand-by-industry-sector-share/ https://www.statista.com/statistics/299609/gold-demand-by-in...
    - scalesolved 8y ago
- 21 8y ago
  Only 10% of the price of gold is "tied down" to it's real world usage. The other 90% is psychological. So gold - 90% psychological Bitcoin - 100% psychological If you don't believe in psychological value, both are about as bad. I'm pretty sure no investment gold holder will be happy if gold price drops down to "tied down" value.
  - MrEldritch 8y ago
    Actually, 70% of the price of gold is tied down to its real world usage. I was surprised too - I actually thought it was only around 10% when I made that comment. But what I was referring to was that simply having some significant non-psychological value was key for giving people the stability and confidence to invest more value in it. In which case, the difference between 10% non-psychological value and 0% non-psychological value is something on the order of an infinity percent relative difference.
Retric 8y ago
Because a store of value is better without random price fluctuations. If I am saving up for a Europe trip I want to add some value to a pot every month not gamble so i might make the trip in 2 or 20 years based on luck. This is even more critical with companies, a farmer that sells his crop needs to insure he can buy fuel in 11 months for next harvest. Having a little more is nice, but having a little less is really bad. That risk profile is fairly common where a modest upside is not worth risking even a small dip.
- scalesolved 8y ago
  > If I am saving up for a Europe trip I want to add some value to a pot every month not gamble so i might make the trip in 2 or 20 years based on luck. You'd most likely not save for this trip in gold. > a farmer that sells his crop needs to insure he can buy fuel in 11 months for next harvest. Having a little more is nice, but having a little less is really bad. Also I don't know any farmers using gold as a store while waiting for harvests. Look at some the gold fluctuations here, mainly large double digit swings: http://onlygold.com/Info/Historical-Gold-Prices.asp http://onlygold.com/Info/Historical-Gold-Prices.asp Gold is less volatile due to multiple financial instruments allowing trading/hedging on top of it, millennia of usage as store of value and that governmental institutions also back it as a store of value. Even with all that said it still took dips and swings of: 2015: -11% 2013: -27.6% 2010: 30% Those seem volatile.
  - Retric 8y ago
    Gold is used as a hedge because it often moves opposite of other value stores. Crypto currency's move independent of any specific store of value making them effectively nearly useless as hedges. PS: Adjusted for inflation in 1915 gold was worth $483.23 in 2015 prices, in 2018 it was actually worth $1,060. That's extreme long term price stability as in +/- 1% per year over 100 years go back say 500 or 2,000 years and it stays very stable. That long term stability relates to it's intrinsic value as an actual good, which bounds price movements.
zecg 8y ago
Because otherwise the value won't be there when everyone needs to redeem it desperately.
saalweachter 8y ago
Because a store of value is a theoretical construct that is never actually realized. There is no such thing as a perfect store of value. Luxury goods and status objects can go out of vogue. Foods spoil. Houses need constant maintenance. Land's value can shift based on regional demand or even be destroyed by changes in climate - too much water, too little water. Currencies can fail and even personal favors fade over time.

MrEldritch 8y ago

It needs to be useful for something other than just "being a store of value". Gold 'works' as well as it does because there's at least something tying it down to market fundamentals. You can make jewelry out of it, you can coat electrical contacts with it. There's reasons besides collective psychology that gold is worth something particular which isn't $0. A digital asset like Bitcoin has nothing tying it down to market fundamentals at all unless there's something else to do with it. It's a disconnected number flapping about in the wind. And as we've observed, since the value people ascribe to a Bitcoin is entirely psychological, the price can do anything. I'm not storing my value in anything I can't be fairly certain will have similar or greater value in the future. A Bitcoin that could be used as a currency would have some inherent value, because being able to use something as currency is valuable. Something has to be at least a little useful for its value to be reliable. (Having a trusted organization, which you expect to be around for a long time, that promises to exchange it for something useful counts as being useful itself.)

csomar 8y ago
Not looking to argue with you as it seems like you have an idea stuck to your mind. But bitcoin/crypto is very useful to tax evasion, capital flight, criminal organizations, scams, speculative trading, wealth transfer, and other stuff. Some of these are trillion dollar markets.
- scalesolved 8y ago
  All of that is true to fiat, which of the above in your list is not possible with fiat?
  - mpfundstein 8y ago
    Just because there is a substitute doesn’t render cryptos useless. Further is it much more easy to send 1M in btc than smuggle them in a suitcase
  - eriken 8y ago
    There are plenty of people who use fiat currencies that are almost useless outside of their own nations borders, with extremely bad exchange rates. This basically binds a person to one country and hinders movement and prosperity.
    - scalesolved 8y ago
      Look at what the OP was saying, he was only listing negative things and attributing them all to something BTC excels at. I was saying that fiat is hardly a paragon of virtue :)
scalesolved 8y ago
> Gold 'works' as well as it does because there's at least something tying it down to market fundamentals. You can make jewelry out of it, you can coat electrical contacts with it. In the earlier phases of Gold as a store of value I'd agree that it having additional uses were a bonus but now when an institution be it private or governmental purchases millions of gold as assets for a SoV then this usage is inconsequential. Gold used to be volatile but now is a stable store of value, it retains this because the market decides a fair price, gold can theoretically go to zero, it's just had hundreds of years to achieve a more stable price/value. > since the value people ascribe to a Bitcoin is entirely psychological This is totally true of gold too, it's just embedded more into society as an element that has value. > A Bitcoin that could be used as a currency would have some inherent value, because being able to use something as currency is valuable It's cheaper and faster for me to send BTC between US/EU, volatility is an issue of course. > Something has to be at least a little useful (or else backed up by a trusted organization) for its value to be reliable. I'm not sure many of the 'trusted' organizations are that trustworthy, look at the 2007 crash, massively over leveraged assets with complex rules/instruments and collusion (that resulted in the UK with no one being prosecuted). There a few ways where I see BTC having an advantage as a SoV over gold. * Portability (transferring any amount of BTC is limited only by transaction cost). * Scarcity (The number of BTC is capped at 21 million ever on the network, gold will still be found and mined). * Divisible (BTC can be divided to small amounts that would make it more useful for smaller purchases where gold is not practicable).
- MrEldritch 8y ago
  >In the earlier phases of Gold as a store of value I'd agree that it having additional uses were a bonus but now when an institution be it private or governmental purchases millions of gold as assets for a SoV then this usage is inconsequential. Nearly 70% of the demand for gold is for jewelry, electronics, and other non-financial/SoV applications. The market value of gold is dominated by its practical and aesthetic uses. https://www.statista.com/statistics/299609/gold-demand-by-industry-sector-share/ https://www.statista.com/statistics/299609/gold-demand-by-in...
  - scalesolved 8y ago
21 8y ago
Only 10% of the price of gold is "tied down" to it's real world usage. The other 90% is psychological. So gold - 90% psychological Bitcoin - 100% psychological If you don't believe in psychological value, both are about as bad. I'm pretty sure no investment gold holder will be happy if gold price drops down to "tied down" value.
- MrEldritch 8y ago
  Actually, 70% of the price of gold is tied down to its real world usage. I was surprised too - I actually thought it was only around 10% when I made that comment. But what I was referring to was that simply having some significant non-psychological value was key for giving people the stability and confidence to invest more value in it. In which case, the difference between 10% non-psychological value and 0% non-psychological value is something on the order of an infinity percent relative difference.

Retric 8y ago

Because a store of value is better without random price fluctuations. If I am saving up for a Europe trip I want to add some value to a pot every month not gamble so i might make the trip in 2 or 20 years based on luck. This is even more critical with companies, a farmer that sells his crop needs to insure he can buy fuel in 11 months for next harvest. Having a little more is nice, but having a little less is really bad. That risk profile is fairly common where a modest upside is not worth risking even a small dip.

scalesolved 8y ago
> If I am saving up for a Europe trip I want to add some value to a pot every month not gamble so i might make the trip in 2 or 20 years based on luck. You'd most likely not save for this trip in gold. > a farmer that sells his crop needs to insure he can buy fuel in 11 months for next harvest. Having a little more is nice, but having a little less is really bad. Also I don't know any farmers using gold as a store while waiting for harvests. Look at some the gold fluctuations here, mainly large double digit swings: http://onlygold.com/Info/Historical-Gold-Prices.asp http://onlygold.com/Info/Historical-Gold-Prices.asp Gold is less volatile due to multiple financial instruments allowing trading/hedging on top of it, millennia of usage as store of value and that governmental institutions also back it as a store of value. Even with all that said it still took dips and swings of: 2015: -11% 2013: -27.6% 2010: 30% Those seem volatile.
- Retric 8y ago
  Gold is used as a hedge because it often moves opposite of other value stores. Crypto currency's move independent of any specific store of value making them effectively nearly useless as hedges. PS: Adjusted for inflation in 1915 gold was worth $483.23 in 2015 prices, in 2018 it was actually worth $1,060. That's extreme long term price stability as in +/- 1% per year over 100 years go back say 500 or 2,000 years and it stays very stable. That long term stability relates to it's intrinsic value as an actual good, which bounds price movements.

zecg 8y ago

Because otherwise the value won't be there when everyone needs to redeem it desperately.

saalweachter 8y ago

Because a store of value is a theoretical construct that is never actually realized. There is no such thing as a perfect store of value. Luxury goods and status objects can go out of vogue. Foods spoil. Houses need constant maintenance. Land's value can shift based on regional demand or even be destroyed by changes in climate - too much water, too little water. Currencies can fail and even personal favors fade over time.