Author Topic: Bitgold as investment  (Read 1451 times)

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Offline arp

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Bitgold as investment
« on: September 09, 2015, 06:29:30 pm »
Hi,

I recently found Bitshares and the possibility to exchange BTS for Bitgold via the client. Do you think that buying Bitgold is a good alternative for buying physical gold (in terms of value)?

Offline donkeypong

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Re: Bitgold as investment
« Reply #1 on: September 09, 2015, 06:40:33 pm »
It should be a good proxy. Once the 2.0 edition comes out soon, trading will be much easier and there should be greater market depth. The market peg should hold bitgold's value reliably close to the real thing. And it's much easier to buy or sell when all you have to do is click a few buttons. Compare that to pulling out all those gold bullion bars from the loose boards under your bed + taking or shipping them to a metals dealer for liquidation. Or vice versa.

Offline devlux

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Re: Bitgold as investment
« Reply #2 on: September 09, 2015, 06:58:39 pm »
I think we need a lot more people participating in all of these markets. 

The market depth isn't there right now which is making the price spread a bit "crazy".
The more people we get participating in these markets, the healthier they will become.

You need to remember that "bit" ANYTHING is actually just a bet.

When you acquire bitGold you are betting that the price of Gold relative to BTS will increase faster than the price of another asset such as silver or USD. 

When you CREATE or SHORT these objects into existence then you are taking the opposite of that bet.  You are betting that BTS will rise relative to Gold.  Put another way, you are betting that the price of Gold in BTS terms wil bel going down faster than the BTS price of another asset such as silver or USD.

No matter which way you look at it, it's not an investment in the classical sense.
There is no underlaying "Gold" for you to receive inkind should the market collapse and if there are no takers, you might well be forced to ride your bitGold all the way down to 0.

May as well call it "betGold"  :)

As a crypto or electronic asset though, market pegged bit assets are by far superior to anything else out there.
There is nothing in the world that has the potential that this class of products has.

Just keep in mind that you aren't really trading and investing in an asset, you are trading in a derivative. 

As a derivative it is not based on gold or any other asset in any meaningful sense of the word. 
It's just a bundle of bitshares guaranteed to always be equivalent to the price of said asset according to the published feed which may or may not be an accurate representation of reality.

With the expected "7 Year Cycle" due to come this year, it would be a very good idea to spread yourself out among the various "hard currency" derivatives such as bitGold & bitSilver.  I would also recommend keeping some in bitUSD and some other bitFiats as a way of offloading the risk of market declines.

Offline Helikopterben

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Re: Bitgold as investment
« Reply #3 on: September 09, 2015, 09:20:11 pm »
You should always be able to redeem 1 bitgold for 1 ounce of physical gold, minus fees and expenses such as shipping costs.  In the future, on and off ramps will provide an easier way to do this.  The peg is based on the global flow of information about price.  Your risk is systemic failure of bitshares, but not third party risk.

IMO, once bitshares becomes a solid and sound protocol, then bitgold will be a BETTER investment than physical gold as far as security is concerned.  I cant encrypt physical gold.  I cant store a backup of physical gold in multiple geographic locations.  I cant create a brain wallet for physical gold.  I cant use multi-sig or equivalent with physical gold.  I can dig a hole in the ground and put physical gold in it or hide it in my house somewhere and hope nobody finds it.  I could put physical gold in a safe and hope nobody breaks into it, but those storage methods are potentially not as secure IMO... otherwise I have to trust a third party, which is probably less secure than digging a hole in the ground. 
« Last Edit: September 09, 2015, 09:22:22 pm by Helikopterben »

Offline devlux

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Re: Bitgold as investment
« Reply #4 on: September 09, 2015, 09:33:08 pm »
I think if  what you say were actually the case we would see more action in those markets.
The fact that no one is buying/selling in the markets and the total market cap of each asset is on a downward trajectory kinda means those theories are wrong.

If people really believe in bitAssets as an asset rather than a gamble, then they should be trying to make markets. 
Right now you can't buy anything without paying MASSIVE premiums that make it very unattractive.

BitSilver is about the only exception to this rule, which is very interesting because silver is WAY under priced in general.  The XAG/USD rate will probably double by this time next year if the fed so much as breaks wind in the general direction of an interest rate raise.

I'd be willing to build an on/off ramp between physical XAG & bitSilver (technical side of things).  If anyone knows any coin shops or legit metals dealers that would like a direct integration let me know.  But they have to be willing to take it at spot +- 3% 1bitSilver for 1ozXAG

Offline Helikopterben

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Re: Bitgold as investment
« Reply #5 on: September 09, 2015, 09:51:09 pm »
I think if  what you say were actually the case we would see more action in those markets.
The fact that no one is buying/selling in the markets and the total market cap of each asset is on a downward trajectory kinda means those theories are wrong.

If people really believe in bitAssets as an asset rather than a gamble, then they should be trying to make markets. 
Right now you can't buy anything without paying MASSIVE premiums that make it very unattractive.

BitSilver is about the only exception to this rule, which is very interesting because silver is WAY under priced in general.  The XAG/USD rate will probably double by this time next year if the fed so much as breaks wind in the general direction of an interest rate raise.

I'd be willing to build an on/off ramp between physical XAG & bitSilver (technical side of things).  If anyone knows any coin shops or legit metals dealers that would like a direct integration let me know.  But they have to be willing to take it at spot +- 3% 1bitSilver for 1ozXAG

You do realize that the current iteration of bitshares won't exist in 2 to 3 months.  That is most likely why no one is trading in those markets.  That and the fact that the client is buggy and some market rules are flawed.  I would wait until 2.0 comes out to make a genuine assessment of market conditions.  Even then, I would expect some issues to crop up along the way.  It may be a while before fully functioning markets develop because the system just needs time to develop.  If you have any assets in the current system they will be transferred to the new one.

Offline arp

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Re: Bitgold as investment
« Reply #6 on: September 10, 2015, 08:59:57 am »
It's really interesting to read all your answers, thank you for that. Meanwhile, I still have to study Bitshares a bit more, I still don't get that "pegged" method. I have understood that it's better to wait for BTS 2.0 and then buy some BitGold.
Another question pops up then: is it best to buy Bitshares now (while they are cheaper) and exchange them for BitGold in the 2.0 client?

Offline inarizushi

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Re: Bitgold as investment
« Reply #7 on: September 10, 2015, 11:53:15 am »
It's really interesting to read all your answers, thank you for that. Meanwhile, I still have to study Bitshares a bit more, I still don't get that "pegged" method. I have understood that it's better to wait for BTS 2.0 and then buy some BitGold.
Another question pops up then: is it best to buy Bitshares now (while they are cheaper) and exchange them for BitGold in the 2.0 client?

When you buy BitGold, you "lose" money if BTS goes up compared to the price of gold, so yes, if you think that BTS will go up in the next weeks, you should buy BTS now, wait until the price goes up, and then buy BitGold. Buying BitGold is selling BTS for gold.

It will be easier in 2.0, because the peg should be better with the new mechanism, now if you buy bitAssets you have to buy them at a higher price than the market price.
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Offline Erlich Bachman

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Re: Bitgold as investment
« Reply #8 on: September 10, 2015, 12:48:17 pm »
I still have to study Bitshares a bit more, I still don't get that "pegged" method.

First you must realize that the prescious metals markets have both "paper prices" and "plysical prices" otherwise known as a "premium for delivery" on the "physical metal"

traditional market:

If I tried to purchase 1,000 tons of physical gold on the open market, then the price of gold (or at least the price of gold premiums for delivery) should rise to meet my massive demand. 

pegged market:

If the bitGold market was deep enough and I purchased the same amount of bitGold then the actual physical gold price would not be affected until I tried obtaining my gold through a physical gateway, and then the owner of that gateway would then have to try to source the gold which would raise the price as I described above. 

So in that regard, pegged markets have a similar effect on the price of gold as paper gold contracts such as the GLD (little to no affect on the gold price until you try to claim delivery).  To put it simply, the prices of pegged assets reflect the additional "premium cost" that you are required to pay when acquiring the physical metal.  The premium on bitGold will probably mimic the actual physical gold premiums once gateways open up.  This premium rises and falls due to supply shortages in the physical market.

In other words, your local coin dealer will never give you spot price for physical gold, so why would you ever expect to pay spot prices for bitGold?


The bitGold market mirrors the "physical" gold market not the "paper" gold market which is affected by naked shorts (no kidding).  I know what you're going to say next:

But how can they be "naked" if they have "shorts" on?

That's a different post entirely.

In the meantime, check out Fuzzy's interview with the golden jackass (no kidding).
« Last Edit: September 10, 2015, 12:54:26 pm by Erlich Bachman »
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Offline arp

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Re: Bitgold as investment
« Reply #9 on: September 10, 2015, 01:37:43 pm »
until I tried obtaining my gold through a physical gateway, and then the owner of that gateway would then have to try to source the gold which would raise the price as I described above. 

Imagine all investors in "pegged gold" wanted to their gold in physical form, there could be a potential problem then (not enough gold for everyone).


Offline mf-tzo

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Re: Bitgold as investment
« Reply #10 on: September 10, 2015, 06:16:40 pm »
until I tried obtaining my gold through a physical gateway, and then the owner of that gateway would then have to try to source the gold which would raise the price as I described above. 

Imagine all investors in "pegged gold" wanted to their gold in physical form, there could be a potential problem then (not enough gold for everyone).

It is already known for many years now that there is no physical gold for the paper gold traded. For some reason I think that soon this will happen (many people will ask physical delivery) and we will experience very strange things in the current financial markets..