Thanks for the comment - My hypothesis is that people growing up today in their 20s and 30s who would have normally bought gold in their 40s and 50s will buy crypto instead. So it will be a generational shift versus a replacement for existing older gold holders. (Could be wrong of course).
I don’t buy it - gold has a natural floor, for one thing. I can sell it to make pretty earrings or fancy computer cables. The risk of it losing all its value is basically the risk that we will move to a post-scarcity Star Trek style society with matter replicators. Crypto.. not so much.
Why does this floor influence your choice to purchase it over some other commodity to store value (crypto or otherwise?) What do you think that floor even is? (My working assumption right now is gold could lose 99.9% of its value if it was priced based upon it's utility as a metal and not as a culturally agreed upon store of capital.)
So your logic is that "people buy gold because other people believe it's a safe investment"? That same logic applies to crypto - if people stop believing that gold is a good investment and start believing that crypto is a good investment, gold will cease to be a good investment and crypto will become a good investment.
I think gfodor is asking something more along the lines with "What can you do with gold that you cannot do with anything else you can buy?" There are valid answers to that - gold is a catalyst in several chemical reactions that won't work with any other metal, it's corrosion resistant, it's shiny, it's a very good conductor that's quite malleable. But I'm with him in surmising that if people only used gold for its metallurgical properties, absent any historical sentimental attachment, the price would drop 99.9%. Gold is actually quite abundant; 190kt have been mined so far [1], most of which is either locked up in jewelry or being hoarded as an investment, so if people ceased to believe it was valuable there'd be a very large oversupply for the few real industrial uses.
That’s still far more uses than if people think a particular coin has lost its value. When thinking about a store of value for loss-averse people, the intrinsically useful, always-been-valuable mineral I can hold in my hand seems like a psychological winner over numbers in a blockchain that require an industrial society with the blockchain to keep churning. My take was that people were speculating in bitcoin to get rich, not to weather government collapse.
The price of a commodity depends more on the energy, labor, and technology required to extract it and consequent market power of the main producers than on its abundance in the earth's crust. Otherwise strontium ($1000/kg, 360 ppm in crust) would be a lot cheaper than tin ($16/kg, 2.2 ppm).
Ignore the utility of gold, I feel that just muddies the waters.
The volatility of crypto makes it a terrible store of value. While people may use it as such, it is primarily a speculative asset.
OTOH, gold has historical precedent assuring its stability. So while that could suddenly change, its going to take a fairly sizable event to shift the perception. Like a nuclear holocaust or something.
If there's any generational shift in this thinking it's purely naivety.
So my perspective is basically that crypto is a terrible store of value, but gold is also a terrible store of value. Take a look at the price of gold since the Nixon Shock:
At the time of my birth, gold was worth $800/oz. By the time I was old enough to ask "What's gold?", it had fallen to $300/oz. It was up to $500 by 1991, then began a long slide down to almost $200 in 2000. Then it rapidly zoomed to $1900 during the Financial Crisis, and has since fallen back to $1200. If you invested in gold in 2009, you would've lost 40% of your money in constant dollar terms, and almost 6x relative to the S&P 500.
It's even worse if you zoom out to the 100 year history. Private ownership of any significant amount of gold was outlawed from 1933-1974, and owners were required to turn in their gold for $20.67 or face 10 years in prison.
It's not Millenials who are being naive here (well, maybe they are too). It's the generations before them who believe there's any such thing as a reliable store of value. Everything is speculative - things are worth only what other people will pay for them, and there's a long history (still continuing in places other than the developed world) of people not even doing that and just taking them at the barrel of a gun.
Indian households have the largest private gold holdings in the world, standing at an estimated 24,000 metric tons. That figure surpasses the combined official gold reserves of the United States, Germany, Italy, France, China and Russia.
So you'll have to convince a billion+ humans that gold is only worth it value as a metal before it loses 99.9% of it's value.
The mere existence of a price floor isn't particularly relevant; if your nest egg goes down to 1% it's basically the same as going to 0%. You've still lost your shirt.
I don't know what the floor for industrial uses actually is though; if it's 10% of the current speculative price that might be germane, but if it's lower it might not.
Floor is better when it is higher - would you agree with that statement? But if floor is important and it is better when higher - then the best store of value would be a basket of long lasting useful commodities. Like iron. Their floor is practically their current market value.
It is a big shift and I could be wrong. However, horses are also something we used for transportation going back to the beginning of recorded history... (lots of other examples too).
Crypto has a lot of aspects that make for a superior store of value (easy to move, seizure and censorship proof etc). Obviously, also has some drawbacks too like difficulty to custody...
Note that there was a 51% attack against ETC which is not Ethereum (ETH). ETC already had very little usage and was known to be insecure before the attack.
