Gold is certainly the ideal model for something like Bitcoin but in terms of projectable value gold has time on its side. I will happily invest in Bitcoin when its history as a store of value and a medium of exchange is measured in millennia.
I disagree. I don't think Bitcoin should strive to be a store of value like Gold is. Today most Gold investing is just based on fear, because people see a government misbehaving and lose faith in its ability to maintain the value of its fiat and then flee to something that still has some properties useful in monies.
This is no where near the main usefulness of Bitcoin though, which IMHO are: its extremely divisible, portable, efficient and has cheap transaction costs. Its also by far the most free in terms of your ability to enter into a transaction with anyone the world over, regardless of what a particular government thinks about that transaction.
> I will happily invest in Bitcoin when its history as a store of value and a medium of exchange is measured in millennia.
The history of Gold as a medium of exchange and store of value has virtually no bearing on whether or not you should invest in it in 2017. Gold pays no dividends, has no interests, does not appreciate over the long term, and can't protect against incident forms of inflation. On top of all that, it has none of the above mentioned technological advantages Bitcoin brings.
There are arguments to be made for Gold but they are in its utility in modern industry, etc.
Those were/are all the main uses for gold for much of human history. Bitcoin has improved on or has potential to improve on those, but its relative volatility puts gold to shame.
>The history of Gold as a medium of exchange and store of value has virtually no bearing on whether or not you should invest in it in 2017...There are arguments to be made for Gold but they are in its utility in modern industry, etc.
I would argue the history of gold is the only reason to invest in it. It is extremely overvalued compared to its industrial and commercial uses. However its history shows it is a decent diversification vehicle to protect against loss of value of fiat currencies. This applies to the doomsday scenarios you alluded to in your comment as well as the less drastic economic downturns.
I've heard differently.
Vice: One Bitcoin Transaction Now Uses as Much Energy as Your House in a Week
https://motherboard.vice.com/en_us/article/ywbbpm/bitcoin-mi...
Average transaction fees have gone up substantially.
https://bitinfocharts.com/comparison/bitcoin-transactionfees...
This and easy tax evasion (governments will hardly ever support it) are the two main factors that put me bearish on Bitcoin. Not on blockchain though.
There are even conspiracy theories that the US government itself created bitcoin, for the same reason that the US navy labs invented Tor. To provide people in other countries with censorship resistent tools.
This is exactly whats wrong with bitcoin and people who like it. Its certainly very arguable whether its efficient and cheap compared to whats already commonplace but putting that aside... you think tax evasion and tax fraud are features inherent in bit coin.
You can smuggle cash, gold and goods to any country you want and skip out on the taxes and regulations. That's not some futuristic innovation.
So is USD out for you too, then? It's not even 300 years old yet. If you mean fiat currency in general, that's also out, as we haven't had that for multiple millennia yet either.
I think that's kind of an abuse of the term "invest". If you read their prospectus it's clear that they are looking for foreign currency arbitrage opportunities:
> The applications of the FIs must have at least 80% of their PL represented by assets directly related or synthesized via derivatives to the variation of the North American. The applications, together with those of the FIs invested in assets or of public or private issuers, other than the UF, and assets traded abroad, are limited to 50% of PL. The FIs will be able to operate in derivative markets with the sole purpose of protecting positions held in cash until the such limits, provided that they are referenced in assets and / or financial indicators aligned to your goal. The fund may invest in FIs which apply a maximum of 10% of financial assets traded abroad.
>nobody holds USD because they think the value will go up long term
People can and do implicitly invest in USD. For example, I might use an FX hedge on a foreign investment to protect against foreign currency volatility in favor of exposure to USD because I have more faith in its value during the lifespan of my investment.
>Holding fiat currency means you lose money constantly due to inflation
Sure, but it's also protected against losses in a market downturn. Cash is outperforming if market returns are negative and in excess of inflation loss (which becomes more likely as poor market performance slows inflation). Not arguing that people should hold cash out of fear, but your characterization of cash seems a little simplistic.
I sort of think that's an abuse of the term "invest". Sure you're investing in some kind of instrument that is highly affected by the value of the USD, but you're not really investing in USD. You're not long USD by holding that investment. By that metric people who short Bitcoin or Bitcoin exchanges are also "investing" in bitcoin.
Investing involves risk management, not just positive returns, and hedging a long position with a position in something like USD is not comparable to shorting.
Consider that it is very possible to invest in a financial security to reduce risk and hedge losses, not just to get a return on the capital itself. Investing encompasses a lot more than just literal value investing; this isn’t an abuse of terminology, your usage here is rather limited.