Zero hedge gold bitcoin ecstasy

The most important difference between Bitcoin and gold lies in their contrasting supply and demand mechanisms. Many commentators have compared Bitcoin to gold as an investment asset. Economists, by contrast, are more interested in considering how a zero hedge gold bitcoin ecstasy system based on Bitcoin compares to a gold-standard monetary system. In what important respects are the Bitcoin system and a gold standard similar? In what other important respects are they different?

Bitcoin is similar to a gold standard zero hedge gold bitcoin ecstasy at least two ways. Bitcoin and the gold standard are obviously different in other ways. Gold is a tangible physical commodity; bitcoin is a purely digital asset. Gold payments can go peer-to-peer without third-party involvement only when a physical coin or bar is handed over.

Electronic gold payments require a trusted vault-keeping intermediary. Bitcoin payments operate on a distributed ledger and can go peer-to-peer electronically without the help of a financial institution. In practice, however, many Bitcoin transactions use the services of commercial storage and exchange providers like Coinbase.

The most important difference between Bitcoin and gold lies in their contrasting supply and demand mechanisms, which give them very different degrees of purchasing power stability. The stock of gold above ground is slowly augmented each year by gold mines around the world, at a rate that responds zero hedge gold bitcoin ecstasy, and stabilizes, the purchasing power of zero hedge gold bitcoin ecstasy.

Commodity non-monetary demands also respond to the price of gold and dampen movements in its value. The rate of Bitcoin creation, by contrast, is entirely programmed.

It does not respond to its purchasing power, and there are no commodity demands. Because the absorption of gold by non-monetary uses from which it is not recoverable like tooth fillings that will go into graves and stay there, but unlike jewelry is small, the total stock of gold grows over time. Historically this has produced a near-zero secular rate of inflation in gold standard countries. The number of BTC in circulation was programmed to expand at 4. At that point, assuming that real demand to hold BTC grows merely at the same rate as zero hedge gold bitcoin ecstasy GDP, Bitcoin would exhibit mild secular growth in its purchasing zero hedge gold bitcoin ecstasy, or equivalently we would see mild deflation in BTC-denominated prices of goods and services.

A rise in the purchasing power of BTC does not provoke any change in the quantity of BTC in the short run or in the long run. In Econ language, the supply curve for BTC is always vertical. The supply curve is, however, programmed to shift to the right over time, ever more slowly, until it stops at 21 million units.

The short-run supply curve is not vertical. Still more importantly, this rise will bring about a much larger increase in the longer run by incentivizing owners of gold mines to increase their output. The purchasing power of gold is mean-reverting over the long run, a pattern seen clearly in the historical record. Because its quantity is pre-programmed, the stock of BTC is free from supply shocks, unlike that of monetary gold.

Supply shocks from gold discoveries under the gold standard were historically small, however. For reference, the average of decade-averaged annual growth rates over was about 2. Any sizable price level increase fall in the purchasing power of gold caused by a reduced demand to hold gold would reduce the quantity of gold mined, thereby reversing the price level movement. Conversely, any sizable price level decrease rise in the purchasing power of gold caused by an increased demand to hold gold would increase the quantity mined, thereby reversing that price level movement.

Bitcoin lacks any such supply response. There is no mean-reversion to be expected in the purchasing power of BTC, and thus its purchasing power is much harder to predict at any horizon. Describing gold supply, Warren Weber writes: Changes in zero hedge gold bitcoin ecstasy world stock of monetary gold come about every year from normal mining. Historically, the changes in the growth rate were not dramatic by comparison to changes in the postwar growth rates of fiat monies.

As often zero hedge gold bitcoin ecstasy not, the changes in gold stock growth rates were equilibrating, speeding the return of the purchasing power of gold to trend from above trend.

The phrase from John Cochrane quoted above is part of a sentence that reads in its entirety: The zero hedge gold bitcoin ecstasy supply mechanism that produces price variation in Bitcoin should give pause to those who predict that Bitcoin will become a commonly accepted medium of exchange. It says nothing about the purchasing power of gold under a gold standard. White is a senior fellow at the Cato Institute, and professor of economics at George Mason University since You must be logged in to post a comment.

Want an edge in cryptocurrency markets? Get news that moves markets to your inbox. By Larry White The most important difference between Bitcoin and gold lies in their contrasting supply and demand mechanisms. Similarities and Differences Bitcoin is similar to a gold standard in at least two ways. Zero hedge gold bitcoin ecstasy out these tools to get started.

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