Guest Post by SD reader SilverorPropertyTaxes:
Silverdoctors.com and Max Keiser have both done extensive documentation and exposing of how the silver market is manipulated.
Traditionally, silver has been seen as a hedge against inflation, but how can this work if it’s a manipulated market through phony ETF’s and re-hypothecated lending of bullion? The silver supply is running out, and you can see just a few of the figures for its rapid consumptions here and here.
When silver is manipulated – for instance the banks drop 2.5 years of U.S. silver production onto the market in ten minutes time in the form of short contracts, it makes it hard to see how anyone can use silver as a hedge against inflation in the short term. However, when you look at the rapid rise of bitcoin, you see that what could be a useful tool to hedge your silver investment against manipulation in the markets. It is more difficult for the banks to manipulate bitcoin than silver. For one, there is no one who can claim to have bitcoin and then be granted the ability to short it like silver. People have not been accumulating bitcoin for ages like silver (supposedly), and there is little or no bitcoin derivative market.
I would like to find a new way to graph and analyze the relationships of bitcoins to the U.S. Dollar, Bitcoins to Silver, and Silver in Dollars, and I believe you should probably own a substantial portion of bitcoins in addition to silver to hedge manipulation. Breaking it down, there is a need for a hedge against INFLATION AND a hedge against commodity MANIPULATION.
So, as documented before by others, bitcoins behave as both commodity and currency. It is important to note which markets are in place to permit exchange from bitcoins to silver/gold, bitcoins to dollars and dollars to bullion.
Dollars to bullion
There are a lot of dollar to bullion markets, including APMEX, Gainesville, and SDBullion among others.
Dollars to Bitcoins
MtGox.com is the world’s largest bitcoin exchange.
Bitcoins to Bullion
Both coinabul.com and goldsilverbitcoin.com are two services that allow you to convert bitcoin into bullion. I don’t know why, but the price in bitcoins for bullion products is high compared to if one sold the bitcoins on MtGox, and then bought bullion with their resulting dollars. Will this ever go down?
When silver is manipulated – for instance the banks drop 2.5 years of U.S. silver production onto the market in ten minutes time in the form of short contracts, it makes it hard to see how anyone can use silver as a hedge against inflation in the short term. However, when you look at the rapid rise of bitcoin, you see that there is a useful tool to hedge your silver investment against manipulation in the markets. I see that it is harder to manipulate bitcoin than silver. For one, there is nobody out there who can claim to have bitcoin and then be granted the ability to short it like silver. People have not been accumulating bitcoin for ages like silver (supposedly), and there is little or no bitcoin derivative market.
Bitcoin is great, especially for short term transactions, because once you are set up through Dwolla, you can transfer money relatively anonymously across the world in an instant, or completely anonymously via thumb drive (flash drive, gig stick, etc.).
I want to get into the theoretical math of this issue now:
Look at the idea of: USD/BTC – a practical trade denomination.
Then, see the idea of: USD/OZ. AG – Commonly traded silver in USD
Finally, examine: BTC/OZ. AG – Buy bullion with bitcoin, usually overpriced.
If the relationship between BITCOIN, USD, and SILVER OZ. were a triangle, what would we have?
Within a system of arc lengths in golden ratio with each other within a triangle, we are dealing with transcendental equations and their intersections, a topic I’d love to get into with reference to financial analysis, but do not have time to do so now.
The question is really where the price of bitcoin will go anyway, so pricing bitcoins in silver is just a fine switcheroo.
Anyway, I was then thinking, well, what if its not the value of the bitcoin, USD, or OZ. AG that is locked in a triangular relationship, but the Rate of Change of their value?
First of all, let’s see an overlay of the graphs of the price of bitcoin in USD and the price of silver in USD
The first time bitcoin spiked, silver immediately shot up a little bit to make sure that the cartel was not exposed. Then, due to the hack on MtGox, the bitcoin crashed. Since then, when silver dropped vertically, bitcoin was in the pits. After that, their movements followed each other a bit. Finally, now their prices meet.
What will happen from here?
I see the fist spike as one side of a potential cup forming, and I see today’s price as the beginning of a handle for bitcoin. I anticipate bitcoin will stay in the high 20′s to mid 30′s for the next three weeks to three months, and shoot up dramatically, silver following. Bitcoin can force the banking cartel to fold, because it came from perceived thin air, which we recognize as the genius of entrepreneurialism, and when people can transfer bitcoin into bullion more and more readily, because their profits permit direct purchases with bitcoin, then they will be able to take delivery on physical at an exponentially increasing rate. Buy bitcoin now, and hold for relatively massive discounts in physical bullion.