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.
2013 Year of the Snake 10 oz .999 Silver Bars
As Low As .99 Over Spot At SDBullion.com!
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.
Sin(t)=O/H
Cos(t)=A/H
Tan(t)=O/A
If the relationship between BITCOIN, USD, and SILVER OZ. were a triangle, what would we have?
Sin(t)=USD/BTC
Cos(t)=(OZ. AG)/BTC
Tan(t)=USD/(OZ. AG)
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.
2013 Canadian Wildlife Series Wood Bison
As Low As $2.89 Over Spot at SDBullion.com!
![[Most Recent Quotes from www.kitco.com]](http://www.kitconet.com/images/live/s_silv.gif)
![[Most Recent Quotes from www.kitco.com]](http://www.kitconet.com/images/live/s_gold.gif)
WTF??????
Seriously wtf.
I think I’d rather own miners now than intangible magical bitcoins. Just saying.
If you don’t hold it you don’t own it.
BAD advice…
1) Market cap of bitcoins is TINY hence, even easier to manipulate
2) If and when it grows, have no doubt that the feds will do everything in their power to take the exchanges down
3) The whole “virtual” wallet is very problematic to say the least
I suppose one could use at as a medium of exchange but NEVER as a store of value.
1) Market cap of bitcoins is TINY hence, even easier to manipulate.
Market cap is constantly growing and you don’t give a example of how to manipulate it, so there is no weight to your statement.
2) If and when it grows, have no doubt that the feds will do everything in their power to take the exchanges down.
That would only be limited to the US. Bitcoin is global and biggest exchange is currently in Japan.
3) The whole “virtual” wallet is very problematic to say the least.
You have a point here, but that is only in its current ‘geek’ form. It could be implemented in many different ways to be much more secure then current monetary holdings.
“Market cap is constantly growing and you don’t give a example of how to manipulate it, so there is no weight to your statement.”
The earlier adapters have a GARANGUNTAN amount of bitcoins. They just don’t have the liquidity to get out. Last check, the total market cap of bitcoins was between $150-200mm. I would think any semi experienced trader with a decent amount of bitcoins could come in and run some stops and trigger panics.
As I said earlier, imho bitcoins are a medium of exchange (so is physical cash) but anyone buying for capital appreciation is playing the bigger fool game.
What happened to “if you can’t hold it, you don’t own it?” mindset. If I can’t put this in my pocket, it’s all smoke and mirrors.
“…we are dealing with transcendental equations and their intersections…”
- - - - - - - - - - - - - - - - - - - - - - - - -
Reading that makes me want to sit cross-legged on the floor, surrounded by candles and randomly-scattered ASE’s & Junk Silver, place my hands together and chant “oooooommmmmmmm.”
No thank you, I think that I will just stick with Phyzz.
With all due respect to the adherents of bitcoin, we already have one bit of electronic currency called FIAT dollars. That system is destined for failure and will draag plenty of people with it.
If a monetary system becomes large enough it will eventually attract bad players (and politicians) Maybe there’s a ground floor for bitcoins. Those with the trust and technical knowledge to manage a bitcoin system will use it, I’m sure.With everything going on now there’s enough to concentrate on presently. Trying to stay out of the way of those falling pianos is more than enough to focus one’s attention.
I admit I’m a technoluddite but this system would have to be well vetted and foolproof before I stick my toe into this sea. Foolproof? Of this I doubt, since fools are so ingenious.
If Bitcoin continues this trajectory path upwards without correction for 10 months, following the average increase of $10 per month, we will have $130 Bitcoin by December 2013.
And secondly, You cannot make a comparison between Silver price and Bitcoin prices. These 2 markets are too mismatched for these types of comparisons.
I believe the real Bull market behind Bitcoin are these massively expanding Bitcoin based Online Gambling casinos.
I bought $10,000 in Bitcoin in August 2012, and I also bought $10,000 in Silver. My Bitcoin has tripled in price… I cant complain about that. Silver in my back pocket and liquid Bitcoin in the front.
SP.
Soo….. what can you buy with 3 times more bitcoins?
@Cianod0on
Books, electronics, food, weapons, ammo, drugs, porn, gambling, video games, wireless minutes, hosting, vpn, labor, gift cards to traditional merchants, fiat, alpaca socks, whatever else I can’t think of off the top of my head or that indie sellers offer on open markets..
and of course 3 times as much gold and silver than if you would have bought those initially instead.
Now let me return the favor: what can you buy with 3 times as much in gold and silver? õ_O
If you don’t hold it you don’t own it. There are several reasons hard assets win out over bitcoins:
1. Has to have internet/electricity to even exist.
2. Is vulnerable to hacking and any other online down service reason.
3. Is too easy for the government to shut down or just simply deem your bitcoins illegal and take down the site.
4. Has no intrinsic worth as it is a fiat based currency that relies on faith for acceptance.
5. If SHTF you can’t barter digital 1′s and 0′s
Like someone said earlier it can work in the meantime as a means of exchange but it will never be real money. In my mind chickens and goats are more like money than bitcoins.
Every monetary instrument has it’s own pros and cons. Every monetary instrument is nothing but a commodity which serves the purposes of being easier to trade, to hold, and to authenticate than the other commodities you can trade in that market space.
That said, your points against Bitcoin are mostly either shared or directly counterpointed with the drawbacks of using precious metals as money.
1. How much does it cost you to move 10oz of gold 100 miles?
2. Is vulnerable to physical theft, must either invest in vault and armed guard or yield wealth to third party to secure against physical thievery.
3. Gold Reserve Act of 1934
4. Unless you personally plan to make jewelry or electronic wiring out of it, has no intrinsic worth and relies on faith that others will buy it off you in the future.
5. If SHTF you can’t eat gold.
And just for fun,
6. You can’t hollow out bitcoins and fill them with tungsten.
7. You can’t manipulate Bitcoin value based on proxy certificates like you can with PM, since Bitcoin is already easy and inexpensive to transmit over distance in it’s perfectly counterfeit-proof form.
I agree that if you don’t hold it you don’t own it. That’s why my bitcoin private keys are committed to memory via brainwallet. No force on earth can divest me of that holding without learning those private keys, so I’ve simply shifted the problem space for thieves from physical security to information security which is a field I have significantly better training in. I appreciate that not everybody does, so to each their own.
Electronic money is part of the evil we are seeing from the Federal Reserve where trillions can be thrown around and no one the wiser. In other words, bitcoin is not a solution, it is part of the problem.
Hell it’s sort of Pyramid Scheme, as I understand it, the longer you belong to it the more Bit Coins you have or something to that effect but not sure. I’ll just Keep Stacking my Physical.
Digital currency = one computer glitch you are now broke. It has happened with bitcoin. Pass I would be safer putting my money in the local bank and that isn’t high on my list of things to do.