Fundamentals supporting gold:
1. It has industrial uses - this doesn't justify current prices, but it does provide support at low price points because there is a demand that will increase at lower price levels.
2. People are attracted to shiny objects, and people like status symbols, thus they are willing to pay a lot of money for shiny objects that their friends can't afford.
Fundamentals supporting cryptocurrencies:
1. Criminals need a way to do business online. Of course it works for normal people too, but with the transaction fees and inconveniences inherent in current systems, cryptocurrencies are most attractive for people who can't do business through traditional channels.
2. But Blockchain is the future...
You can see a lot of parallels here, but note the differences:
1. Industry may use more gold plating as prices fall, but falling bitcoin prices won't make criminals switch from cash to crypto, so the price cushion is weaker.
2. People have been attracted to shiny objects for all of human history, so this is likely a part of human nature. (Regular) people have been attracted to blockchain for like 10 months, so this is probably a fad. Additionally, while bitcoin may be scarce within its own ecosystem, cryptocurrencies are not scarce in a global sense...a new crapcoin is minted everday. Unless BTC is the one true coin (and it can't support the transaction load), there is no real scarcity here.
By the way, if the fundamentals I listed for gold sound a little shaky, it's because they are. A responsible financial adviser might tell you to put 80% of your money in stocks, but he'd never tell you to hold 80% in gold.
Fundamentals supporting cryptocurrencies: 1. Criminals need a way to do business online. Of course it works for normal people too, but with the transaction fees and inconveniences inherent in current systems, cryptocurrencies are most attractive for people who can't do business through traditional channels. 2. But Blockchain is the future...
You can see a lot of parallels here, but note the differences: 1. Industry may use more gold plating as prices fall, but falling bitcoin prices won't make criminals switch from cash to crypto, so the price cushion is weaker. 2. People have been attracted to shiny objects for all of human history, so this is likely a part of human nature. (Regular) people have been attracted to blockchain for like 10 months, so this is probably a fad. Additionally, while bitcoin may be scarce within its own ecosystem, cryptocurrencies are not scarce in a global sense...a new crapcoin is minted everday. Unless BTC is the one true coin (and it can't support the transaction load), there is no real scarcity here.
By the way, if the fundamentals I listed for gold sound a little shaky, it's because they are. A responsible financial adviser might tell you to put 80% of your money in stocks, but he'd never tell you to hold 80% in gold.