Market Cap and Turnover

More gold is traded daily in London than is produced through mining in a year, so more than 300 years of production is passed around in the London gold market every year. Given that gold production has greatly increased over the last hundred years, we can estimate that it takes about three years to pass around all the gold ever produced, just in London. That's how liquid the gold market is.

On the other hand, we have trading volumes for Bitcoin at BitStamp in the US. They have averaged half a billion dollars a day over the last two months, which means that it will take about 2000 days to turn over Bitcoin's entire market cap of one trillion dollars at that exchange at current volumes. That's about six and a half years.

Gold has been used as money for about six thousand years, while Bitcoin has just celebrated ten years of existence, so if we use mining time as our measure, turnover of gold in London is more than one thousand times that of Bitcoin at BitStamp. We get this by noting that turnover relative to total production is two times bigger in London, and that total production took more than five hundred times as many years. Two times five hundred is one thousand.

Some may say that this is a little contrived, and I would agree. However, there's something to the saying that time is money. Time represents opportunity cost. People could have done something else. The fact that people have spent six hundred times more time looking for gold than tending network computers looking for Bitcoin should not be forgotten. One thousand times more sweat and labour is being passed around in London than at BitStamp, yet the market cap of gold is only eight times that of Bitcoin. We get this by multiplying the conventional estimate for the world's above ground gold reserve with 50 dollars per gram. That is 160,000 metric tonnes, or 160,000,000,000 grams times 50, which gives us 8 trillion dollars.

All of this is based on a popular measure used within the Bitcoin community itself, namely that Bitcoin has value through opportunity cost in terms of resources spent. I don't think that's a very good measure of value, but when used as our base for calculations, Bitcoin comes out very expensive relative to gold.

Another concerning issue related to Bitcoin's relatively young age is that Bitcoin hasn't had much time to disperse into the population at large. Gold has had 600 times more time to circulate. Just about every family on the planet owns at least some gold. Even very poor people own a few grams in the form of a gold ring or two. Considering that we get 20 grams of gold per person if we take the total above ground reserves and divide it by a world population of eight billion, we find that gold is very well distributed. Any middle class family can put aside enough gold to get their allotted average, and it would only take three years for everybody to do so at current turnover volumes.

All of this is very different for Bitcoin. Hardly anyone owns any Bitcoin. It's still largely in the hands of a few whales, and it would take years to rectify this. That's a lot of time for something that's only ten years old. Furthermore, such a reallocation would greatly enrich a few whales at the expense of everyone else. The process would have the characteristics of a tax where people hand over hard earned resources to a small group of people who spent very little time amassing their holdings.

If we were to take half the market cap of Bitcoin, and divide it over the biggest Bitcoin whales, we're not likely to get more than a few hundred individuals. However, if we do the same for gold, we get all the central banks in the world plus thousands of institutions and millions of individuals. No wonder then that turnover in gold is greater than turnover in Bitcoin. A nagging suspicion also arises, namely that the turnover in Bitcoin is largely internal to a few individuals. The turnover doesn't reflect redistribution. Rather, it's just Bitcoin washing around internally, with very few new owners. Unlike the gold market, with millions of jewellery stores all over the world, Bitcoin has virtually no retail participation.

This means that something very dramatic may happen to the price of Bitcoin. The bottom can drop out. All it would take is for a few whales to decide to cash out at the same time, and that could easily happen if interest rates were to go up, because some whales, if not most of them, have taken on debt in order to hold onto their coins. Furthermore, there's the ever-present drain on the Bitcoin community through Bitcoin's constant need for energy and computer equipment, so who's going to step in to buy the day whales and miners are forced to sell?

The answer to this question when it comes to gold, is that there are no whales, and any forced selling by miners poses no threat since they represent a miniscule part of the total gold market due to the fact that gold has been mined for 6000 years rather than just 10 years. Furthermore, there's no lack of retail outlets in the form of jewellery stores, and the majority of gold owners are debt free. There will always be retail interest in gold.

People need gold for all sorts of reasons. Gold rings are in most cultures a minimum requirement for marriage. Gold is used in computers and medical equipment. There are real world uses for gold, and that represents a permanent demand. This is not the case for Bitcoin. Retail investors are speculators with no real need for their lottery tickets. Such people vanish the moment they sense desperation by sellers. Bitcoin can suddenly go bid-less. That will never happen to gold due to its many real world uses.

Whale

By Michaël CATANZARITI - by Michaël CATANZARITI, CC BY-SA 3.0, Link

Diminishing Interest Despite New Record Highs

Bitcoin made a new record high yesterday. The constant chatter related to this Ponzi scheme is so ever-present that it's impossible not to be informed of such events. This should be of no concern to me since I have no intention of ever buying Bitcoin, but the fact remains that I find it unbearably painful to listen to. There's always the nagging feeling that I might have overlooked something. There's also the irritation of seeing something stupid take off in a big way.

There are two main strategies that I employ for myself when dealing with the lure of bubble mania. First and foremost, I stay away from the chatter as much as possible. I remind myself of all the reasons why this is a trap. However, I hate to keep my eyes off of developments for too long at a time, so I make predictions based on my objections and spend some time every now and again to see how my predictions match reality as it unfolds. I bring up my technical indicators. Charts of various kinds are studied for clues as to the likely near term trajectory of things.

This morning, I spent a short half hour comparing a three month chart of Bitcoin prices with a one year chart of Bitcoin searches from Google trends, and what I found was quite interesting.

The search interest for buying Bitcoin peaked on January 9, the precise date that Bitcoin prices made their first all time high peak of the year. The search interest peaked again in mid February, about a week before the next all time high. Interest for buying Bitcoin was lower in February than in January, and this latest all time high now in mid March has come with interest in Bitcoin barely higher than interest in gold.

Taking a longer term look at search interests for Bitcoin, we see that recent interest is far below the manic interest back in 2017.

Not only is interest in Bitcoin fading into this year from its peak in January, interest is also down from its all time peak. The price of Bitcoin is going up while search interest is fading.

From the Bitcoin price chart, we also see trading volumes trending downwards into this year. This indicates reduced commitment from traders. There's a growing sense that Bitcoin's price is wrong. Buyers and sellers are finding it harder to agree on a price. While this may mean that the price is too low, it is more likely to mean that the price is too high, especially considering the fading interest on Google trends. Adding to this that there is a constant need to sell Bitcoin in order to pay for energy and equipment, things look rather precarious. 

Bitcoin might not technically be a Ponzi scheme, but it shares the essential characteristics of such a scheme, namely the constant need for new participants in order to pay its bills. The Bitcoin community as a whole has to dish out millions of dollars every month in order to pay for electricity and equipment, with no goods or services produced in the process. There's only Bitcoin for which there is no real use beyond speculation. Without an inflow of new speculators, present speculators will have to pay the bills themselves, and the only thing they have to sell is Bitcoin, unless they are prepared to go into debt or draw on personal savings.

It appears that the day is rapidly approaching when forced selling by cash strapped Bitcoin miners will overwhelm a diminishing pool of new speculators. If no new enthusiasm can be generated, Bitcoin will go into the sort of free fall that Ponzi schemes experience when everybody suddenly realize that the scheme is unsustainable and doomed.

Brass token currently priced at about $60,000

By Steve Jurvetson - https://secure.flickr.com/photos/jurvetson/8410385932/in/photostream/, CC BY 2.0, Link

Time Related Experiments

Einstein predicts two types of time dilation, both of which have been tested and confirmed. One is the effect of gravity on time, the other is the effect of relative motion on time. Time goes slower in space than on earth, and radioactive particles decay slower when moving at great speeds. However, this doesn't mean that Einstein has been proven right in his conclusions about space and time. There are other ways to explain this than through a curvature of space-time.

My aether physics ends up with similar results for both gravity and motion. These results are not identical to those of Einstein, but so similar that we can say that there's at least one alternative explanation to the observed facts. Instead of a curvature of space-time, we can explain the observed phenomena as features of the aether. But we don't have to stop at this. There are other experiments that can be made, the outcome of which would determine more clearly whether time is a phenomenon related to the aether or a component of space-time.

Most theories that invoke the aether explain gravity in terms of densities. Space isn't curved. Rather, the aether is different in its composition close to massive bodies than farther away. In my theory, this difference in composition extends beyond gravity. The electric force and magnetism are explained in similar ways. Hence, there are experiments that can be made in which clocks are put into strong electric or magnetic fields. Specifically, we can make the following predictions:

• A clock placed in an attracting magnetic field will slow down
• A clock placed in a repelling magnetic field will speed up
• A clock placed in an attracting electric field will speed up
• A clock placed in a repelling electric field will slow down

My prediction is that the effects of the electric field on time are opposite to those of the magnetic field.

I'm no expert on Einstein's work, but this article indicates that there are predictions that can be made based on his work as well, so it would make sense to test this, if for no other reason than to confirm his predictions.

Such experiments must necessarily be done with clocks that are extremely accurate as well as mechanically indifferent to electric and magnetic fields. That may prove difficult to find. However, the experiments are likely to reveal more about the nature of space and time, and are therefore well worth making, if at all possible. 

Clock

By Mettness, CC BY-SA 3.0, Link

Schopenhauer's Complicated Balancing Act

I mentioned Schopenhauer and Kant in my post on free will. That's not because I'm an expert on them. I only know them from secondary sources. However, I know enough about them to know that it's not worth my time to study them in detail. That goes for other famous thinkers as well, with Karl Marx as a typical example that most people can relate to. We know what communism is. We don't need to read Das Kapital to form an opinion.

What is most interesting about great thinkers is not so much their conclusions as their observations. Their conclusions are usually pre-conceived and therefore not as well thought out as they may seem. However, their observations can be quite enlightening. Marx made a number of lucid observations about factory life that anyone can agree on. The same can be said about Schopenhauer when it comes to the human psyche. As stand alone observations, this is all great stuff. But if we try to follow their reasoning from observations to conclusion, we're struck by how complex and contrived everything becomes. Only those determined to accept the conclusion from the start will fail to notice the rather dodgy logic being used.

This illustrates the futility in trying to convince people of ideas through logic and argument. Ideas are not accepted through logic, but through emotion and general popularity. Communism didn't find widespread support in the 20th century through logic and reasoning. It found support because a lot of people wished the conclusions in Marx's work to be true.

This tendency to be driven primarily by emotion over reason is not limited to the ignorant and stupid. We all carry this in us, at least according to Schopenhauer. What separates thinkers like Schopenhauer from other people is not so much their ability to elevate themselves above emotions, but their desire to explain and defend their ideas through logic and argument. In this sense, Schopenhauer becomes his own paradox. He knew the futility of argument, yet he never tired of defending his work on metaphysics through reasoning and logic.

Schopenhauer would have objected to my mention of him in my post on free will. He was an atheist, so the will described in his work doesn't have any kind of purpose. His will is a meaningless striving for existence. However, in doing this, he merely separates the will from the ego which he fails to explain. The ego is something that can to some extent direct our will. This much he says, but leaves it otherwise unexplained. The irony in this is that he operates with two levels of existence, just like the Bible, but denies that it is similar. He too has a material world and a spirit that directs it, so why the complicated attempt to explain it in terms different from the Bible? The answer to this lies probably in the way German society was organized in his time, rather than in any real objection to the concept of a purposeful spirit that directs our actions.

Schopenhauer was very much an individualist. He loved to think things through for himself, and he hated any kind of dogma. He also detested career academics like Hegel. He could not stand the self importance that such people projected, and the constant fawning and praise that society lavished upon Hegel's obscure writings revolted him. Why not level the playing field and play hard ball without anyone running to hide behind dogma or obscurity? What Schopenhauer longed for was something distinctly un-German. He wanted something far less dogmatic and hierarchical. Yet, this made him in many ways a typical example of the other type of German, namely the stormy passionate German that we find in Nietzsche and Wagner, both heavily influenced by Schopenhauer.

The irony in all of this is that I suspect that Schopenhauer would have been quite drawn towards Bible interpretations had he lived in our day and age. Dogma has moved from religion to science. We can discuss religion, but not science. As a consequence, an individualist like Schopenhauer would find more to ponder in the Bible and less to argue about in science. With academia still as stifling as it ever was, Schopenhauer would have been an outsider. His views about things would have been more or less the same, his observations and opinions too. But his work may have allowed for an explanation of the ego. He might at least have opened the possibility of the ego being a manifestation of God's free will.

Arthur Schopenhauer

By Ludwig Sigismund Ruhl - Schopenhauer-Archiv der Stadt- und Universitätsbibliothek Frankfurt am Main, Public Domain, Link

How Durability and Storage Costs Relate to Inflation Hedging

It's becoming increasingly clear that the monetary inflation that we've seen over the last year is finding its way into price increases on commodities. We can no longer point to falling prices of raw materials as evidence that monetary inflation is contained and managed so as to lift the prices of financial assets, but not prices of more ordinary things such as oil, lumber and copper.

Investors now see opportunities in buying commodities as hedge against monetary inflation. Interest rates are so low that the opportunity cost of holding onto a bunch of copper or other raw material is low, especially with the price of almost everything else at record highs.

This has resulted in a trend reversal in the price of commodities. Traders who have not yet made the transition from financial assets to commodities are underperforming colleagues who have. Adding to this the clear intention by governments to accelerate monetary inflation into the future, more and more people look to commodities as sensible hedges for their portfolios. However, this brings up two problems that traders in financial assets rarely think about.

1. How to keep their commodities fresh
2. Where to store them

A simple way to deal with the first problem is to buy things that stay fresh on their own. Durable commodities such as oil, lumber and copper are therefore preferable to pork, fish, eggs and milk.

A simple way to deal with the second problem is to buy stuff that takes up little space, or things for which storage space is plentiful and easy to find. Oil is therefore preferable to coal or gas, lumber is preferable to bricks or gravel and copper is preferable to iron.

The ideal commodity in this respect would be something that takes up no space and for which there is no storage cost, and many have mistakenly identified Bitcoin to be of this kind. The fact that Bitcoin can be held as a code outside the web, safely locked away somewhere secret, makes it appear as if it has no storage cost. However, the code is only part of the Bitcoin eco-system. The data that it represents must be stored on network computers, and these computers require energy and maintenance. Unfortunately for Bitcoin owners, neither the data stored nor the cost of storing it is under their direct control. Both the equipment and the cost of operating it are responsibilities of Bitcoin miners who must sell Bitcoin in order to pay their bills. Millions of dollars must be procured every month for this purpose, making Bitcoin ownership a lot more precarious than it may seem.

If Bitcoin miners go broke or give up, Bitcoin owners will find themselves holding nothing but worthless pieces of paper with codes written on them. However, gold has value regardless of what happens to gold miners. Gold is also infinitely durable and easy to store.

The storage cost for Bitcoin only appears to be near zero, while the storage cost of gold held privately really is near zero. It is therefore gold, rather than Bitcoin, that has the smallest storage and maintenance cost. Once this becomes clear to inflation hedgers, we will see gold once again outperform Bitcoin. There's only a matter of time before this happens, because the hidden cost of owning Bitcoin will sooner or later reveal itself in the form of overwhelming selling pressure. It's impossible to predict when this will happen, but given the power hungry nature of the Bitcoin network, the trigger for such a sell off is likely to be a spike in the cost of energy.

Cryptocurrency mining farm

By Marco Krohn - Own work, CC BY-SA 4.0, Link

Not Just My Mother

So it appears that more people than just my mother have struggled with unpleasant side effects from the experimental vaccines that are currently pushed by politicians and media. Things have gotten so bad that one of the variants have been halted in seven European countries.

Luckily for my mother, she got the Pfizer variant and not the AstraZeneca. However, the symptoms my mother displayed after receiving her first shot were unnervingly similar to those now being investigated. Could it be that Pfizer has similar issues, only not so severe?

Smallpox vaccine

By Photo Credit: James Gathany Content Providers(s): CDC - This media comes from the Centers for Disease Control and Prevention's Public Health Image Library (PHIL), with identification number #2674. Note: Not all PHIL images are public domain; be sure to check copyright status and credit authors and content providers. Deutsch | English | македонски | slovenščina | +/−, Public Domain, Link

Free Will In a Clockwork Universe

Ever since Newton laid out the laws of physics in his work, and probably long before then, there's been a debate about free will and how it relates to the world we live in. The problem that was identified is that there is no room for a free will in a clockwork universe where everything is either input data in the forms of forces and energy or calculation in the forms of action and change. If everything is merely a consequence of what happened earlier, then free will is but an illusion. We believe we are free to act, merely because the future is unknowable, not because we're truly free.

One way of looking at this is to imagine the universe as an enormous calculating machine where the future is continuously calculated based on the past. At every moment in time, the calculation is complete for that instance, only to become the basis for the calculation of the next moment. The past can only be recorded selectively by us, and the future can only be estimated. Reality unfolds at a truly astronomic scale, and cannot be calculated ahead of time because the universe itself is the biggest and ultimately the only calculating device there is for this calculation.

Some have suggested that quantum mechanics solves this problem by introducing inherent uncertainty into calculations. However, this is of no help. Uncertainty in itself doesn't make us free. It makes the future somewhat less knowable, but nothing that we can call free will is added as a consequence. The problem remains. If everything is the result of inputs and calculations, there's no free will, only the appearance of free will due to our unknowable future.

This can be illustrated with examples from the world of artificial intelligence. We can construct machines with the ability to think and learn, and the things that these machines think of and discover cannot be known ahead of time. Artificial intelligence produces all sorts of discoveries when applied to statistical data, imagery and the like. However, this doesn't constitute free will. Free will is not merely the ability to produce results that cannot be known ahead of time. Free will is the ability to act, at least to some extent, contrary to input and algorithm. This requires a layer of being that is beyond the realm of physics.

This is not a new insight. Newton himself was very uncomfortable with the nihilistic conclusions that could be drawn from his clockwork universe. Newton was for this reason convinced that God had to play a part in things. When faced with the fact that planetary orbits are more stable than what would be generally concluded from his physics, he embraced the idea that the stability might be due to God's hand coming in and stabilizing things every now and again. Many of his contemporaries found this eccentric and naïve to the point of being funny, and delighted in the fact that even a genius like Newton will at times entertain and take serious shockingly silly ideas.

However, the problem remains. Either, we're mere automata with no true free will, or we are endowed with a will that can change outcomes to be different from what input and calculation would make on their own. Intuitively, we tend to believe that free will is real, and this is reflected in the Bible as well as the works of philosophers like Kant and Schopenhauer. These free will arguments add an extra layer to existence. The world is not merely what we see, there is also a will. Kant made the distinction between "Ding an sich" and "Ding an mich". Schopenhauer speaks of "representation" and "will". The Bible talks of God as something separate from His creation.

These views are in the end all the same, so we might as well use the Bible as the illustrating example, where God is the universal will of the world. Not only does He create the entire universe from nothing, He reserves the right to swoop in from time to time to fix things. However, He leaves things mostly to run on their own. There's little to no direct intervention. Instead, there's indirect intervention. He creates humans in His image. He gives us a bit of His will to use as our own, and it is this tiny bit of the overall will of the universe that is our free will. Kant and Schopenhauer say pretty much the same, but with different words.

From this, it follows that pantheism is not in the end a religious belief, but an atheist world view. Pantheism makes no distinction between God and His creation. Hence, the problem of free will is unresolved. Those inclined towards pantheism or atheism are therefore faced with a problem that Christians don't have to grapple with. Free will is fully explained in the Bible. This is not the case for atheists. Their challenge, if they want to avoid the nihilistic conclusion that we're nothing but automata, is to find a mechanism that would explain free will as something more than mere appearance due to our unknowable future.

Creation of Adam

By Michelangelo - See below., Public Domain, Link