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Posted May 24, 2019
This is in response to the article entitled “Drop Gold and The Myths We’re told”.
Before I begin I would like to clarify this is not investment advice and that I have no affiliation with Grayscale or Mr. Barry Silbert, or anyone working there for that matter. I do own bitcoin, and I also own gold and silver which I purchased subsequently to owning bitcoin. Co-founder of Tokenbot. I am a crypto native.
Similarly to the author of the article posted above, I also “abhor the phenomenon of bad information spreading its way into public markets, and feel a responsibility to rectify the public record when I identify a didactic void.” Please allow me rectify and reorg the public record of the didactic voids you have created.
Unlike the author of the article posted above, I do not have extensive professional investing experience in global financial markets. I have not managed an investment fund, although I have access to many top ears on Wall Street. I have founded a total number of zero publicly traded companies, which still result in zero dollars in wealth for institutional and retail investors around the world. I do not claim to and have not been actively involved with Bitcoin and cryptocurrencies from their inception in 2009. In fact it was not until late 2016 until I started reading about bitcoin, and was ultimately early 2017 before I reached my rabbit hole. I own zero cryptocurrency patents. I did not steal the name of an early attempt at a decentralized digital currency and make it the name of my website, even though I had also read it being mentioned in Satoshi’s original Bitcoin Whitepaper. I eventually realized, after reading the gold article further, that there is no way Nick Szabo wrote this article, and that I had just missed the fact that the name of the cryptocurrency he created now had a .com after it. Clever. I hope he is getting royalties.
Also unlike our “purely intellectually desired” author, I did not purchase millions of dollars of Antminer S9s at an average price of $2400 which can now be purchased for $379 or less. Which, might I add is a bigger loss than Bitcoin had itself. I also did not create a company logo that resembled a prominent, REAL, blockchain company:
Also not to be confused with the former firm of Michael Novogratz: Fortress Investment Group
I also did not pivot my company in Ocotober 2017 to capitalize on the Bitcoin or Blockchain name, like so many did, including Natural Resource Holdings Ltd (another Gold company?) which had a couple name changes and merged with a Canadian Mining firm, Backbone Hosting Solutions. Of course the hype drove the stock price up thousands of percent within 60 days! Name changes include Blockchain Mining Ltd and subsequently, Bitfarms. I guess the name Bitmain would have been a little too suspect at this point huh?. At least it was actually mining, and not a Long Island Iced Tea company.
One would think, that claiming to be involved with bitcoin since its inception, you would understand the full grasp of what is actually happening here and the vast potential that was created when Satoshi solved the Double spend problem as well as a probabilistic solution to the Byzantine General’s Problem. But no. Instead, you call a bubble in the spring of 2017 and decide to dump millions of dollars of bitcoins. Talk about bad timing! I was probably buying some, so thanks. To make matters worse, while I, the guy with no financial investment expertise in global markets is calling a bull run almost to the day…
You are selling yet again less than 3 weeks after the return to the upside….
I dont know if you are a day trader, but I hope you were not hodling all crypto winter just to sell in the $3800 range. We are now over 100% from when you sold. I know a few good cartoon characters on Twitter that I can introduce you to if you like. And I’m beginning to see another reason why this is called the greatest wealth transfer in human history.
Lastly, I am not associated, nor have ever been, with any gold company or brokerage firm specializing in precious metals. And I certainly do not have a new Gold Jewelry startup either! Which by the way, I immediately sent a message to Grit Capital to notify them when @jack had just tweeted about one of their clients, which happens to sell gold, so you’re welcome. Thats what a real “global cooperative civilization” looks like. Not the misinformation didactic voids you are creating. None of your actions have been for the collective good. This just leads me to believe that when you say things such as the paragraph below, you are hoping we, as a society, rely on YOUR flawed beliefs, for your benefit only. Your article was solely to come to the defense of gold, which is in your best interest, and that is fine. Someone other than Peter Schiff or the Gold Council should step up once in a while.
“When society relies on flawed beliefs and dogmas that can be easily proven to be unfounded, untested, and unexamined, the collective intellect becomes restrained, leading towards significant misallocations of societal resources. Such misallocations have long-lasting effects, which transcend cultures and borders, weakening the social contract we are all party to as members of a global cooperative civilization.”
The DropGold Campaign
Regardless of what anyone thinks about the campaign, its clear and to be expected, that as the investment manager of the GBTC exchange traded fund, Mr. Silbert would do everything legally possible to provide the best return to shareholders. That goes for any investment manager. The significant premium placed on GBTC is also not without some merit. I would not recommend my Mom to store bitcoin herself unless I thought she was ready for the massive responsibility it takes to hold and control your own wealth with no recourse if you simply “lose the password”. GBTC allows investors to use investment accounts they are already familiar with and gives them exposure to Bitcoin without the underlying risk of accidentally losing their bitcoin or having it stolen. The current storage costs incurred I would imagine are much higher than that of gold considering the risk. Its much easier to steal bitcoin, as we have seen over and over, than it is to steal physical gold. The 2% annual fee reflects this compared to a normal fund around .4% give or take. GBTC is certainly worth a premium, the question is how much exactly? I believe the premium will be a reflection of retail education and should trend downward as the years go on. Once you are comfortable storing your own wealth, then there is less incentive to pay a premium.
The amount of the premium also allows investors somewhat of an arbitrage as the previous author mentioned. For instance on May 13th, the dollar amount of bitcoin held per share was $7.38 with a market price of $10.21 creating a premium of about 38.3%. By May 16th the dollar amount of bitcoin held per share was about $7.91. With a higher amount of bitcoin held per share price you would think that the market price would also rise, after all, you would own more bitcoin now right? There are a few variables to consider. The price of Bitcoin, the amount of shares outstanding, and the number of bitcoin held by Grayscale. In this instance, the market price actually fell to $9.94 that day which means that GBTC might have liquidated some bitcoins, but more than likely it was a combination of retail sell pressure combined with the rising price of bitcoin over those days. But rarely do you see the per share of bitcoins rise, while the market price drops, during a price run of bitcoin. This move dropped the premium from 38% down to 25%! A great buying opportunity right? Again, not so fast. The next 2 reported days (20th and 23rd) showed declining price per bitcoin share with a more or less constant market price, thus increasing the premium back up 32%. With Bitcoin price being somewhat stable during this period and a steady decline of price per share of bitcoin, coupled with steady increase in the premium, you could speculate that Grayscale was either buying bitcoin or selling shares during this time.
To refer back to how GBTC was marketing the DropGold campaign, I thought it was beautifully crafted, in my humble opinion and I believe it will age quite well! I do find it ironic however that someone who would go to the lengths of pivoting their entire business to capitalize on being seen as a blockchain or bitcoin company has the audacity to be critical of a longtime unwavering pillar in the crypto community.
” Frankly, I’m surprised that Grayscale Securities’ counsel approved the type of marketing language that has been employed while relying on such weak primary research. In my humble opinion, and based upon my first-hand experience, risk factors are not enough when making statements of facts that compel an investment in securities.”
I’m curious what statements you or your company made exactly when you decided to pivot and the stock price subsequently went up thousands of percent within 60 days?!!
It is at this point of the article where I start to get confused as to whether or not you are defending gold or in fact defending bitcoin. Arguing the theatrical weight and value density portrayed as insufficient is a giant reach for a defense of gold (I personally was not counting the bars to see if it was physically possible, just as I was not up in arms about how gold is not transported by dollys, or how Ferraris dont drive like that in the city, or how helicopters dont really fly between buildings either). If anything you are strengthening the case that gold is even heavier as shown, meaning bitcoin weighs even less than portrayed. I’ll look forward to seeing this rectified in future commercials as well. Thank you for pointing that out.
A few major points to discuss…You mention predictability as a way to measure and plan for the future. Well there is an inflation schedule set for bitcoin for well over the next 100 years. What is the inflation schedule for Gold next year alone? No one can know exactly. And if someone decides to print more money to devote more resources to mining gold then more gold will be produced. There is no amount of money that can increase the production of more bitcoin every 10 minutes than is already scheduled. The same amount will be produced, it will just be more difficult. The key here is that no one controls the supply. You cannot get any more predictable than that! This also instills a sense of future which you mentioned. Can also be conveyed as having a Low time preference. I’ll admit I did not know what that term meant before bitcoin.
One increasing argument is the amount of energy that is consumed and will have to be consumed for bitcoin to continue on. Bitcoin will be the sole reason that leads us to develop more efficient energy sources than we have today. It will be paramount! Besides, with increased energy consumption, comes increased civilization and more developed societies. If we are going to bank the unbanked, then this is inevitable. This will also increase the continued cooperation through time amongst society, further incentivizing nodes to continue to operate the ledger.
The lack of imagination and creativity to abstractly think how things might be done in the future is astounding to me. Your ignorance is apparent with the assumption that nature already perfected a system. Bitcoin is not trying to simply mimic what nature has “already perfected”. It is pushing the envelope and asking what else is possible. We do not know the supply of gold, well then the metabolic energy that was spent to mine that gold is inefficient. The continued investment of energy is exactly what gives bitcoin value. Bitcoin taxes metabolic energy rather than preserving it so we as a cooperating society can know the supply, who owns what, transact across continents and even planets, and have a predictable supply schedule that cannot be manipulated, but only made more efficient. Just ask Satoshi what does a better job of maintaining the energy embodiment through time.
The reason no one came to golds defense is because there is no existential need for anyone to put forth any more energy, which is a flaw, not a feature. You keep eluding to cooperation, well what kind of cooperation is that?! To concede that something is already perfected is the first of many backwards steps.
The effort of making the attempt is progress. Which also includes every altcoin out there trying to do things that have never been done. We are not in 1994 of bitcoin. We are in 2019 of the internet. Digitally native assets will always be more secure than physical assets. It took thousands of years for gold to reach the end of its monetary use, but it is still necessary to propel us into the future as you so reminded us. Bitcoin mining equipment needs gold. There is a clear step of continued cooperation here. I predict the price of gold will eventually be dictated on the price of bitcoin and how much bitcoin an ounce of gold can help produce.
Bitcoin does not need another intrinsic form of value like jewelry. Bitcoin’s intrinsic value is knowledge. It’s best at being transparent, a medium of exchange, a store of value. Gold will be best used for one thing, the production of Bitcoin.
Bitcoin will best at being one thing…..Sound Money!