By that reasoning, investing in gold is also speculation. Because it only has minimal industrial uses and most of its value comes from the fact that people say it has value.

And a piece of art is not a productive asset either. Yet, it can and will have value. I don't think there is anything inherently wrong with that.

I'm happy to invest in things that I believe are likely to go up in value, whether those are companies, mineral rights, art, watches, Bitcoin, or water deposits.

> By that reasoning, investing in gold is also speculation.

What else? However, gold has some utility as jewelry etc. Cryptocurrencies are (currently) pure speculation.

> gold has some utility as jewelry

Gold's utility as jewelry stems from its high value as a precious metal.

It's circular reasoning though, since we're also saying that it's high value is underpinned by its use as jewelry.

That's not entirely correct. Gold is malleable and does not tarnish, both of which are nice for making jewelry.

E.g. the Incas used gold for jewelry despite it being fairly abundant.

Why do you say gold jewelry has utility? Because people are willing to pay for it? How does that distinguish gold jewelry from Bitcoins, which people are also willing to pay for?

Jewelry looks pretty. Bitcoins don't.

Well, it only looks pretty to you if you're into that type of thing. I don't think it would be hard to find people who don't think gold jewelry looks good. My point is that the utility is entirely dependent on the subjective experience of the user.

There's plenty of stuff more expensive than gold, the reason gold is used is because it's shiny-bling.

People in the past have traded using seeds as fiat, but they wore shiny or coloured things like shells, polished stones, polished metals.

Human vision is attracted to shiny and brightly coloured artefacts, it's not entirely subjective. This is why you can trick a child to accept a shiny coin in exchange for a high value item, or currency note, or even for a higher value coin that has less polish.

There's still a difference between use-value (looks pretty, albeit subjectively, to you) and exchange-value (looks resalable, albeit in your estimation, to someone else). There's a difference between what you want to do with the thing, and what you can do with the thing yourself, without someone else with whom to transact.

That’s true but the belief that gold has cosmetic value goes back for thousands of years. Even if you ignore that something like two thirds of consumption is industrial, that’s a huge track record to conflate with … basically nothing. It’s on the scale of saying there’s no reason why your band couldn’t be as valuable as the Beatles.

All value is defined in relation to a specific person. There's no movie, for example, that everybody likes. But that doesn't mean that entertaining people isn't valuable.

I would argue that there is a good argument to be made that gold is a speculative investment. Look at how similar the scammy "buy gold now" ads are to the crypto ads. There is also a large contingent of the gold market that is holding it not to make money, but as a store of value for after government collapses. The preppers that buy gold aren't that much different than the crypto-libertarians that fear currency collapse/manipulation.

Never mind the fact that if widespread inflation or deflation occurs, the value of bitcoin will suffer as well.

Although bitcoin is a speculative investment, it can be argued to have some utility. Unfortunately, that utility mainly revolves around making purchases the government doesnt agree with.

It's also been used to hide assets from taxation. The IRS seems to being growing increasingly aware of this, so the utility is probably going to become negative soon.

> Cryptocurrencies are (currently) pure speculation.

False. Cryptocurrencies are _mostly_ speculation. Go to any dark web site and everything for sale is being transacted in crypto. Look at XRP - there are clearly large commercial organizations using that crypto for business purposes.

What exactly are people doing with XRP? Honest question.

Crypto certainly has, if not more, at least the same utility than jewelry. Trust less, distributed ledgers--these aren't tulips.

They do not have the same utility. I can walk out of my house and find people deriving value from wearing jewelry. Trustless, distributed ledgers, on the other hand, not so much.

At the moment, Bitcoin's primary non-speculative use case is light financial crime: money laundering, capital control evasion, ransomware, buying various illegal stuff, ponzi schemes, etc. I agree that it's possible that one day trustless, distributed ledgers will deliver enormous amounts of value. But it's important to distinguish between delivered value and potential value.

The only developments in cryptocurrency that I've personally found interesting have been smart contracts. Even then, there's no reason that couldn't be done by a traditional financial institution using fiat currency. The fact that smart contracts were first implemented with cryptocurrency is an implementation detail, not a fundamental requirement.

Frankly, I'd probably rather use smart contracts with regular currency. If there was some kind of scam or theft then the financial institution might be able to reverse some of the charges.

Most of the advantages of cryptocurrency don't really sound like advantages to me.

Exactly. Reversability by a trusted party when things go wrong can be a huge benefit.

Even financial markets will do it as needed. I used to write trading software. Some of our traders were trading on the DTB; being German, they were sticklers for rules. One day our traders jumped on something and made a lot of money. But it turned out that somebody at another company had fat-fingered an order at a very low price for a very large quantity. Large enough that it would have destroyed their company.

The exchange decided there was no point in that, so they unwound all the trades. I thought our guys would be mad. They were a little disappointed to lose the expected profit, but they were otherwise fine with it. They didn't see any sense in that kind of destruction just for a short-term gain.

Tulips and jewelry at least look pretty. And you're trusting, at least, the implementation and the underlying math. Personally the risk of recourse-less outweighs the value of trust-less.

Yes, buying gold with the intention of selling it later is speculation. Buying anything with the intention of selling it later for a higher price is speculation.

If you were a jewelry-maker, I suppose you could call buying gold an investment.

> Buying anything with the intention of selling it later for a higher price is speculation.

I'm buying shares of an S&P 500 index now with the intention of selling them at a higher price in ~40-50 years. Am I a speculator or an investor?

Index funds receive dividends from the stocks, so you're investing.

This may be hidden from you if the index fund (or your broker) automatically reinvests. But either way, you own economically productive assets that a) create value for customers, and b) throw off a stream of cash. Even if the S&P 500 is at the exact same level in 50 years, you'll still gain significantly. That's obviously not true of commodities (e.g., gold, silver) or currencies.

Agreed. Even trading fiat currency through Forex is a form of speculation. The Wikipedia page for Forex even describes it as such: https://en.wikipedia.org/wiki/Foreign_exchange_market