In the case of bitcoins, they do not have a utility outside of their use as a medium of value exchange. You can't really melt them down and use them to make jewelry, build cables or any of the myriad other uses that gold has.
edit: I think I mean it's "use value". The value of gold if it were not used a store of value.
Even if gold loses favor as a value store, there will be some minimum boundary on its price based on its usefulness in practical applications. That is not true of bitcoin.
The GP was implying that bitcoin has a commodity value, which it does not. It merely has value as a means of exchange. What that means is that bitcoin does not benefit from same lower price boundary that gold does. Therefore, it is much riskier.
What good would bitcoins do for you after a Hurricane Katrina-like event when there is no communications network or electrical service to speak of? What about gold?
If that's true, 30/1600 is about 2%, yet gold is still perceived as a fairly safe store of value.
Also, the claim that "gold only became a currency when it was stamped" is wrong. The value of gold on the commodity markets today does include a value store component and none of it is stamped.
When the czar's family fled russia they didn't grab rubles, the grabbed jewels. Why? Because their currency was worth nothing but their jewels could be traded for value in a very transparent manner wherever they might end up.
1) Store of value. Much easier to store gold/USD/Bitcoins than the food you will need in the future.
2) Medium of Exchange. Can be used to exchange for real goods, thus avoiding the headache of barter.
3) Unit of Account. e.g. is easily divisible.
Bitcoins aren't great at #2, but gold is terrible at #3. If bitcoins prove to be a lasting store of value, then it will almost certainly be more "money" like than gold.
But I wasn't trying to measure currency dick size. I was just making the point that not being good at 2 doesn't necessarily hurt its ability at 1.
Fact is, if I had "invested" in 100 BTC only 5 months ago when it was hovering around USD$10, that would have cost me about $1000. And now it would be worth $10000. There are not that many investments that have that kind of return in such a short time. You'd have to be dumb to believe that people aren't doing exactly this. You don't see 1000% returns and just ignore it and wonder about its utility. Right now, it's a volatile and risky currency exchange being intentionally used to ride the rising popularity into a cash la-la land.
At some point people are going to convert this toy back to a real-world currency and take their winnings home with them. I don't know what's going to happen then, but I don't believe it will be good. Perhaps 'stabilizing' would be a good optimistic name for it.
Equating a currency to a game of chance based on independent events—now that's irrational thinking.
My conclusions might not be valid, this isn't something I'm an expert at, but I really don't think that's a good example.
Why, my dear fellow, that is exactly how every government-backed currency works today!
And, thanks to its inflationary nature, it becomes virtually worthless over time:
Although inflation has remained low in recent years, it ravages the value of paper money over time. A dollar in 1900 is only worth about $0.04 in today's currency.
Quoted from: http://finance.yahoo.com/blogs/daily-ticker/bitcoin-prices-b...
Of course Bitcoin is deflating - it was designed that way. And of course fiat currencies are inflating - there is no limit to how much can be printed except reason, which is apparently in short supply.
Complete collapse is entirely possible. If governments crack down on exchange sites that allow for convertibility - that'll pretty much be it. I'd be very surprised this hasn't happened. I think they are waiting for all the major players to be massively invested in bitcoin so that when they pull the plug it'll take a very long time for an alternative to rise from the ashes.
I hope this doesn't happen. But what world do we think we're living in really?
Now the speculators are in........
When was the last time someone acquired a good or service with an ounce of gold? Perhaps we shouldn't consider gold a currency? Well I'm fine with that. Bitcoin probably isn't a proper currency yet either (in the sense that people aren't exchanging much with it yet). But not being directly relatable to utility in exchange certainly hasn't hurt gold in recent history. So I don't see why necessarily it will be a problem for bitcoins.