By Jaffer Ali
BTC folks read on. As a former gold bug that still likes gold (however irrational), one learned about “paper Gold” and how the price of gold was manipulated through ETFs that SUPPOSEDLY had real gold in their vault but moved away from full 1:1 asset backing.
They practiced fractional reserve economics, figuring that unless there was a mass demand to withdraw the real gold, (think “bank run”), they could satisfy withdrawals when people wanted self custody.
If you are an investor, do you really want a lot of gold in your house?
No, but you could take custody and put it in a vault or there are companies that will charge you, say 1/2% to store your gold in their vault.
Eventually, many gold ETFs changed Terms & Conditions to allow them to pay investors in fiat if you wanted to withdraw real gold.
Presently, there is an estimated 200x more “paper gold” than real gold being traded.
Paper gold is basically an IOU.
JP Morgan, Deutsche Bank & others have been fined MILLIONS of dollars for fuckery, meaning suppressing price.
There is a LOT of demand for gold worldwide.
There is a relatively fixed supply of gold (increases about 2%-2.5% per year through mining). But the supply of real gold + paper gold can be manipulated and this means the price can be manipulated…and it is.
BTC price is manipulated in a similar fashion, just not as dramatically because the Blockchain can reveal the true supply… but the wallet addresses need to be known.
AND HERE IS WHERE THE BTC FUCKERY SHINES.
Exchanges co-mingle BTC, hide addresses, lend out assets they do not own and create Bitcoin IOUs (see Celsius, FTX & likely all other exchanges that will not provide blockchain proof of reserves). But here is why there is a limit to the BTC fuckery.
It is much easier to self custody BTC than gold…and much less expensive than storing gold. There are risks if you forget your keys to the wallet, but storing digital assets is much easier and this limits the amount of paper BTC as more people remove their BTC from exchanges.
Those exchanges or *custodians* of YOUR BTC are in extreme danger of a digital bank run…and it happens quickly.
The more an exchange or custodian of YOUR ASSETS increases the fractional reserve (remember, Gold is at 200:1), the more at risk they are at blowing up.
If ANY COMPANY holding your digital assets will not VERIFY their holdings through the blockchain, it is best to ASSUME they are scammers.
This essay was first published by Jaffer on Twitter and has been under permission by the author translated into Vietnamese by the team of BitcoinVN News.
Jaffer Ali is the CEO & Founder of PulseTV – and an entrepreneur by heart with decades long experience of risk-taking and risk-managing in the real world.