The Success of the Spanish Silver Dollar: Lessons for Bitcoin

An Unconventional Comparison: Bitcoin vs. Gold Sovereigns

When it comes to comparing Bitcoin with gold, the common belief is that their finite supply makes them attractive long-term stores of value. However, the analogy between Bitcoin and gold sovereigns, which were widely adopted in the British Empire, is weak. Unlike gold sovereigns, the adoption of which was promoted by the British imperial government, Bitcoin has no nation state to promote its use. Therefore, a more fitting comparison can be drawn between Bitcoin and the Spanish silver dollar, also known as the reale.

The Spanish Silver Dollar: A Trade Currency Against All Odds

The Spanish silver dollar, or reale, thrived as a trade currency despite Spain's decline as a nation. It even gained adoption in countries that were never Spanish colonies, challenging the notion that a currency can only succeed with the support of a strong home country. The reale's success can be attributed to three key factors: availability, quality, and verifiability.

The Birth of the Reale

The reale was introduced in 1497 as part of Spain's monetary system reform, following Columbus' discovery of America. It was divisible into eight parts, known as "pieces of eight." It's important to note that the reale should not be confused with the gold doubloons.

The Silver Bonanza and Global Demand

In 1545, the Spanish discovered the Cerro de Potosi in present-day Bolivia, the richest source of silver in history. The scarcity of coins led the Spanish crown to allow the minting of reales in New Spain. Around the same time, Portuguese explorers found new trade routes to the Indies and China, bypassing traditional gold-based trade routes. Merchants in East Asia, particularly China, preferred silver over gold due to a shortage of bronze. The demand for silver quickly surpassed supply, creating a market for regular shipments of reales from New Spain to the Philippines, another Spanish colony.

From America to Asia: The Spread of Adoption

The adoption of the reale spread throughout the Americas, and by 1792, it became the de facto currency of the newly independent United States. The US dollar was initially pegged to the reale. In 1879, China followed suit by pegging its new yuan to the reale or the Mexican peso. The growth of the Spanish Empire facilitated the distribution and availability of the reale in both America and Asia, laying the groundwork for its success.

Consistency and Stability: The Role of the Spanish Government

The Spanish government played a crucial role in maintaining the quality and stability of the reale. Unlike many other currencies of the time, the reale experienced limited debasement. However, while the reale remained strong, the domestic Spanish economy weakened due to inflation-fighting measures that stifled exports and encouraged imports. These policies, combined with continuous conflict and excessive royal spending, led to a significant outflow of silver reales to the rest of Europe. Other European nations, such as the Dutch and the British, sought to compete with the Spanish empire and required silver to facilitate trade with China and Asia. The Spanish reales were preferred over foreign coins due to their consistency and verifiability.

Verifiability: A Key Factor in Success

Foreign attempts to replicate the reale were unsuccessful, as Chinese and Asian traders rejected coins of the same quality and weight. The Spanish reales were trusted due to their consistent characteristics. The US made a similar attempt in 1872 by introducing the "Trade dollar" to compete with the reale. However, the US coin suffered from a discount in East Asia, while the reale commanded a premium. In response, the US Coinage Act of 1873 authorized the creation of the "Eagle dollar." Although the Eagle had limited success in southern China, the declining value of silver led to its redemption in the US. Eventually, many countries transitioned to the gold standard, and the reale's prominence waned.

Could Bitcoin Be a Trade Currency?

Despite not being associated with any nation, Bitcoin shares similarities with the Spanish silver dollar. Bitcoin is abundantly available on the open internet, just as the reale was available across America and Asia. Like the reale's consistent weight and purity, Bitcoin has a consistent design and structure. Its underlying mathematics are universally applicable. Furthermore, Bitcoin's verifiability is facilitated by its presence on a public ledger with an immutable structure. While Bitcoin may face criticism regarding its suitability as a means of exchange, it possesses the key attributes of availability, quality, and verifiability that contributed to the reale's success.


The Spanish silver dollar's success as a trade currency despite its home nation's decline is remarkable. Bitcoin's achievement as a globally recognized digital currency without a home nation is even more remarkable. Although Bitcoin's path to widespread adoption may take time, the lessons learned from the reale's history offer valuable insights into the potential success of digital currencies in today's ever-evolving financial landscape.

Frequently Asked Questions

How do you withdraw from an IRA that holds precious metals?

First, determine if you would like to withdraw money directly from an IRA. After that, you need to decide if you want to withdraw funds from an IRA account. Next, make sure you have enough money in order for you pay any fees or penalties.

If you are willing to pay a penalty for early withdrawal, you should consider opening a taxable brokerage account instead of an IRA. If you choose this option, you'll also need to consider taxes owed on the amount withdrawn.

Next, determine how much money you plan to withdraw from your IRA. The calculation is influenced by several factors such as your age at withdrawal, the length of time you have owned the account and whether or not you plan to continue contributing to retirement plans.

Once you know how much of your total savings to convert to cash, it's time to choose the type of IRA that you want. Traditional IRAs allow you to withdraw funds tax-free when you turn 59 1/2 while Roth IRAs charge income taxes upfront but let you access those earnings later without paying additional taxes.

Once you have completed these calculations, you need to open your brokerage account. Brokers often offer promotional offers and signup bonuses to encourage people into opening accounts. You can save money by opening an account with a debit card instead of a credit card to avoid paying unnecessary fees.

When it's time to make withdrawals from your precious-metal IRA, you'll need a place to keep your coins safe. Some storage facilities can accept bullion bar, while others require you buy individual coins. You'll have to weigh the pros of each option before you make a decision.

Because you don't have to store individual coins, bullion bars take up less space than other items. But you will have to count each coin separately. On the flip side, storing individual coins allows you to easily track their value.

Some people prefer to keep their coins in a vault. Others prefer to store them in a safe deposit box. Regardless of the method you prefer, ensure that your bullion is safe so that you can continue to enjoy its benefits for many years.

How is gold taxed by Roth IRA?

An investment account's tax is calculated based on the current value of the account, and not on what you paid originally. If you invest $1,000 into a mutual fund, stock, or other investment account, then any gains are subjected tax.

The money can be withdrawn tax-free if it's deposited in a traditional IRA (or 401(k)). Taxes are only charged on capital gains or dividends earned, which only apply to investments longer than one calendar year.

The rules that govern these accounts differ from one state to the next. For example, in Maryland, you must take withdrawals within 60 days after reaching age 59 1/2 . Massachusetts allows you up to April 1st. New York offers a waiting period of up to 70 1/2 years. You should plan and take distributions early enough to cover all retirement savings expenses to avoid penalties.

What precious metal is best for investing?

This question is dependent on the amount of risk you are willing and able to accept as well as the type of return you desire. Although gold has traditionally been considered a safe investment choice, it may not be the most profitable. Gold may not be right for you if you want quick profits. If you have time and patience, you should consider investing in silver instead.

If you don't care about getting rich quickly, gold is probably the way to go. If you are looking for a long-term investment that will provide steady returns, silver may be a better choice.

What is the tax on gold in an IRA

The tax on the sale of gold is based on its fair market value when sold. Gold is not subject to tax when it's purchased. It's not considered income. If you sell it later you will have a taxable profit if the price goes down.

For loans, gold can be used to collateral. Lenders look for the highest return when you borrow against assets. For gold, this means selling it. This is not always possible. They might keep it. They might decide that they want to resell it. Either way you will lose potential profit.

In order to avoid losing your money, only lend against your precious metal if you plan to use it to secure other collateral. If you don't plan to use it as collateral, it is better to let it be.

Is it possible to hold a gold ETF within a Roth IRA

Although a 401k plan might not provide this option, you should still consider other options like an Individual Retirement Account (IRA).

A traditional IRA allows contributions from both employee and employer. You can also invest in publicly traded businesses by creating an Employee Stock Ownership Plan (ESOP).

An ESOP gives employees tax advantages as they share the stock of the company and the profits it makes. The tax rate on money that is invested in an ESOP is lower than if it was held in the employees' hands.

A Individual Retirement Annuity (IRA), is also available. An IRA lets you make regular, income-generating payments to yourself over your life. Contributions to IRAs do not have to be taxable

How do I open a Precious Metal IRA

The first step is to decide if you want an Individual Retirement Account (IRA). If you do, you must open the account by completing Form 8606. Next, fill out Form 5204. This will determine the type of IRA that you are eligible for. This form should be filled within 60 calendar days of opening the account. Once this has been completed, you can begin investing. You might also be able to contribute directly from the paycheck through payroll deduction.

To get a Roth IRA, complete Form 8903. The process for an ordinary IRA will not be affected.

You'll need to meet specific requirements to qualify for a precious metals IRA. You must be at least 18 years of age and have earned income to qualify for a precious metals IRA. Your annual earnings cannot exceed $110,000 ($220,000 if you are married and file jointly) for any tax year. Contributions must be made on a regular basis. These rules apply regardless of whether you are contributing directly to your paychecks or through your employer.

A precious metals IRA can be used to invest in palladium or platinum, gold, silver, palladium or rhodium. However, you won't be able purchase physical bullion. This means you can't trade shares of stock and bonds.

To invest directly in precious metals companies, you can also use precious metals IRA. This option is offered by some IRA providers.

There are two major drawbacks to investing via an IRA in precious metals. First, they don't have the same liquidity as stocks or bonds. They are therefore more difficult to sell when necessary. They also don't pay dividends, like stocks and bonds. So, you'll lose money over time rather than gain it.


  • If you take distributions before hitting 59.5, you'll owe a 10% penalty on the amount withdrawn. (
  • You can only purchase gold bars at least 99.5% purity. (
  • (Basically, if your GDP grows by 2%, you need miners to dig 2% more gold out of the ground every year to keep prices steady.) (
  • Instead, the economy improved, stocks rebounded, and gold plunged, losing 28 percent of its value in 2013. (
  • If you accidentally make an improper transaction, the IRS will disallow it and count it as a withdrawal, so you would owe income tax on the item's value and, if you are younger than 59 ½, an additional 10% early withdrawal penalty. (

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Investing In Gold vs. Investing In Stocks

Gold investing as an investment vehicle can seem extremely risky these days. The reason behind this is that many people believe that gold is no longer profitable to invest in. This belief comes from the fact most people see gold prices falling due to the global economy. They fear that investing in gold will result in a loss of money. However, investing in gold can still provide significant benefits. Below are some of them.

One of the oldest forms known of currency is gold. It has been in use for thousands of year. People around the world have used it as a store of value. It's still used by countries like South Africa as a method of payment.

Consider the price per gram when you decide whether you should invest in or not. When looking into buying gold bullion, you must decide how much you are willing to spend per gram. You could contact a local jeweler to find out what their current market rate is.

It's worth noting, however, that while gold prices have fallen recently the cost of producing gold is on the rise. So, although gold prices have declined in recent years, the cost of producing it has not changed.

You should also consider the amount of your intended purchase when considering whether you should buy or not. It is sensible to avoid buying gold if you are only looking to cover the wedding rings. This is not a wise decision if you're looking to invest in long-term assets. Selling your gold at a higher value than what you bought can help you make money.

We hope this article helped you to gain a better appreciation of gold as a tool for investment. We recommend you do your research before making any final decisions. Only then will you be able to make an informed decision.


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