Bitcoin

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Malinois000
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Bitcoin

Post by Malinois000 » Sun Aug 13, 2017 2:18 pm

What do you think about Bitcoin and Cryptocurrencies? Investing or gambling?

Indexboss
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Re: Bitcoin

Post by Indexboss » Sun Aug 13, 2017 2:24 pm

There have been a few threads on it. From my recollection it doesn't seem like a trusted investment by bogleheads, and may suggested only using small amounts of "surplus" money to put towards it.

With that said I know some people who have made money off of it. I personally do not own any or plan on buying any.

Malinois000
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Re: Bitcoin

Post by Malinois000 » Sun Aug 13, 2017 2:33 pm

I have a friend who purchased 100 shares of GBTC (ETF) at $200 several months ago. It closed at $616 on Friday. It's hard not to consider this asset class as a potential for at least a small percentage of your funds.

MotoTrojan
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Re: Bitcoin

Post by MotoTrojan » Sun Aug 13, 2017 2:36 pm

Malinois000 wrote:
Sun Aug 13, 2017 2:33 pm
I have a friend who purchased 100 shares of GBTC (ETF) at $200 several months ago. It closed at $616 on Friday. It's hard not to consider this asset class as a potential for at least a small percentage of your funds.
Only tripled his money? How about those that put $100 in 2010 and now have $72M :moneybag .

High-risk, high reward. Seemed like Bitcoin was running out of steam, especially with Ethereum coming out of nowhere (5000%+ YTD a month ago) and almost passing it in market-cap, but now Bitcoin has the momentum. Especially when you consider the Bitcoin Cash "dividend" it spun-off.

I will say that you should be really careful with those sort of funds. I think it was GBTC specifically actually which was trading for WAY above the value of the bitcoin it was carrying, almost 2X NAV at one point. Better to use Coinbase or their less expensive trading package GDX to buy the coins directly. Coinbase is now a $1B company, so very trustworthy with big dollars backing them. Those ETF style funds only work well when there is momentum, but as soon as people realize they are spending $2 for $1 worth of Bitcoins, things could go south.

ny_rn
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Re: Bitcoin

Post by ny_rn » Sun Aug 13, 2017 6:46 pm

I started trading cryptocurrencies (bitcoin, ethereum and litecoin) a few months back with some money I wanted to speculate with. So far, I'm happy with the results. I'll continue playing with cryptocurrencies until it is no longer fun or "I win the game."

Malinois000
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Re: Bitcoin

Post by Malinois000 » Sun Aug 13, 2017 7:18 pm

Is there a more conservative way to play Bitcoins, for example, one of the major tech companies or banks?

ny_rn
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Re: Bitcoin

Post by ny_rn » Sun Aug 13, 2017 7:42 pm

Malinois000 wrote:
Sun Aug 13, 2017 7:18 pm
Is there a more conservative way to play Bitcoins, for example, one of the major tech companies or banks?
The words conservative, play and bitcoins sound like a very dangerous combination.

You could just purchase more of the total stock market index and you will be investing in NVIDIA and AMD.

finjour
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Re: Bitcoin

Post by finjour » Sun Aug 13, 2017 7:45 pm

I like Bitcoin, Ethereum, and the other cryptocurrencies. I especially like the underlying technology (the blockchain), and I think the blockchain will be big in the future.

I think of buying cryptocurrencies as speculating. From my experience, people who buy cryptocurrency expect to sell it at a higher price in the future.

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heathshuler
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Re: Bitcoin

Post by heathshuler » Sun Aug 13, 2017 9:32 pm

A few searches of prior bogleheads posts will yield mostly negative reactions from the group. I get why...the technology itself and the speculation regarding its future is very inconsistent with the fundamentals of being Boglehead. I have some stake in it since 2015 and have enjoyed the run up, but I certainly don't expect to get a pat on the back for it on this site. No ill will or anything like that against bogleheads...this site has an amazing set of intelligent and helpful posters...I just don't expect this to be a useful forum for crypto talk at this point. Do check out though a recent podcast on Bitcoin at "Money For The Rest Of Us". He had some very pro-Bitcoin thoughts and his podcast is generally considered around here to be one of the good ones.

book lover
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Re: Bitcoin

Post by book lover » Mon Aug 14, 2017 9:33 am

Tulips anyone?

ny_rn
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Re: Bitcoin

Post by ny_rn » Mon Aug 14, 2017 9:42 am

book lover wrote:
Mon Aug 14, 2017 9:33 am
Tulips anyone?
Definitely. But, I will take a few tulip petals that fall from time to time.

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tadamsmar
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Re: Bitcoin

Post by tadamsmar » Mon Aug 14, 2017 10:16 am

Malinois000 wrote:
Sun Aug 13, 2017 2:18 pm
What do you think about Bitcoin and Cryptocurrencies? Investing or gambling?
I personally think investing is gambling. The distinction is wrong-headed.

The FTC makes the distinction based on whether the activity provides some service to the legal economy. That's why speculation of pork belly futures and thousands of other things like that are not considered illegal gambling. The FTC has not cracked down on bitcoin, so it's not gambling by their definition.

Two things must be true for a risky investment to be a good idea:

1. You need to have a edge, a sound reason to think that it will provide a return on investment. The statistical expectation of the ROI has to be greater than zero, it not enough to merely have a well-founded belief that you might make money.
2. You need a sound capital management policy, you need enough backing capital based on a sound risk analysis.

I don't think #1 holds for bitcoin. So number #2 does not matter.

BTW, the same two things must hold for risky gambling to be a good idea. (There is such a thing as arbitrage in gambling, so some gambling moves involve no risk.)

Beyond that, there is a certain non-pecuniary reward for both risky gambling and risky investing even when #1 does not hold, if you bet a small amount it might be fun.

Jonathan
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Re: Bitcoin

Post by Jonathan » Mon Aug 14, 2017 11:07 am

tadamsmar wrote:
Mon Aug 14, 2017 10:16 am
I personally think investing is gambling.
Agreed. And gambling is investing.

We often see the following position in this forum: only Boglehead-style investing counts as real investing, whereas everything else is simply "speculating". I've wrongly perpetuated this falsehood myself, but I know now that it's just a BogleMyth, or a way for over-enthusiastic or misguided Bogleheads to intellectually bully people into thinking that if they're not buying Big John Bogle's funds, then they're not really investing.

The definition of "investing" is common, fairly universal, and repeated throughout various dictionaries, encyclopedias, and specialty investment reference texts, most of which are easily accessed with a simple Google search. When we look outside of this forum, we can see that investing means laying out money with the intention of obtaining profit.

Reasonable people can rightly say that certain types of investing aren't their preferred or recommended method of investing, but once they start characterizing others' investments as "not real investing" you know they've crossed the line into intellectual dishonesty.

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iceport
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Re: Bitcoin

Post by iceport » Mon Aug 14, 2017 11:11 am

Jonathan wrote:
Mon Aug 14, 2017 11:07 am
tadamsmar wrote:
Mon Aug 14, 2017 10:16 am
I personally think investing is gambling.
Agreed. And gambling is investing.

We often see the following position in this forum: only Boglehead-style investing counts as real investing, whereas everything else is simply "speculating". I've wrongly perpetuated this falsehood myself, but I know now that it's just a BogleMyth, or a way for over-enthusiastic or misguided Bogleheads to intellectually bully people into thinking that if they're not buying Big John Bogle's funds, then they're not really investing.

The definition of "investing" is common, fairly universal, and repeated throughout various dictionaries, encyclopedias, and specialty investment reference texts, most of which are easily accessed with a simple Google search. When we look outside of this forum, we can see that investing means laying out money with the intention of obtaining profit.

Reasonable people can rightly say that certain types of investing aren't their preferred or recommended method of investing, but once they start characterizing others' investments as "not real investing" you know they've crossed the line into intellectual dishonesty.
Hmm... that's a persuasive argument. I think I might be guilty. :(
"Discipline matters more than allocation.” ─William Bernstein

PVW
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Re: Bitcoin

Post by PVW » Mon Aug 14, 2017 12:29 pm

Jonathan wrote:
Mon Aug 14, 2017 11:07 am
tadamsmar wrote:
Mon Aug 14, 2017 10:16 am
I personally think investing is gambling.
Agreed. And gambling is investing.

We often see the following position in this forum: only Boglehead-style investing counts as real investing, whereas everything else is simply "speculating". I've wrongly perpetuated this falsehood myself, but I know now that it's just a BogleMyth, or a way for over-enthusiastic or misguided Bogleheads to intellectually bully people into thinking that if they're not buying Big John Bogle's funds, then they're not really investing.

The definition of "investing" is common, fairly universal, and repeated throughout various dictionaries, encyclopedias, and specialty investment reference texts, most of which are easily accessed with a simple Google search. When we look outside of this forum, we can see that investing means laying out money with the intention of obtaining profit.

Reasonable people can rightly say that certain types of investing aren't their preferred or recommended method of investing, but once they start characterizing others' investments as "not real investing" you know they've crossed the line into intellectual dishonesty.
When you post and interact on a bulletin board built around an investing ideology, it's not bullying when other posters repeat the foundation of the ideology.

For some, there might not be a distinction between gambling and investing. For me the distinction is that my gambling is done for emotional reasons. I enjoy the entertainment that comes from the high risk, high reward payouts. Investing is buying something of value that is expected to increase in value. Gambling is the antithesis of the Boglehead investment philosophy. I still gamble on occasion, but the money comes out of my entertainment budget, not my investments.

Jonathan
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Re: Bitcoin

Post by Jonathan » Mon Aug 14, 2017 1:03 pm

PVW wrote:
Mon Aug 14, 2017 12:29 pm
When you post and interact on a bulletin board built around an investing ideology, it's not bullying when other posters repeat the foundation of the ideology.
Sure, if they repeat an ideology as just that - an ideology. If they repeat that the definition of investing is as they say it, without pointing out that reference sources universally disagree, AND repeatedly push their "definition", then that's intellectual bullying.

I'm fairly limited in my ability to criticize this behavior, as I've admittedly engaged in it myself!

ThrustVectoring
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Re: Bitcoin

Post by ThrustVectoring » Mon Aug 14, 2017 1:13 pm

It's volatile enough, and disconnected enough from fundamental value, that I'd put at most 5% of my money into cryptocurrencies.

TravelforFun
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Re: Bitcoin

Post by TravelforFun » Mon Aug 14, 2017 1:15 pm

Malinois000 wrote:
Sun Aug 13, 2017 2:33 pm
I have a friend who purchased 100 shares of GBTC (ETF) at $200 several months ago. It closed at $616 on Friday. It's hard not to consider this asset class as a potential for at least a small percentage of your funds.
It went up to $760 this morning.

kosomoto
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Re: Bitcoin

Post by kosomoto » Mon Aug 14, 2017 1:24 pm

ThrustVectoring wrote:
Mon Aug 14, 2017 1:13 pm
It's volatile enough, and disconnected enough from fundamental value, that I'd put at most 5% of my money into cryptocurrencies.
This 5% allocation to fun money really bothers me. What happens when you lose that 5%? Do you stop having any fun money? Or do you put in more money this turning that 5% into a never ending sinkhole of money?

Jonathan
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Re: Bitcoin

Post by Jonathan » Mon Aug 14, 2017 1:41 pm

BTW, bitcoin does fit fairly into Boglehead ideology, like this:

CORRECT: Purchasing bitcoin is not in alignment with my investment portfolio strategy, so I don't do it.
CORRECT: I don't understand bitcoin, so I don't purchase it.
CORRECT: Bitcoin may be a black swan event. By definition, we can't tell now.
CORRECT: Bitcoin is risky, but so are many of the other stocks in my funds. Therefore, I just allocate a tiny percentage of my portfolio to it.
CORRECT: My indexing strategy lacks exposure to bitcoin, so I've purchased a small amount of it.

INCORRECT: Bitcoin is just tulips.
INCORRECT: Bitcoin is just a bubble.
INCORRECT: Bitcoin is not real investing.
INCORRECT: Bitcoin does not fit traditional valuation models, therefore it has no value.

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tadamsmar
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Re: Bitcoin

Post by tadamsmar » Mon Aug 14, 2017 1:48 pm

PVW wrote:
Mon Aug 14, 2017 12:29 pm
For some, there might not be a distinction between gambling and investing. For me the distinction is that my gambling is done for emotional reasons. I enjoy the entertainment that comes from the high risk, high reward payouts. Investing is buying something of value that is expected to increase in value. Gambling is the antithesis of the Boglehead investment philosophy. I still gamble on occasion, but the money comes out of my entertainment budget, not my investments.
Jimmy the Greek famously said "I never gamble".

I guess he was using your definition?

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arcticpineapplecorp.
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Re: Bitcoin

Post by arcticpineapplecorp. » Mon Aug 14, 2017 1:48 pm

gambling. When you invest in business, you receive your fair share of the profits in accordance with your percentage ownership. When you own companies that are profitable, those businesses grow in size. You receive dividends which when reinvested buy you more shares. If you buy 1 bitcoin, in 100 years you'll still just have 1 bitcoin. The value of that bitcoin may be more than you paid for it. But that's still gambling, not investing. Because you're receiving no earnings/dividends. The only way you make money is if you sell it for more than you paid. With investing, the share price can change or remain the same but you're still receiving your share of the earnings over time. Last I checked, bitcoin pays no earnings/dividends. That's because it's a currency. If you buy currencies you're gambling/guessing on the future direction of the value of that currency.
"Invest we must." -- Jack Bogle | “The purpose of investing is not to simply optimise returns and make yourself rich. The purpose is not to die poor.” -- William Bernstein

inbox788
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Re: Bitcoin

Post by inbox788 » Mon Aug 14, 2017 4:10 pm

I've come to settle on these definitions:

gambling - a game of chance where the expected return is <= 1.
investing - a game of chance where the expected return is > 1.

Poker is a game of skill, where the professionals are investing their time with good returns, and everyone else is gambling.

IMO, currencies and commodities are zero sum games (less than zero, if you take into account trading fees and such), and thus gambling. Bitcoin falls into this category.

Jonathan
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Re: Bitcoin

Post by Jonathan » Mon Aug 14, 2017 4:47 pm

inbox788 wrote:
Mon Aug 14, 2017 4:10 pm
gambling - a game of chance where the expected return is <= 1.
inbox788 wrote:
Mon Aug 14, 2017 4:10 pm
Bitcoin falls into this category.
Here's the bitcoin chart since 2011. Over 88,000% return. The charts are all strongly in the green for similar 2-year returns, 1-year, 6-month, 30-day, 7-day, and 1-day. We can't say that bitcoin won't plummet tomorrow, and I realize that past performance can't predict future results. Nevertheless, it's difficult to reconcile the historical data with "expected return is <= 1".

Image

It's possible that bitcoin simply doesn't fit into current models used to describe various methods of investing, and that's fine too. Again, bitcoin may drop to zero tomorrow, but, so far, it's been one of the greatest investments in human history.

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rmelvey
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Re: Bitcoin

Post by rmelvey » Mon Aug 14, 2017 4:55 pm

I have money that I can afford to lose in bitcoin/ethereum. I plan on buying another $1k worth of bitcoin this week (ACH transfers take 4 days for GDAX :? )

I think bitcoin has a lot of potential. Institutions are just starting to dip their toes in. It could play a role similar to gold in portfolios, but with far greater potential for tax evasion / money laundering / skirting capital controls :twisted: The addressable market is huge.

Nate79
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Re: Bitcoin

Post by Nate79 » Mon Aug 14, 2017 5:40 pm

Jonathan wrote:
Mon Aug 14, 2017 4:47 pm
inbox788 wrote:
Mon Aug 14, 2017 4:10 pm
gambling - a game of chance where the expected return is <= 1.
inbox788 wrote:
Mon Aug 14, 2017 4:10 pm
Bitcoin falls into this category.
Here's the bitcoin chart since 2011. Over 88,000% return. The charts are all strongly in the green for similar 2-year returns, 1-year, 6-month, 30-day, 7-day, and 1-day. We can't say that bitcoin won't plummet tomorrow, and I realize that past performance can't predict future results. Nevertheless, it's difficult to reconcile the historical data with "expected return is <= 1".

Image

It's possible that bitcoin simply doesn't fit into current models used to describe various methods of investing, and that's fine too. Again, bitcoin may drop to zero tomorrow, but, so far, it's been one of the greatest investments in human history.
That's an interesting chart. It shows that the return was basically zero for 3 years (Dec 2013 to Dec 2016) and then in 6 months the market has gone crazy.

I don't speculate in currency markets. Neither some third world countries currency nor Bitcoin.

inbox788
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Re: Bitcoin

Post by inbox788 » Mon Aug 14, 2017 5:53 pm

Jonathan wrote:
Mon Aug 14, 2017 4:47 pm
Here's the bitcoin chart since 2011. Over 88,000% return. The charts are all strongly in the green for similar 2-year returns, 1-year, 6-month, 30-day, 7-day, and 1-day. We can't say that bitcoin won't plummet tomorrow, and I realize that past performance can't predict future results. Nevertheless, it's difficult to reconcile the historical data with "expected return is <= 1".
Expected return isn't based on history or some graph. The graph clearly shows a historic trend, a fad, or it could be a bubble, but nothing fundamental explains the growth or value, nor is it sustainable (i.e. can't just draw the line to infinity). The game of currencies and bitcoin is that folks are swapping things among themselves. Where does the return come from other than another player that adds more to the game expecting a future player to add more (greater fool theory)? (i.e. Mark Cuban and Yahoo investors that followed)

With bonds, someone is paying interest, so adding to the pool. In a business, customers pay and companies are expected to be profitable (even if they begin or at times lose money), and again, more money is added to the pool. Even with real estate, where there ins't any clear monies added to the pool, there is at least a rent or use value. With bitcoin, there are a few rare examples of such value, but so far quite limited and possibly fleeting.
Last edited by inbox788 on Mon Aug 14, 2017 5:59 pm, edited 1 time in total.

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tadamsmar
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Re: Bitcoin

Post by tadamsmar » Mon Aug 14, 2017 5:57 pm

inbox788 wrote:
Mon Aug 14, 2017 4:10 pm
I've come to settle on these definitions:

gambling - a game of chance where the expected return is <= 1.
investing - a game of chance where the expected return is > 1.

Poker is a game of skill, where the professionals are investing their time with good returns, and everyone else is gambling.

IMO, currencies and commodities are zero sum games (less than zero, if you take into account trading fees and such), and thus gambling. Bitcoin falls into this category.
Suppose I offer you a bet on a biased coin. You have a 51% chance of winning the coin toss.

But I stipulate that you have to bet everything you own on this one coin toss.

If you take the bet, that's investing according to your definition. Are you sure you thought it through correctly before you proposed that definition?

Also there are card counters who have an edge in Blackjack and manage their money to make a reliable profit. But since it is not Poker you are claiming that this is gambling.

inbox788
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Re: Bitcoin

Post by inbox788 » Mon Aug 14, 2017 6:05 pm

tadamsmar wrote:
Mon Aug 14, 2017 5:57 pm
Suppose I offer you a bet on a biased coin. You have a 51% chance of winning the coin toss.

But I stipulate that you have to bet everything you own on this one coin toss.

If you take the bet, that's investing according to your definition. Are you sure you thought it through correctly before you proposed that definition?

Also there are card counters who have an edge in Blackjack and manage their money to make a reliable profit. But since it is not Poker you are claiming that this is gambling.
I'd stipulate I'd bet my net worth one dollar at a time on that game. When and were shall we do it?

Yes, it's investing (E>1), but high risk. Your 100% all/none offer is a poor risk investment. Separate odds and expected return from risk. You want a game that has low risk and positive (E>1) expected return. Or at least a tolerable risk/return.

No, I said nothing about Blackjack. What you are describing is investing if in fact the card counter has an edge (E>1). Casinos are not in the business of losing money, so those folks are often banned. Casinos know the card counter/investor gains is from their loss. Whether it is really a good investment depends on the ROIC/ROIT (return on invested time).

BTW, using the same definition, insurance or extended warranties fall under gambling. Paired with whatever even is being insured it's a hedge. You might say not all gambling is bad. And you've shown you shouldn't invest in every investment. Food for thought.

need403bhelp
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Re: Bitcoin

Post by need403bhelp » Mon Aug 14, 2017 6:57 pm

inbox788 wrote:
Mon Aug 14, 2017 5:53 pm
Jonathan wrote:
Mon Aug 14, 2017 4:47 pm
Here's the bitcoin chart since 2011. Over 88,000% return. The charts are all strongly in the green for similar 2-year returns, 1-year, 6-month, 30-day, 7-day, and 1-day. We can't say that bitcoin won't plummet tomorrow, and I realize that past performance can't predict future results. Nevertheless, it's difficult to reconcile the historical data with "expected return is <= 1".
Expected return isn't based on history or some graph. The graph clearly shows a historic trend, a fad, or it could be a bubble, but nothing fundamental explains the growth or value, nor is it sustainable (i.e. can't just draw the line to infinity). The game of currencies and bitcoin is that folks are swapping things among themselves. Where does the return come from other than another player that adds more to the game expecting a future player to add more (greater fool theory)? (i.e. Mark Cuban and Yahoo investors that followed)

With bonds, someone is paying interest, so adding to the pool. In a business, customers pay and companies are expected to be profitable (even if they begin or at times lose money), and again, more money is added to the pool. Even with real estate, where there ins't any clear monies added to the pool, there is at least a rent or use value. With bitcoin, there are a few rare examples of such value, but so far quite limited and possibly fleeting.
I like an even simpler explanation, adapted from Rick Ferri's "All About Asset Allocation" in his chapter on commodities.

Stocks - you are buying the future dividends (which, as you pointed out, are generated by the company's future profits).

Bonds are just a contract between you and someone else to pay you interest regularly - you are buying those payments.

Real estate - you are buying the regular income from renting it out.

Bitcoin on the other hand, like other commodities, has no regular payout nor inherent capacity to generate regular payments to you. Over the long term, there is no regularly paid out reward for owning bitcoin, and thus no reason for its price to grow (above the rate of inflation) indefinitely.

Jonathan
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Re: Bitcoin

Post by Jonathan » Mon Aug 14, 2017 7:57 pm

When I look up "investing", the definition is pretty consistent: putting money out in the hopes of getting more money. Nevertheless, I'm open to different views on that definition.

Yes, the bitcoin charts are a bit striking. I generally accompany them with some "could drop to zero tomorrow" type of phrasing.

If you're trying to get around why rational people might think bitcoin would have value, consider approaching it like this:

----------
Why does gold have value? It undeniably does, and has held value for millennia. Not because of its limited industrial value; steel is probably more valuable in that regard. All gold is about $6 or $7 trillion in value now. That's around 10% of the value of all global stock markets. Gold is divisible, difficult to counterfeit, durable (difficult to destroy), fungible, transferable, and perhaps most importantly: predictably scarce. Those same qualities of gold are present in bitcoin.
----------

Iruntons
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Re: Bitcoin

Post by Iruntons » Mon Aug 14, 2017 10:44 pm

I bought in to a few of the Crypto coins after doing research on them. 5 weeks in and I have made 5 times my investment. I pulled out my original investment after the 2nd week. Now, I'm just playing with house money. I'm learning something new and I'm having fun doing it. Plus, it has turned into a substantial amount of money. It's not for everyone.

WentzWagon
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Re: Bitcoin

Post by WentzWagon » Mon Aug 14, 2017 11:12 pm

Iruntons wrote:
Mon Aug 14, 2017 10:44 pm
I bought in to a few of the Crypto coins after doing research on them. 5 weeks in and I have made 5 times my investment. I pulled out my original investment after the 2nd week. Now, I'm just playing with house money. I'm learning something new and I'm having fun doing it. Plus, it has turned into a substantial amount of money. It's not for everyone.
What did you buy? Also where do you purchase and store

Engineer250
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Re: Bitcoin

Post by Engineer250 » Mon Aug 14, 2017 11:53 pm

Investing in Bitcoin to me seems closest to currency trading in a really small country that has no central bank, no military, no treaties with other countries, no citizens, no industry, no infrastructure, and no laws. If that appeals to you, by all means go ahead.
Where the tides of fortune take us, no man can know.

inbox788
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Re: Bitcoin

Post by inbox788 » Tue Aug 15, 2017 3:14 am

Jonathan wrote:
Mon Aug 14, 2017 7:57 pm
Why does gold have value? It undeniably does, and has held value for millennia. Not because of its limited industrial value; steel is probably more valuable in that regard. All gold is about $6 or $7 trillion in value now. That's around 10% of the value of all global stock markets. Gold is divisible, difficult to counterfeit, durable (difficult to destroy), fungible, transferable, and perhaps most importantly: predictably scarce. Those same qualities of gold are present in bitcoin.
Besides gold, people also treat diamonds, silver, platinum, and other materials as valuable beyond their intrinsic or use value. And they're all relatively scarce. Just happens gold is the most popular, and why that is may simply be historic. Similarly, bitcoin may be historically the first cryptocurrency, but today, dozens or more new candidates are available as alternates. Whether bitcoin remains the top dog in a millennia is still to be determined. With newer currencies growing, bitcoin may not even remain the most popular. And although there is scarcity built into bitcoin or any one digital currency, what's to stop people from creating new ones like with the other commodities? Copper, lead, lithium.

lorie
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Re: Bitcoin

Post by lorie » Tue Aug 15, 2017 3:23 am

Iruntons wrote:
Mon Aug 14, 2017 10:44 pm
I bought in to a few of the Crypto coins after doing research on them. 5 weeks in and I have made 5 times my investment. I pulled out my original investment after the 2nd week. Now, I'm just playing with house money. I'm learning something new and I'm having fun doing it. Plus, it has turned into a substantial amount of money. It's not for everyone.
That sounds amazing. Did you gain a lot yesterday?

inbox788
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Re: Bitcoin

Post by inbox788 » Tue Aug 15, 2017 7:52 am

lorie wrote:
Tue Aug 15, 2017 3:23 am
Iruntons wrote:
Mon Aug 14, 2017 10:44 pm
I bought in to a few of the Crypto coins after doing research on them. 5 weeks in and I have made 5 times my investment. I pulled out my original investment after the 2nd week. Now, I'm just playing with house money. I'm learning something new and I'm having fun doing it. Plus, it has turned into a substantial amount of money. It's not for everyone.
That sounds amazing. Did you gain a lot yesterday?
I wonder what it is that people are learning. Some people may not be taking away the right lesson. Pulling out original investment early doesn't appear to be new, but good strategy that would have helped Madoff investors. When the music stops (again), a whole new lesson will be provided to those holding the bag.

fatlever
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Re: Bitcoin

Post by fatlever » Tue Aug 15, 2017 9:01 am

arcticpineapplecorp. wrote:
Mon Aug 14, 2017 1:48 pm
If you buy 1 bitcoin, in 100 years you'll still just have 1 bitcoin. The value of that bitcoin may be more than you paid for it. But that's still gambling, not investing. Because you're receiving no earnings/dividends. The only way you make money is if you sell it for more than you paid. With investing, the share price can change or remain the same but you're still receiving your share of the earnings over time. Last I checked, bitcoin pays no earnings/dividends. That's because it's a currency. If you buy currencies you're gambling/guessing on the future direction of the value of that currency.
You're choosing to make up your own definition of investment. Appreciation in value is an investment.

People bought and held useless tracts of land or gold that just sat around that didn't have any earning or dividends and nobody said "ha that piece of land or your gold does not have any earnings and dividends, it's not an investment!"
Invest - to put (money) to use, by purchase or expenditure, in something offering potential profitable returns, as interest, income, or appreciation in value.
Bitcoin really is more of an asset than a currency though. Acceptance is not widespread, mostly dark markets, VPN services, porn and only a small selection of mainstream sites. Transaction confirmation can a few minutes to a days and transaction costs are too high for small purchases.

But it's crazy how an intelligent group such of Bogleheads who research and analyze everything to death have continued to brush off Bitcoin as a tulip frenzy. Tulip mania lasted like a year, if this guy who called it a tulip back in 2011 had put in $100, it would be 25K checking the Bitcoin time machine

http://whatifbitcoin.com/result.html?da ... in=Bitcoin
SP-diceman wrote:
Wed Jun 22, 2011 10:08 am
It’s the 2011 version of The Holland Tulip Mania.
The more things change, the more they stay the same.
  • Yes, there is massive massive speculation.
  • But there is also a huge number of people that view Bitcoin as a safe haven to put money away from governments that can manipulate currencies and produce massive inflation
  • A ton of people who do not have have access to any sort of investments and Bitcoin is the only appreciating asset EVERYONE has access to
  • A lot of people who believe in the technology and see that cryptos will be the new currencies and store of value.
This whole religious war you saw with the Bitcoin decentralization/scaling issue split and another upcoming one is all around keeping Bitcoin decentralized and out of the control of any one group or governments. People are actually willing to destroy something that has a $50 billion market cap because they believe in it so strongly. And you continue to call it tulips after nearly 10 years. :oops:

kosomoto
Posts: 350
Joined: Tue Nov 24, 2015 8:51 pm

Re: Bitcoin

Post by kosomoto » Tue Aug 15, 2017 9:48 am

fatlever wrote:
Tue Aug 15, 2017 9:01 am
arcticpineapplecorp. wrote:
Mon Aug 14, 2017 1:48 pm
If you buy 1 bitcoin, in 100 years you'll still just have 1 bitcoin. The value of that bitcoin may be more than you paid for it. But that's still gambling, not investing. Because you're receiving no earnings/dividends. The only way you make money is if you sell it for more than you paid. With investing, the share price can change or remain the same but you're still receiving your share of the earnings over time. Last I checked, bitcoin pays no earnings/dividends. That's because it's a currency. If you buy currencies you're gambling/guessing on the future direction of the value of that currency.
You're choosing to make up your own definition of investment. Appreciation in value is an investment.

People bought and held useless tracts of land or gold that just sat around that didn't have any earning or dividends and nobody said "ha that piece of land or your gold does not have any earnings and dividends, it's not an investment!"
Invest - to put (money) to use, by purchase or expenditure, in something offering potential profitable returns, as interest, income, or appreciation in value.
Bitcoin really is more of an asset than a currency though. Acceptance is not widespread, mostly dark markets, VPN services, porn and only a small selection of mainstream sites. Transaction confirmation can a few minutes to a days and transaction costs are too high for small purchases.

But it's crazy how an intelligent group such of Bogleheads who research and analyze everything to death have continued to brush off Bitcoin as a tulip frenzy. Tulip mania lasted like a year, if this guy who called it a tulip back in 2011 had put in $100, it would be 25K checking the Bitcoin time machine

http://whatifbitcoin.com/result.html?da ... in=Bitcoin
SP-diceman wrote:
Wed Jun 22, 2011 10:08 am
It’s the 2011 version of The Holland Tulip Mania.
The more things change, the more they stay the same.
  • Yes, there is massive massive speculation.
  • But there is also a huge number of people that view Bitcoin as a safe haven to put money away from governments that can manipulate currencies and produce massive inflation
  • A ton of people who do not have have access to any sort of investments and Bitcoin is the only appreciating asset EVERYONE has access to
  • A lot of people who believe in the technology and see that cryptos will be the new currencies and store of value.
This whole religious war you saw with the Bitcoin decentralization/scaling issue split and another upcoming one is all around keeping Bitcoin decentralized and out of the control of any one group or governments. People are actually willing to destroy something that has a $50 billion market cap because they believe in it so strongly. And you continue to call it tulips after nearly 10 years. :oops:
"Bitcoin is the only appreciating asset EVERYONE has access to"

Did you forget all the other altcoins? Did you forget real assets as well?

Your argument is flawed.

There are multiple other coins technologically superior to bitcoin and more being made each day. If everyone decides to switch to ethereum or whatever, pop goes the bitcoin bubble.

Accrual
Posts: 44
Joined: Tue Feb 07, 2017 3:22 pm
Location: Durham, NC.

Re: Bitcoin

Post by Accrual » Tue Aug 15, 2017 10:05 am

Buying Bitcoin for the sole purpose of expecting appreciation is undoubtedly speculation.

I am happy for those who took the risk and purchased Bitcoin as it has paid off immensely.

I do not lose sleep at night because I did not/will not jump on the Bitcoin train.

fatlever
Posts: 106
Joined: Sat Apr 16, 2011 8:37 am

Re: Bitcoin

Post by fatlever » Tue Aug 15, 2017 10:46 am

kosomoto wrote:
Tue Aug 15, 2017 9:48 am
fatlever wrote:
Tue Aug 15, 2017 9:01 am
arcticpineapplecorp. wrote:
Mon Aug 14, 2017 1:48 pm
If you buy 1 bitcoin, in 100 years you'll still just have 1 bitcoin. The value of that bitcoin may be more than you paid for it. But that's still gambling, not investing. Because you're receiving no earnings/dividends. The only way you make money is if you sell it for more than you paid. With investing, the share price can change or remain the same but you're still receiving your share of the earnings over time. Last I checked, bitcoin pays no earnings/dividends. That's because it's a currency. If you buy currencies you're gambling/guessing on the future direction of the value of that currency.
You're choosing to make up your own definition of investment. Appreciation in value is an investment.

People bought and held useless tracts of land or gold that just sat around that didn't have any earning or dividends and nobody said "ha that piece of land or your gold does not have any earnings and dividends, it's not an investment!"
Invest - to put (money) to use, by purchase or expenditure, in something offering potential profitable returns, as interest, income, or appreciation in value.
Bitcoin really is more of an asset than a currency though. Acceptance is not widespread, mostly dark markets, VPN services, porn and only a small selection of mainstream sites. Transaction confirmation can a few minutes to a days and transaction costs are too high for small purchases.

But it's crazy how an intelligent group such of Bogleheads who research and analyze everything to death have continued to brush off Bitcoin as a tulip frenzy. Tulip mania lasted like a year, if this guy who called it a tulip back in 2011 had put in $100, it would be 25K checking the Bitcoin time machine

http://whatifbitcoin.com/result.html?da ... in=Bitcoin
SP-diceman wrote:
Wed Jun 22, 2011 10:08 am
It’s the 2011 version of The Holland Tulip Mania.
The more things change, the more they stay the same.
  • Yes, there is massive massive speculation.
  • But there is also a huge number of people that view Bitcoin as a safe haven to put money away from governments that can manipulate currencies and produce massive inflation
  • A ton of people who do not have have access to any sort of investments and Bitcoin is the only appreciating asset EVERYONE has access to
  • A lot of people who believe in the technology and see that cryptos will be the new currencies and store of value.
This whole religious war you saw with the Bitcoin decentralization/scaling issue split and another upcoming one is all around keeping Bitcoin decentralized and out of the control of any one group or governments. People are actually willing to destroy something that has a $50 billion market cap because they believe in it so strongly. And you continue to call it tulips after nearly 10 years. :oops:
"Bitcoin is the only appreciating asset EVERYONE has access to"

Did you forget all the other altcoins? Did you forget real assets as well?

Your argument is flawed.

There are multiple other coins technologically superior to bitcoin and more being made each day. If everyone decides to switch to ethereum or whatever, pop goes the bitcoin bubble.

I was talking about the fact that most people in the world do not have access to stock markets, mutual funds, cannot buy land, don't have a good way to store gold securely, etc. Compared to that Bitcoin is a lot more accessible and can be stored securely.

Yes, there are many alternatives but until recently most online exchanges only allow you to buy Bitcoin with your local currency and even the biggest one in the US only allows 3 and trading within 3. Most people that venture into cryptocurrencies will be in Bitcoin. Most other altcoins seem to die off after the hype. Most look like garbage to me. Sure, there is a lot of money to be made picking and timing the right ones when they are getting hyped and dump it for the garbage it is but now you are really speculating and gambling.

I have a lot of doubts about some of these contract platforms. I played around with Solidity and the Ethereum VM and I am not impressed with the language and have doubts about serious financial applications running on the EVM. Antshares/NEO jumped from .55¢ when I learned about it to like $50 in 3 months. I can't find any documentation on it, how to write contracts , etc. I don't even understand IOTA. I have a development background working across financial apps in BOA, TIAA, Fidelity so I am not technically illiterate. But it's crazy when I read information saying "they have solid technology" based on superficial marketing verbiage.

I've made some money jumping in and out of hypes but was just for the thrills with play money. I think once you get some Bitcoin and there is a danger in jumping to other cryptocurrencies because suddenly Bitcoin's performance looks laggardly when you could have turned a $1K into $50K in 7 weeks. You could get lucky but most likely you'll lose money because almost everything else is hyped crap.

That is another reason why Bitcoin's growth will continue. All this money is pouring into cryptocurrencies but it most of it will go back to Bitcoin.

Jonathan
Posts: 391
Joined: Tue Apr 30, 2013 5:36 pm

Re: Bitcoin

Post by Jonathan » Tue Aug 15, 2017 11:00 am

If you think bitcoin is "tulips", good news: you can short bitcoin. Shorting means when bitcoin goes down, your investment goes up.

Shorting is widely available, but bogleheads may be most interested in shorting on GDAX, Coinbase's exchange. Coinbase is a regulated, FDIC insured, mainstream exchange, whose investors include the New York Stock Exchange, Andreessen Horowitz, and Union Square Ventures.

I understand this may come across as a snarky put-your-money-where-your-mouth-is sort of challenge, but I'm being earnest. Shorters can reduce volatility, help with price discovery, and generally increase market health. Perhaps this was one of the problems with Tulip Mania or the South Sea Bubble: they weren't shortable.

Valuethinker
Posts: 33398
Joined: Fri May 11, 2007 11:07 am

Re: Bitcoin

Post by Valuethinker » Tue Aug 15, 2017 11:14 am

inbox788 wrote:
Tue Aug 15, 2017 3:14 am
Jonathan wrote:
Mon Aug 14, 2017 7:57 pm
Why does gold have value? It undeniably does, and has held value for millennia. Not because of its limited industrial value; steel is probably more valuable in that regard. All gold is about $6 or $7 trillion in value now. That's around 10% of the value of all global stock markets. Gold is divisible, difficult to counterfeit, durable (difficult to destroy), fungible, transferable, and perhaps most importantly: predictably scarce. Those same qualities of gold are present in bitcoin.
Besides gold, people also treat diamonds, silver, platinum, and other materials as valuable beyond their intrinsic or use value. And they're all relatively scarce. Just happens gold is the most popular, and why that is may simply be historic. Similarly, bitcoin may be historically the first cryptocurrency, but today, dozens or more new candidates are available as alternates. Whether bitcoin remains the top dog in a millennia is still to be determined. With newer currencies growing, bitcoin may not even remain the most popular. And although there is scarcity built into bitcoin or any one digital currency, what's to stop people from creating new ones like with the other commodities? Copper, lead, lithium.
Germanium ;-).

https://www.fantasticfiction.com/b/jame ... flight.htm

Seriously cobalt is definitely one where a supply crunch seems to be coming. Basically one source in the world (Democratic Republic of Congo) and no easy alternatives.

kosomoto
Posts: 350
Joined: Tue Nov 24, 2015 8:51 pm

Re: Bitcoin

Post by kosomoto » Tue Aug 15, 2017 11:36 am

fatlever wrote:
Tue Aug 15, 2017 10:46 am
kosomoto wrote:
Tue Aug 15, 2017 9:48 am
fatlever wrote:
Tue Aug 15, 2017 9:01 am
arcticpineapplecorp. wrote:
Mon Aug 14, 2017 1:48 pm
If you buy 1 bitcoin, in 100 years you'll still just have 1 bitcoin. The value of that bitcoin may be more than you paid for it. But that's still gambling, not investing. Because you're receiving no earnings/dividends. The only way you make money is if you sell it for more than you paid. With investing, the share price can change or remain the same but you're still receiving your share of the earnings over time. Last I checked, bitcoin pays no earnings/dividends. That's because it's a currency. If you buy currencies you're gambling/guessing on the future direction of the value of that currency.
You're choosing to make up your own definition of investment. Appreciation in value is an investment.

People bought and held useless tracts of land or gold that just sat around that didn't have any earning or dividends and nobody said "ha that piece of land or your gold does not have any earnings and dividends, it's not an investment!"
Invest - to put (money) to use, by purchase or expenditure, in something offering potential profitable returns, as interest, income, or appreciation in value.
Bitcoin really is more of an asset than a currency though. Acceptance is not widespread, mostly dark markets, VPN services, porn and only a small selection of mainstream sites. Transaction confirmation can a few minutes to a days and transaction costs are too high for small purchases.

But it's crazy how an intelligent group such of Bogleheads who research and analyze everything to death have continued to brush off Bitcoin as a tulip frenzy. Tulip mania lasted like a year, if this guy who called it a tulip back in 2011 had put in $100, it would be 25K checking the Bitcoin time machine

http://whatifbitcoin.com/result.html?da ... in=Bitcoin
SP-diceman wrote:
Wed Jun 22, 2011 10:08 am
It’s the 2011 version of The Holland Tulip Mania.
The more things change, the more they stay the same.
  • Yes, there is massive massive speculation.
  • But there is also a huge number of people that view Bitcoin as a safe haven to put money away from governments that can manipulate currencies and produce massive inflation
  • A ton of people who do not have have access to any sort of investments and Bitcoin is the only appreciating asset EVERYONE has access to
  • A lot of people who believe in the technology and see that cryptos will be the new currencies and store of value.
This whole religious war you saw with the Bitcoin decentralization/scaling issue split and another upcoming one is all around keeping Bitcoin decentralized and out of the control of any one group or governments. People are actually willing to destroy something that has a $50 billion market cap because they believe in it so strongly. And you continue to call it tulips after nearly 10 years. :oops:
"Bitcoin is the only appreciating asset EVERYONE has access to"

Did you forget all the other altcoins? Did you forget real assets as well?

Your argument is flawed.

There are multiple other coins technologically superior to bitcoin and more being made each day. If everyone decides to switch to ethereum or whatever, pop goes the bitcoin bubble.

I was talking about the fact that most people in the world do not have access to stock markets, mutual funds, cannot buy land, don't have a good way to store gold securely, etc. Compared to that Bitcoin is a lot more accessible and can be stored securely.

Yes, there are many alternatives but until recently most online exchanges only allow you to buy Bitcoin with your local currency and even the biggest one in the US only allows 3 and trading within 3. Most people that venture into cryptocurrencies will be in Bitcoin. Most other altcoins seem to die off after the hype. Most look like garbage to me. Sure, there is a lot of money to be made picking and timing the right ones when they are getting hyped and dump it for the garbage it is but now you are really speculating and gambling.

I have a lot of doubts about some of these contract platforms. I played around with Solidity and the Ethereum VM and I am not impressed with the language and have doubts about serious financial applications running on the EVM. Antshares/NEO jumped from .55¢ when I learned about it to like $50 in 3 months. I can't find any documentation on it, how to write contracts , etc. I don't even understand IOTA. I have a development background working across financial apps in BOA, TIAA, Fidelity so I am not technically illiterate. But it's crazy when I read information saying "they have solid technology" based on superficial marketing verbiage.

I've made some money jumping in and out of hypes but was just for the thrills with play money. I think once you get some Bitcoin and there is a danger in jumping to other cryptocurrencies because suddenly Bitcoin's performance looks laggardly when you could have turned a $1K into $50K in 7 weeks. You could get lucky but most likely you'll lose money because almost everything else is hyped crap.

That is another reason why Bitcoin's growth will continue. All this money is pouring into cryptocurrencies but it most of it will go back to Bitcoin.
People who have no access to any form of stock market don't have enough money to move the needle on bitcoin. The wealthy in almost every country can find a way to open a foreign brokerage. I don't think a grassroots purchasing of bitcoin in Sudan is going to affect the 70 billion market cap much. Even Nigeria has a stock market.

While it takes a few extra transfers, you don't need the major exchanges to invest in altcoins.

Jonathan
Posts: 391
Joined: Tue Apr 30, 2013 5:36 pm

Re: Bitcoin

Post by Jonathan » Tue Aug 15, 2017 11:54 am

You can create your own cryptocurrency in 5 minutes. Thousands of other cryptocurrencies have been created, and none have yet beaten bitcoin in market cap. Bitcoin runs on the largest computer network in the history of mankind. This doesn't mean that they can't/won't surpass bitcoin in value, it just means that bitcoin has been constantly strength tested.

Nevertheless, I find the altcoin scene fascinating, and I've learned a great deal by comparing/contrasting different coins. I do believe that if bitcoin "succeeds" (hard to quantify success), then there will be various other successful altcoins too, just like precious metals.

The gold comparison is interesting because my perception is that gold has always had an uneasy relationship with Boglehead philosophy. Its value is undeniable, but it doesn't fit cleanly into the belief system as do other assets or investing principles. Discussions like this may be a reflection of that same conceptual unease, but centered around bitcoin instead of gold.

need403bhelp
Posts: 439
Joined: Thu May 28, 2015 6:25 pm

Re: Bitcoin

Post by need403bhelp » Tue Aug 15, 2017 12:30 pm

Jonathan wrote:
Tue Aug 15, 2017 11:54 am
The gold comparison is interesting because my perception is that gold has always had an uneasy relationship with Boglehead philosophy. Its value is undeniable, but it doesn't fit cleanly into the belief system as do other assets or investing principles. Discussions like this may be a reflection of that same conceptual unease, but centered around bitcoin instead of gold.
There is an interesting, at least theoretical, difference between the historically-inflation-matching performance of gold and potential future price of bitcoin vs inflation.

Specifically, think about the best-case scenario for someone who is betting in the long-term on bitcoin: bitcoin wins, and every item that we buy is priced in bitcoin.

Now, instead of the CPI-U being computed in dollars, it is computed in bitcoins.

That means that, by definition, 3% inflation means a 3% DECREASE in bitcoin value.

In other words, in the extreme case, if bitcoin becomes the de facto currency of the US, bitcoin will actually have a perfect NEGATIVE correlation with inflation, and is guaranteed to lose you money as an investment. On the other hand, this has not been historically true with other commodities, such as gold, which have at least kept up with inflation over the long term.

Jonathan
Posts: 391
Joined: Tue Apr 30, 2013 5:36 pm

Re: Bitcoin

Post by Jonathan » Tue Aug 15, 2017 12:56 pm

Isn't inflation reasonably well-correlated with the increase in money supply? See: https://en.wikipedia.org/wiki/Monetary_inflation

So the counter-argument goes like this: fiat currency is inherently inflationary, whereas bitcoin is not. Money supply increases, gold supply increases. Inflation increases. The amount of bitcoins that will ever be created is fixed: 21 million. The final bitcoin is expected to be mined around 2140. Thus, bitcoin is inherently deflationary.

Your point is still interesting.

Iruntons
Posts: 26
Joined: Mon Mar 20, 2017 8:54 pm

Re: Bitcoin

Post by Iruntons » Tue Aug 15, 2017 1:02 pm

lorie wrote:
Tue Aug 15, 2017 3:23 am
Iruntons wrote:
Mon Aug 14, 2017 10:44 pm
I bought in to a few of the Crypto coins after doing research on them. 5 weeks in and I have made 5 times my investment. I pulled out my original investment after the 2nd week. Now, I'm just playing with house money. I'm learning something new and I'm having fun doing it. Plus, it has turned into a substantial amount of money. It's not for everyone.
That sounds amazing. Did you gain a lot yesterday?
No!! I went down about 15% overall. Not near as much fun. Today is much better. Trust me, I realize the volatility of the Crypto market.

Iruntons
Posts: 26
Joined: Mon Mar 20, 2017 8:54 pm

Re: Bitcoin

Post by Iruntons » Tue Aug 15, 2017 1:05 pm

flyersrule wrote:
Mon Aug 14, 2017 11:12 pm
Iruntons wrote:
Mon Aug 14, 2017 10:44 pm
I bought in to a few of the Crypto coins after doing research on them. 5 weeks in and I have made 5 times my investment. I pulled out my original investment after the 2nd week. Now, I'm just playing with house money. I'm learning something new and I'm having fun doing it. Plus, it has turned into a substantial amount of money. It's not for everyone.
What did you buy? Also where do you purchase and store
I buy and sell on Bittrex and store on a Ledger Nano S. I hold 5 different coins but the bulk is in NEO and Stratus

Gauss44
Posts: 78
Joined: Wed Apr 24, 2013 12:53 pm

Re: Bitcoin

Post by Gauss44 » Tue Aug 15, 2017 2:13 pm

I have bitcoin. My experience is that bitcoin is a great investment as long as:

1. You store it in a wallet that doesn't get either hacked or seized. So, research the companies you use. Consider scatter hoarding, but don't if you have to resort to sketchy options.

AND

2. You are able to successfully cash it out or at least exchange it for another currency when you want to. My advice is to make small transactions before larger ones to check to see if it will work properly.

Definitely be ready for rapid changes in value!!!!

EDIT: Part of my faith in bitcoin comes from the people investing in it and how much they are investing. Another part of it comes from the idea that a digital currency makes sense in a digital age.

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