Bitcoin: food for thought

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tadamsmar
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Bitcoin: food for thought

Post by tadamsmar » Sat Dec 23, 2017 1:32 pm

Here's the earliest mention of bitcoin on Bogleheads that I can find:

viewtopic.php?f=10&t=84400&p=1208595&hi ... n#p1208595

October 19, 2011

The title is: Bitcoin value falls 90% since June

On the thread, Bitcoin is variously called a scam and a Ponzi scheme.

You could get a bitcoin for less that 4 bucks back then. You could have made a million while taking on no significant risk, only the risk of losing $400.

Many of us hold the TSM or EM or small-cap funds. Via those firms we chronically held $400 in some pretty dicey publicly traded companies while simultaneously calling Bitcoin a scam and a Ponzi scheme. Some of those investments no doubt were a total loss.

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Re: Bitcoin: food for thought

Post by pokebowl » Sat Dec 23, 2017 1:44 pm

I would argue the difference between 2011 and 2017 is bitcoin has since been backed by the full faith and credit of investor hype and removed itself from the Satoshi standard.


...I'll show myself out.

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Re: Bitcoin: food for thought

Post by MichaelRpdx » Sat Dec 23, 2017 1:46 pm

tadamsmar wrote:
Sat Dec 23, 2017 1:32 pm
Here's the earliest mention of bitcoin on Bogleheads that I can find:

viewtopic.php?f=10&t=84400&p=1208595&hi ... n#p1208595

October 19, 2011

The title is: Bitcoin value falls 90% since June
Thank you for the research.
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VictoriaF
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Re: Bitcoin: food for thought

Post by VictoriaF » Sat Dec 23, 2017 1:48 pm

tadamsmar wrote:
Sat Dec 23, 2017 1:32 pm
Many of us hold the TSM or EM or small-cap funds. Via those firms we chronically held $400 in some pretty dicey publicly traded companies while simultaneously calling Bitcoin a scam and a Ponzi scheme. Some of those investments no doubt were a total loss.
The difference is that it's impossible to disentangle Ponzi stocks from the TSM or EM, whereas Bitcoin is a stand-alone Ponzi.

Victoria
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Re: Bitcoin: food for thought

Post by grayfox » Sat Dec 23, 2017 1:49 pm

tadamsmar wrote:
Sat Dec 23, 2017 1:32 pm
Here's the earliest mention of bitcoin on Bogleheads that I can find:

viewtopic.php?f=10&t=84400&p=1208595&hi ... n#p1208595

October 19, 2011
You didn't look very far. The very first post in that thread has links to earlier discussions

Earlier discussions here:
Bitcoins, the new currency? Feb 14, 2011 8:41 pm
Bitcoin: What is it, in Plain English Jun 20, 2011 1:28 pm
Bitcoin bubble burst? Jun 14, 2011 9:37 am

How could you miss that? It's in the very first post.

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tadamsmar
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Re: Bitcoin: food for thought

Post by tadamsmar » Sat Dec 23, 2017 2:05 pm

VictoriaF wrote:
Sat Dec 23, 2017 1:48 pm
tadamsmar wrote:
Sat Dec 23, 2017 1:32 pm
Many of us hold the TSM or EM or small-cap funds. Via those firms we chronically held $400 in some pretty dicey publicly traded companies while simultaneously calling Bitcoin a scam and a Ponzi scheme. Some of those investments no doubt were a total loss.
The difference is that it's impossible to disentangle Ponzi stocks from the TSM or EM, whereas Bitcoin is a stand-alone Ponzi.

Victoria
Is Bitcoin really a Ponzi?

Is a Rai Stone a Ponzi or just a weird kind of money?

I assume the posters here who called it a Ponzi were just using some kind of metaphor or simile.

"My love is like a rose" is a simile.

"My love is a rose" could be surrealism.

Posters here often confuse metaphors with reality.

I always thought it was an earnest if crazy effort to create something like the Rai Stone.

The TSM is just a easier way to diversify a bit of money into some dicey stuff. In my view dicey is dicey, there is no important difference.
Last edited by tadamsmar on Sat Dec 23, 2017 2:07 pm, edited 1 time in total.

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Re: Bitcoin: food for thought

Post by grayfox » Sat Dec 23, 2017 2:06 pm

Read the fifth post in that post Bitcoins - the new currency? from user aaroni:
It's an interesting concept. The white paper was a good read.

I wonder how well the system can scale. Since every node needs to receive every transaction, I imagine there are serious scaling barriers. When I downloaded the software and ran it for about an hour, I noticed that it continuously used about 50-100 kilobytes/sec of downlink bandwidth to receive "blocks". I'm not sure whether this is realtime transaction data or a transaction history, but either way it suggests to me that the scheme can't scale more than a few orders of magnitude beyond its current size.
In about 2 seconds, he figured out that there was a scaling problem with bitcoin. This was way back in 2011. Kudos to aaroni for figuring that out so quick.

Then he goes on the say
Another thing that bothers me about proof-of-work systems is how they're inherently wasteful. To some extent, pumping carbon dioxide into the atmosphere to solve silly and arbitrary cryptographic challenges is part of their design. The amount of waste has to be significant; otherwise a well funded adversary could easily game the system. If the system works very well and spreads this inefficiency over millions of participants, it may be worth it, but if an alternative system that's not based on proof-of-work can achieve the same basic goals, I would tend to prefer that system.
So he saw that problem, too.
Last edited by grayfox on Sat Dec 23, 2017 2:09 pm, edited 1 time in total.

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Re: Bitcoin: food for thought

Post by alpine_boglehead » Sat Dec 23, 2017 2:09 pm

tadamsmar, thanks for the interesting thought. I'll present what might be the probably standard orthodox Boglehead line of reasoning - by the same logic you would now need to invest in every available crypto currency available. And every small cap company (and startup), which could become the next Nextflix.

And that's the very foundation of indexing - we just don't know which one will be the next big thing, but we'll own it. Unfortunately, the same mechanism that guarantees participation in the big winners forces us to buy all the companies which will go belly up as your rightly say.

Bitcoin definitely has characteristics of a Ponzi scheme. There's a tremendous amount of "real" scams now going on with all the Initial Coin Offerings and selfmade crypto coins. In the early days, it was (and maybe still is) very hard to say if Bitcoin wasn't like one of these.

You will also find people who say that the stock market is a scam and a Ponzi scheme. And no doubt there's a certain amount of (small-cap) companies that are fleecing their investors. Massive share dilution is often brought up as the reason why early investors in China didn't really benefit from the economic boom.

To me it boils down to stocks being ownership in productive assets, vs. currencies etc. being just based on the trust (hope) that someone else will pay you the same or more in the future.

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tadamsmar
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Re: Bitcoin: food for thought

Post by tadamsmar » Sat Dec 23, 2017 2:16 pm

grayfox wrote:
Sat Dec 23, 2017 1:49 pm
tadamsmar wrote:
Sat Dec 23, 2017 1:32 pm
Here's the earliest mention of bitcoin on Bogleheads that I can find:

viewtopic.php?f=10&t=84400&p=1208595&hi ... n#p1208595

October 19, 2011
You didn't look very far. The very first post in that thread has links to earlier discussions

Earlier discussions here:
Bitcoins, the new currency? Feb 14, 2011 8:41 pm
Bitcoin: What is it, in Plain English Jun 20, 2011 1:28 pm
Bitcoin bubble burst? Jun 14, 2011 9:37 am

How could you miss that? It's in the very first post.
I used the Bogleheads advanced search with post time in ascending order:

search.php

I figured that would work and did not look for something earlier.

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VictoriaF
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Re: Bitcoin: food for thought

Post by VictoriaF » Sat Dec 23, 2017 2:17 pm

tadamsmar wrote:
Sat Dec 23, 2017 2:05 pm
VictoriaF wrote:
Sat Dec 23, 2017 1:48 pm
tadamsmar wrote:
Sat Dec 23, 2017 1:32 pm
Many of us hold the TSM or EM or small-cap funds. Via those firms we chronically held $400 in some pretty dicey publicly traded companies while simultaneously calling Bitcoin a scam and a Ponzi scheme. Some of those investments no doubt were a total loss.
The difference is that it's impossible to disentangle Ponzi stocks from the TSM or EM, whereas Bitcoin is a stand-alone Ponzi.

Victoria
Is Bitcoin really a Ponzi?

Is a Rai Stone a Ponzi or just a weird kind of money?

I assume the posters here who called it a Ponzi were just using some kind of metaphor or simile.

"My love is like a rose" is a simile.

"My love is a rose" could be surrealism.

Posters here often confuse metaphors with reality.

I always thought it was an earnest if crazy effort to create something like the Rai Stone.

The TSM is just a easier way to diversify a bit of money into some dicey stuff. In my view dicey is dicey, there is no important difference.
Hey, I used the word "Ponzi" because you had it in your OP! "Ponzi" means different things to different people. For some, it's synonymous with a scam. But a straightforward interpretation of a Ponzi scheme is that the asset value depends on others wanting it.

I am in awe of the sophistication of the Blockchain technology and Bitcoin service architecture, and I don't want to denigrate it. But I also will not invest in it until it becomes a part of the TSM.

Victoria
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tadamsmar
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Re: Bitcoin: food for thought

Post by tadamsmar » Sat Dec 23, 2017 2:28 pm

VictoriaF wrote:
Sat Dec 23, 2017 2:17 pm
tadamsmar wrote:
Sat Dec 23, 2017 2:05 pm
VictoriaF wrote:
Sat Dec 23, 2017 1:48 pm
tadamsmar wrote:
Sat Dec 23, 2017 1:32 pm
Many of us hold the TSM or EM or small-cap funds. Via those firms we chronically held $400 in some pretty dicey publicly traded companies while simultaneously calling Bitcoin a scam and a Ponzi scheme. Some of those investments no doubt were a total loss.
The difference is that it's impossible to disentangle Ponzi stocks from the TSM or EM, whereas Bitcoin is a stand-alone Ponzi.

Victoria
Is Bitcoin really a Ponzi?

Is a Rai Stone a Ponzi or just a weird kind of money?

I assume the posters here who called it a Ponzi were just using some kind of metaphor or simile.

"My love is like a rose" is a simile.

"My love is a rose" could be surrealism.

Posters here often confuse metaphors with reality.

I always thought it was an earnest if crazy effort to create something like the Rai Stone.

The TSM is just a easier way to diversify a bit of money into some dicey stuff. In my view dicey is dicey, there is no important difference.
Hey, I used the word "Ponzi" because you had it in your OP! "Ponzi" means different things to different people. For some, it's synonymous with a scam. But a straightforward interpretation of a Ponzi scheme is that the asset value depends on others wanting it.

I am in awe of the sophistication of the Blockchain technology and Bitcoin service architecture, and I don't want to denigrate it. But I also will not invest in it until it becomes a part of the TSM.

Victoria
Bitcoin some characteristics of a Ponzi.

I have some of have some of the characteristics of Charles Ponzi. For instance I have two eyes. Using a rhetorical method often employed on Bogleheads, you can now premise your arguments on the fact that I *am* Charles Ponzi.

Bitcoin is not a Ponzi because it does not all the characteristics of a Ponzi.

Edit: changed "not premise" to "now premise", reversing the meaning, :oops:
Last edited by tadamsmar on Sat Dec 23, 2017 2:35 pm, edited 1 time in total.

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Re: Bitcoin: food for thought

Post by White Coat Investor » Sat Dec 23, 2017 2:33 pm

It's not a Ponzi scheme at all. It's a speculative frenzy. I don't know why people feel a need to call anything they don't like a Ponzi scheme. It's fairly clearly defined. You pay returns on the investments of the early investors with the contributions of the later investors. It imploded when there is no money to give any one back their money, much less pay out any sort of yield. A bidding war on internet stocks, real estate, tulip bulbs, or bitcoins isn't a Ponzi scheme. There's no deception there. You don't want to be left holding the bag if/when its value drops dramatically, but what you paid for it isn't somehow being stolen from you (other than the hacks we keep hearing about.)
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Re: Bitcoin: food for thought

Post by Epsilon Delta » Sat Dec 23, 2017 3:06 pm

People are saying bitcoin is or is not a Ponzi scheme without saying what a Ponzi scheme is. I find it particularly awful to say it doesn't have a characteristic of a Ponzi scheme without describing said characteristic.

One definition of a Ponzi scheme is:
A Ponzi scheme (/ˈpɒn.zi/; also a Ponzi game) is a fraudulent investment operation where the operator generates returns for older investors through revenue paid by new investors, rather than from legitimate business activities or profit of financial trading. Operators of Ponzi schemes can be either individuals or corporations, and grab the attention of new investors by offering short-term returns that are either abnormally high or unusually consistent.
With this definition IHO the only characteristics of a Ponzi scheme bid coins lack is that it is not fraudulent, mostly because nobody had thought of banning it yet.

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Re: Bitcoin: food for thought

Post by Pajamas » Sat Dec 23, 2017 3:12 pm

First time I read about Bitcoin, I thought about buying $100 worth just to see what would happen. It wasn't easy to do that at the time. I thought about mining it, but it wasn't easy to do that at the time. I also don't buy lottery tickets or similar. So I did neither. Not sure when that was, but many years ago, before it took off. $100 would have bought many Bitcoins.

Do I wish that I had? It would have been fun, in retrospect, but it might have also just fizzled. It didn't look like a good idea at the time, so no regret, I made the best decision that I could with the information that I had.

I see and read about a lot of other similar and not-so-similar "opportunities". We tend to remember the ones that we didn't take that would have turned out very well and forget about all the (many more) other ones that would not have turned out well at all.

(Also, I agree that it is not a Ponzi situation. It is just a speculative frenzy on something that has no intrinsic value and in fact is very wasteful of time and resources, including energy, apart from the potential benefits that may be gained in the future from developing and applying the blockchain concept.)

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Re: Bitcoin: food for thought

Post by Kenkat » Sat Dec 23, 2017 3:15 pm

Back when Bitcoin was $4 each, there was nothing that would have indicated it was the next “thing”, any more than it was clear that Google or Amazon or Dell or Apple was the next “thing” when they first got started.

I became aware of Bitcoin when it was around $10 each because my son was mining them with his gaming computer. To have put real money into them at that time would have felt like throwing money into the wind and hoping it bought a winning lottery ticket.

I don’t think it is a Ponzi scheme; it does not have that intent. It does feel like a speculative frenzy right now, regardless of whether or not Bitcoin becomes a long term viable “thing”.

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tadamsmar
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Re: Bitcoin: food for thought

Post by tadamsmar » Sat Dec 23, 2017 3:28 pm

Epsilon Delta wrote:
Sat Dec 23, 2017 3:06 pm
People are saying bitcoin is or is not a Ponzi scheme without saying what a Ponzi scheme is. I find it particularly awful to say it doesn't have a characteristic of a Ponzi scheme without describing said characteristic.

One definition of a Ponzi scheme is:
A Ponzi scheme (/ˈpɒn.zi/; also a Ponzi game) is a fraudulent investment operation where the operator generates returns for older investors through revenue paid by new investors, rather than from legitimate business activities or profit of financial trading. Operators of Ponzi schemes can be either individuals or corporations, and grab the attention of new investors by offering short-term returns that are either abnormally high or unusually consistent.
With this definition IHO the only characteristics of a Ponzi scheme bid coins lack is that it is not fraudulent, mostly because nobody had thought of banning it yet.
Seems like Bitcoin profits are due to financial trading, the US government seems to treat bitcoin like property or a commodity. So that is another Ponzi characteristic that it lacks, using your definition.

It's not fraudulent and it's not banned by law or regulation. Those are actually two characteristics not one. An honest game of poker is not fraudulent but it is banned by federal and some state laws.

That's three characteristics that Bitcoin does not share with a Ponzi.

Also, I am pretty sure that anything you can own could have it's value run up due to an influx of demand. Literally everything you can trade has or could have that characteristic of a Ponzi.

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Re: Bitcoin: food for thought

Post by ViperAttacks » Sat Dec 23, 2017 3:34 pm

Just because you invested in Bitcoin many years ago doesn't mean you'd have made any money. I thought about buying $1K of Bitcoin back then and I even made an account with MtGox, but then I chickened out.

Feel free to read about what happened to MtGox https://en.wikipedia.org/wiki/Mt._Gox if you didn't hear. :shock: So, even if you were early you might have lost it all anyway unfortunately.

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Re: Bitcoin: food for thought

Post by tadamsmar » Sat Dec 23, 2017 3:37 pm

Kenkat wrote:
Sat Dec 23, 2017 3:15 pm
Back when Bitcoin was $4 each, there was nothing that would have indicated it was the next “thing”, any more than it was clear that Google or Amazon or Dell or Apple was the next “thing” when they first got started.

I became aware of Bitcoin when it was around $10 each because my son was mining them with his gaming computer. To have put real money into them at that time would have felt like throwing money into the wind and hoping it bought a winning lottery ticket.

I don’t think it is a Ponzi scheme; it does not have that intent. It does feel like a speculative frenzy right now, regardless of whether or not Bitcoin becomes a long term viable “thing”.
I think that is a sound argument against putting $400 in Bitcoin in 2011. You'd probably have to put $400 is 100 investments outside of the TSM to make it more likely to payoff. It's would be a big investment of time even if you could afford to lose $40,000.

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Re: Bitcoin: food for thought

Post by tadamsmar » Sat Dec 23, 2017 3:39 pm

Kenkat wrote:
Sat Dec 23, 2017 3:15 pm
Back when Bitcoin was $4 each, there was nothing that would have indicated it was the next “thing”, any more than it was clear that Google or Amazon or Dell or Apple was the next “thing” when they first got started.

I became aware of Bitcoin when it was around $10 each because my son was mining them with his gaming computer. To have put real money into them at that time would have felt like throwing money into the wind and hoping it bought a winning lottery ticket.

I don’t think it is a Ponzi scheme; it does not have that intent. It does feel like a speculative frenzy right now, regardless of whether or not Bitcoin becomes a long term viable “thing”.
That kind of stuff is happening in S Korea in the past week.

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Re: Bitcoin: food for thought

Post by Swelfie » Sat Dec 23, 2017 3:46 pm

Epsilon Delta wrote:
Sat Dec 23, 2017 3:06 pm
People are saying bitcoin is or is not a Ponzi scheme without saying what a Ponzi scheme is. I find it particularly awful to say it doesn't have a characteristic of a Ponzi scheme without describing said characteristic.

One definition of a Ponzi scheme is:
A Ponzi scheme (/ˈpɒn.zi/; also a Ponzi game) is a fraudulent investment operation where the operator generates returns for older investors through revenue paid by new investors, rather than from legitimate business activities or profit of financial trading. Operators of Ponzi schemes can be either individuals or corporations, and grab the attention of new investors by offering short-term returns that are either abnormally high or unusually consistent.
With this definition IHO the only characteristics of a Ponzi scheme bid coins lack is that it is not fraudulent, mostly because nobody had thought of banning it yet.
1) it isn't fraudulent.

2) there is no operator

3) older investors are not paid returns for holding. Anyone may enter or exit for market value and there are no dividends.

4) it offers no short term returns, or long term returns for that matter. It is simply bought and sold.

I fail to see how it meets ANY of the characteristics of a Ponzi scheme. It has much more in common with cabbage patch dolls or fidget spinner.

Bad investment, over hyped, fad, lemming behavior... I can go for any of those but I disagree that it's anything like a Ponzi scheme.

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Re: Bitcoin: food for thought

Post by BuyAndHoldOn » Sat Dec 23, 2017 3:47 pm

Bitcoin is used more for hoarding than for transacting. I question that it has real value.

I know about how useful Blockchain technology could be, but I don't know if "crypto" currencies are a part of that value.

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Re: Bitcoin: food for thought

Post by BogleWogle » Sat Dec 23, 2017 3:56 pm

ViperAttacks wrote:
Sat Dec 23, 2017 3:34 pm
Just because you invested in Bitcoin many years ago doesn't mean you'd have made any money. I thought about buying $1K of Bitcoin back then and I even made an account with MtGox, but then I chickened out.

Feel free to read about what happened to MtGox https://en.wikipedia.org/wiki/Mt._Gox if you didn't hear. :shock: So, even if you were early you might have lost it all anyway unfortunately.
There have been numerous other failed exchanges to my knowledge... not sure what’s worse missing the boat on a $400 gamble or making the gamble, being right, then still end up losing...

Time will tell what place/value crypto’s will have but I don’t see them as anything more than pure speculation.

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Re: Bitcoin: food for thought

Post by Kenkat » Sat Dec 23, 2017 4:13 pm

Pajamas wrote:
Sat Dec 23, 2017 3:12 pm
First time I read about Bitcoin, I thought about buying $100 worth just to see what would happen. It wasn't easy to do that at the time. I thought about mining it, but it wasn't easy to do that at the time. I also don't buy lottery tickets or similar. So I did neither. Not sure when that was, but many years ago, before it took off. $100 would have bought many Bitcoins.

Do I wish that I had? It would have been fun, in retrospect, but it might have also just fizzled. It didn't look like a good idea at the time, so no regret, I made the best decision that I could with the information that I had.

I see and read about a lot of other similar and not-so-similar "opportunities". We tend to remember the ones that we didn't take that would have turned out very well and forget about all the (many more) other ones that would not have turned out well at all.

(Also, I agree that it is not a Ponzi situation. It is just a speculative frenzy on something that has no intrinsic value and in fact is very wasteful of time and resources, including energy, apart from the potential benefits that may be gained in the future from developing and applying the blockchain concept.)
You pretty much captured my thoughts exactly...

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tadamsmar
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Re: Bitcoin: food for thought

Post by tadamsmar » Sat Dec 23, 2017 5:01 pm

Maybe my food for thought is Schrodinger's Cat poo.

If one had bought $400 of Bitcoin in 2011 and held like a good Boglehead, what's the chances that you would have lost it in the Mt Gox thing (theft or scam or whatever)?

Could be pretty high. They were doing 70% of transactions. Not sure of the percentage of market cap was lost.

Maybe a large percentage of small time bitcoin buyer's lost their holdings.

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Re: Bitcoin: food for thought

Post by Wakefield1 » Sat Dec 23, 2017 6:09 pm

I suppose Bitcoin is some sort of game (as defined in mathematical theory) played between people exchanging their money with each other through the "exchanges" or played with an "exchange" as opponent
If some of the Bitcoin "disappeared" then who got the money?
Could Bitcoin be made "peer to peer"?
Is there really no such thing as a Bitcoin? Only an abstraction related to playing a game?

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Re: Bitcoin: food for thought

Post by susze » Sat Dec 23, 2017 6:22 pm

Pajamas wrote:
Sat Dec 23, 2017 3:12 pm
First time I read about Bitcoin, I thought about buying $100 worth just to see what would happen. It wasn't easy to do that at the time. I thought about mining it, but it wasn't easy to do that at the time. I also don't buy lottery tickets or similar. So I did neither. Not sure when that was, but many years ago, before it took off. $100 would have bought many Bitcoins.

Do I wish that I had? It would have been fun, in retrospect, but it might have also just fizzled. It didn't look like a good idea at the time, so no regret, I made the best decision that I could with the information that I had.

I see and read about a lot of other similar and not-so-similar "opportunities". We tend to remember the ones that we didn't take that would have turned out very well and forget about all the (many more) other ones that would not have turned out well at all.

(Also, I agree that it is not a Ponzi situation. It is just a speculative frenzy on something that has no intrinsic value and in fact is very wasteful of time and resources, including energy, apart from the potential benefits that may be gained in the future from developing and applying the blockchain concept.)
Yes with bitcoin you are just buying a small space on a spreadsheet not a ponzi scheme but definitely no intrinsic value. Stocks are backed by the goods and products of the companies and currencies are also backed by the government which is backed by the economy and all the people of the government without the hype crypto is backed by its technology.

Yes there are sham govts and sham companies but with over 1000 cryptos out there I am sure some of those are a sham as well.

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Re: Bitcoin: food for thought

Post by DaftInvestor » Sat Dec 23, 2017 6:40 pm

OP: what's your question?
We seem to have plenty of bitcoin threads - not sure why we need yet another unless there is a different viewpoint or question from the myriad of others. Perhaps I missed the point....

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Re: Bitcoin: food for thought

Post by tadamsmar » Sat Dec 23, 2017 7:14 pm

Wakefield1 wrote:
Sat Dec 23, 2017 6:09 pm
I suppose Bitcoin is some sort of game (as defined in mathematical theory) played between people exchanging their money with each other through the "exchanges" or played with an "exchange" as opponent
If some of the Bitcoin "disappeared" then who got the money?
Could Bitcoin be made "peer to peer"?
Is there really no such thing as a Bitcoin? Only an abstraction related to playing a game?
Reminds me of money, Rai stones, IOUs.

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tadamsmar
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Re: Bitcoin: food for thought

Post by tadamsmar » Sat Dec 23, 2017 7:25 pm

susze wrote:
Sat Dec 23, 2017 6:22 pm
Pajamas wrote:
Sat Dec 23, 2017 3:12 pm
First time I read about Bitcoin, I thought about buying $100 worth just to see what would happen. It wasn't easy to do that at the time. I thought about mining it, but it wasn't easy to do that at the time. I also don't buy lottery tickets or similar. So I did neither. Not sure when that was, but many years ago, before it took off. $100 would have bought many Bitcoins.

Do I wish that I had? It would have been fun, in retrospect, but it might have also just fizzled. It didn't look like a good idea at the time, so no regret, I made the best decision that I could with the information that I had.

I see and read about a lot of other similar and not-so-similar "opportunities". We tend to remember the ones that we didn't take that would have turned out very well and forget about all the (many more) other ones that would not have turned out well at all.

(Also, I agree that it is not a Ponzi situation. It is just a speculative frenzy on something that has no intrinsic value and in fact is very wasteful of time and resources, including energy, apart from the potential benefits that may be gained in the future from developing and applying the blockchain concept.)
Yes with bitcoin you are just buying a small space on a spreadsheet not a ponzi scheme but definitely no intrinsic value. Stocks are backed by the goods and products of the companies and currencies are also backed by the government which is backed by the economy and all the people of the government without the hype crypto is backed by its technology.

Yes there are sham govts and sham companies but with over 1000 cryptos out there I am sure some of those are a sham as well.
I don't think it's a sure thing that Bitcoin is not backed by some self-appointed market makers.

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Re: Bitcoin: food for thought

Post by VictoriaF » Sat Dec 23, 2017 7:30 pm

tadamsmar wrote:
Sat Dec 23, 2017 7:14 pm
Wakefield1 wrote:
Sat Dec 23, 2017 6:09 pm
I suppose Bitcoin is some sort of game (as defined in mathematical theory) played between people exchanging their money with each other through the "exchanges" or played with an "exchange" as opponent.
Reminds me of money, Rai stones, IOUs.
As I recall, game theory makes best predictions for 2-player interactions and deteriorates with a growing number of players. With Bitcoins, you have not only many players but also many types of players. You have Bitcoin miners, Bitcoin owners, Bitcoin exchanges, businesses that accept Bitcoins, governments that want to prevent use of Bitcoins for tax evasion, cyber criminals who try to steal Bitcoins, cyber criminals who accept only Bitcoins to decrypt their Ransomware, mathematicians and other smart people who are trying to break the Bitcoin architecture, and others I can't think of right now.

Victoria
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mws13
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Re: Bitcoin: food for thought

Post by mws13 » Sat Dec 23, 2017 8:56 pm

As a real estate guy, I am thankful that Bitcoin brought us the Blockchain. I just paid $5000 for my bank's attorney to re-clear the Title on a RE property that has been in my family for 65 years. Then I paid my attorney at ADDITIONAL $4000.

This was to see that a property that has been in our family for 65 years and now needs to be updated so that the Title for a 2 year old loan clears Title again. Reality is that Title needs to be cleared ONCE, then put it in a PUBLIC blockchain and sure I will pay Connecticut a transfer fee, but $10,000??? Bitcoin can die tomorrow, but the Blockchain is here to stay. Then let's talk about Tokens and Smart Contracts on Ethereum.

And please stop comparing the Tulip Bubble which is FAKE NEWS:

https://www.smithsonianmag.com/history/ ... 180964915/

First there was Netscape, then there was Alta Vista, and now there is GOOGLE....

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Re: Bitcoin: food for thought

Post by venkman » Sun Dec 24, 2017 1:33 am

tadamsmar wrote:
Sat Dec 23, 2017 1:32 pm
You could get a bitcoin for less that 4 bucks back then. You could have made a million while taking on no significant risk, only the risk of losing $400.
A million is nothing. You can make TENS of millions (or more) practically overnight by investing in $400 worth of Powerball tickets, while taking on no significant risk, only the risk of losing $400. :happy

bawr
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Re: Bitcoin: food for thought

Post by bawr » Sun Dec 24, 2017 3:46 am

Epsilon Delta wrote:
Sat Dec 23, 2017 3:06 pm
One definition of a Ponzi scheme is:
A Ponzi scheme (/ˈpɒn.zi/; also a Ponzi game) is a fraudulent investment operation where the operator generates returns for older investors through revenue paid by new investors, rather than from legitimate business activities or profit of financial trading. Operators of Ponzi schemes can be either individuals or corporations, and grab the attention of new investors by offering short-term returns that are either abnormally high or unusually consistent.
This is reminiscent of the US Social Security system. Old investors (retirees) are paid "dividends" out of money collected from new investors (workers). The returns are "unusually consistent" too.

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Re: Bitcoin: food for thought

Post by gtd98765 » Sun Dec 24, 2017 4:23 am

Agree that Bitcoin is nothing like a Ponzi scheme. The "Greater Fool Theory" is a better analogy: https://en.wikipedia.org/wiki/Greater_fool_theory. The basic idea is that even if I am unsure of the intrinsic value of a purchase, as long as I think there is someone else willing to pay me a higher price than the one I paid, it is a good investment.

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Re: Bitcoin: food for thought

Post by scottinmet » Sun Dec 24, 2017 9:52 am

Could someone tell me where the value is in Bitcoin specifically? As I understand it anyone can set up a blockchain and call it a crypto currency, where is the value if everyone can make a replica of Bitcoin? The only value I can see is that Bitcoin has brand name recognition like Coke or Pepsi. It has inertia on its side, but with all the other crypto currencies being created the market place is much too volatile for any sane person to view as a credible investment.

With real currency it is backed by the issuing country, there is a high level of trust that it will retain its value. There are laws and criminal penalties if someone attempts to counterfeit the currency. With crypto currencies all bets are off and its perceived value could vaporize in an instant or a thousand other crypto currencies could spring up in direct competition with very little capital required. If someone has a copyright on the Blockchain technology then I could see value, otherwise this is the strangest phenomena I have ever seen. In the end I think a lot of people are going to get badly burned by this. :confused

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Re: Bitcoin: food for thought

Post by technovelist » Sun Dec 24, 2017 9:56 am

scottinmet wrote:
Sun Dec 24, 2017 9:52 am
Could someone tell me where the value is in Bitcoin specifically? As I understand it anyone can set up a blockchain and call it a crypto currency, where is the value if everyone can make a replica of Bitcoin? The only value I can see is that Bitcoin has brand name recognition like Coke or Pepsi. It has inertia on its side, but with all the other crypto currencies being created the market place is much too volatile for any sane person to view as a credible investment.

With real currency it is backed by the issuing country, there is a high level of trust that it will retain its value. There are laws and criminal penalties if someone attempts to counterfeit the currency. With crypto currencies all bets are off and its perceived value could vaporize in an instant or a thousand other crypto currencies could spring up in direct competition with very little capital required. If someone has a copyright on the Blockchain technology then I could see value, otherwise this is the strangest phenomena I have ever seen. In the end I think a lot of people are going to get badly burned by this. :confused
What you are missing is that this time it's different! :oops:
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Re: Bitcoin: food for thought

Post by Valuethinker » Sun Dec 24, 2017 10:04 am

mws13 wrote:
Sat Dec 23, 2017 8:56 pm
As a real estate guy, I am thankful that Bitcoin brought us the Blockchain. I just paid $5000 for my bank's attorney to re-clear the Title on a RE property that has been in my family for 65 years. Then I paid my attorney at ADDITIONAL $4000.

This was to see that a property that has been in our family for 65 years and now needs to be updated so that the Title for a 2 year old loan clears Title again. Reality is that Title needs to be cleared ONCE, then put it in a PUBLIC blockchain and sure I will pay Connecticut a transfer fee, but $10,000??? Bitcoin can die tomorrow, but the Blockchain is here to stay. Then let's talk about Tokens and Smart Contracts on Ethereum.

And please stop comparing the Tulip Bubble which is FAKE NEWS:

https://www.smithsonianmag.com/history/ ... 180964915/

First there was Netscape, then there was Alta Vista, and now there is GOOGLE....
Can we not use the term "fake news" here? It is highly politicised right now. We will rip this Forum apart if we start using such terms here.

You haven't read the article to which you linked. Which says there was a Tulip bubble, among merchants.

Many of us have used other analogies such as The South Sea Bubble, the Mississippi Company etc. The British railroad bubble etc.

Blockchain is a big simplification of what is clever about this technology, see various threads here.

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Re: Bitcoin: food for thought

Post by jb1 » Sun Dec 24, 2017 10:49 am

I just dont get people especially back then who didnt put $100 in it just for the hell of it.

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Re: Bitcoin: food for thought

Post by dwickenh » Sun Dec 24, 2017 10:53 am

jb1 wrote:
Sun Dec 24, 2017 10:49 am
I just dont get people especially back then who didnt put $100 in it just for the hell of it.
Hindsight is 20/20. It would have felt like burning a 100 dollar bill. Not many BH's willing to burn a 100.
The market is the most efficient mechanism anywhere in the world for transferring wealth from impatient people to patient people.” | — Warren Buffett

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Re: Bitcoin: food for thought

Post by jb1 » Sun Dec 24, 2017 10:57 am

dwickenh wrote:
Sun Dec 24, 2017 10:53 am
jb1 wrote:
Sun Dec 24, 2017 10:49 am
I just dont get people especially back then who didnt put $100 in it just for the hell of it.
Hindsight is 20/20. It would have felt like burning a 100 dollar bill. Not many BH's willing to burn a 100.
Yes very true. Im currently invested in crypto now, not so much bitcoin. I already took out my original investments plus 1k (that way if it does all go to 0 I can say I made 1k). Im playing with the casinos money now. Id rather take the risk now and not kick myself 10 year later saying "I wish I put some in". To me this is like Amazon, Apple, google, in 2001. No one knew what it was, but those that took a risk are patting themselves on the back now. Then again im only 27. :P

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dwickenh
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Re: Bitcoin: food for thought

Post by dwickenh » Sun Dec 24, 2017 11:12 am

jb1 wrote:
Sun Dec 24, 2017 10:57 am
dwickenh wrote:
Sun Dec 24, 2017 10:53 am
jb1 wrote:
Sun Dec 24, 2017 10:49 am
I just dont get people especially back then who didnt put $100 in it just for the hell of it.
Hindsight is 20/20. It would have felt like burning a 100 dollar bill. Not many BH's willing to burn a 100.
Yes very true. Im currently invested in crypto now, not so much bitcoin. I already took out my original investments plus 1k (that way if it does all go to 0 I can say I made 1k). Im playing with the casinos money now. Id rather take the risk now and not kick myself 10 year later saying "I wish I put some in". To me this is like Amazon, Apple, google, in 2001. No one knew what it was, but those that took a risk are patting themselves on the back now. Then again im only 27. :P

Everything you mention is in hindsight. Why didn't we put 100,000 in Enron before it went belly up. No one is asking that question!!

I think at your age if you have extra cash and can control the gambling, it makes some sense. I wish you good luck and will not be jealous if you hit it big.

Best to you,

Dan
The market is the most efficient mechanism anywhere in the world for transferring wealth from impatient people to patient people.” | — Warren Buffett

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Re: Bitcoin: food for thought

Post by Wakefield1 » Sun Dec 24, 2017 11:38 am

Poor little tulips: if you had a few bulbs of a newly created variety (grown from seedling that resulted from a lucky hybridization cross) and could successfully patent them and get the patent enforced,you could potentially make a lot of money licensing growers to vegitatively propagate them and sell them to the tulip loving public.
In Tulipmania I understand that novel varieties of apparently great commercial value and being sold for high prices were actually virus infected and doomed
new variety of Rose,Azalea,African Violet,Camellia might be worth money to the patent holder of that variety

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Re: Bitcoin: food for thought

Post by susze » Sun Dec 24, 2017 11:47 am

scottinmet wrote:
Sun Dec 24, 2017 9:52 am
Could someone tell me where the value is in Bitcoin specifically? As I understand it anyone can set up a blockchain and call it a crypto currency, where is the value if everyone can make a replica of Bitcoin? The only value I can see is that Bitcoin has brand name recognition like Coke or Pepsi. It has inertia on its side, but with all the other crypto currencies being created the market place is much too volatile for any sane person to view as a credible investment.

With real currency it is backed by the issuing country, there is a high level of trust that it will retain its value. There are laws and criminal penalties if someone attempts to counterfeit the currency. With crypto currencies all bets are off and its perceived value could vaporize in an instant or a thousand other crypto currencies could spring up in direct competition with very little capital required. If someone has a copyright on the Blockchain technology then I could see value, otherwise this is the strangest phenomena I have ever seen. In the end I think a lot of people are going to get badly burned by this. :confused
All the other cryptos have different technologies and processes backed by them. Bitcoin is not currently designed to scale thats why they are doing things like bitcoin cash. eventually the cost to create them will be higher than they are actually worth probably most of the cryptocurrencies will crash to zero. But blockchain and the concept will be here for the longterm or something that resembles it. I imagine when quantum computing comes we will have something better then the blockchain.

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Re: Bitcoin: food for thought

Post by watchnerd » Sun Dec 24, 2017 12:17 pm

https://www.youtube.com/watch?v=g-zIbVEjVpQ

Also:

"7/ Today I learned of a yoga teacher with her entire net worth in Bitcoin. She took out $15,000 in credit card debt to buy more (leverage!) ... Yes, that's where we are. Bitcoin mania"

https://twitter.com/msuster/status/941901699949641728

Full disclosure: I bought some Ethereum and Litecoin on 12/9 on a lark in amounts equivalent to what I might bet on a sporting event or feel comfortable losing in a night gambling. That went up about 70% by 12/21, which I then rebalanced into both Bitcoin Cash and USD. As of this moment (it's so volatile) I'm up 54% compared to 12/9. However, my luck doesn't mean I think buying crypto currencies or tokens is a good investment strategy, any more so than winning at slots would be.
Tweaked 3-Fund: 35% US Equities | 35% Total International | 30% Intermediate Treasuries

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tadamsmar
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Re: Bitcoin: food for thought

Post by tadamsmar » Sun Dec 24, 2017 3:26 pm

The Mt Gox thing hit only 7% of bitcoins. And those creditors may well get 2/3 of it back by virtue of the run up in value of bitcoins that Mt Gox's founder found on an old hard drive.

Still no credible explanation of what happened at Mt Gox.

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Re: Bitcoin: food for thought

Post by abuss368 » Sun Dec 24, 2017 3:48 pm

What caused the large sell off this week?
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Re: Bitcoin: food for thought

Post by watchnerd » Sun Dec 24, 2017 4:16 pm

abuss368 wrote:
Sun Dec 24, 2017 3:48 pm
What caused the large sell off this week?
I don't know if this is any more knowable than asking what caused the stock market to have a down day. Probably even more nebulous given the lack of transparency and unclear linkages to macro economic factors.

It could just be one of the 1000 holders that control 40% of the coins doing profit taking.
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Re: Bitcoin: food for thought

Post by investorpeter » Sun Dec 24, 2017 4:17 pm

Bitcoin futures listed on CBOE and CME made it possible to short bitcoin fairly easily. This actually helps the long-term stability of bitcoin as it allows more efficient price discovery, but there will be short-term pain for people holding bitcoin.

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Re: Bitcoin: food for thought

Post by watchnerd » Sun Dec 24, 2017 5:54 pm

investorpeter wrote:
Sun Dec 24, 2017 4:17 pm
Bitcoin futures listed on CBOE and CME made it possible to short bitcoin fairly easily. This actually helps the long-term stability of bitcoin as it allows more efficient price discovery, but there will be short-term pain for people holding bitcoin.
If Bitcoin were more liquid, and the contracts required delivery, I would agree, as there would be arbitrageurs to step in an exploit / close spreads.

However, I don't see anything that prevents the futures and spot price from wildly diverging given the high transaction costs and hoarding / HODL behaviors of many Bitcoin holders.
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Re: Bitcoin: food for thought

Post by david1082b » Sun Dec 24, 2017 6:29 pm

tadamsmar wrote:
Sat Dec 23, 2017 1:32 pm
Here's the earliest mention of bitcoin on Bogleheads that I can find:

viewtopic.php?f=10&t=84400&p=1208595&hi ... n#p1208595

October 19, 2011

The title is: Bitcoin value falls 90% since June

On the thread, Bitcoin is variously called a scam and a Ponzi scheme.

You could get a bitcoin for less that 4 bucks back then. You could have made a million while taking on no significant risk, only the risk of losing $400.

Many of us hold the TSM or EM or small-cap funds. Via those firms we chronically held $400 in some pretty dicey publicly traded companies while simultaneously calling Bitcoin a scam and a Ponzi scheme. Some of those investments no doubt were a total loss.
Instead of Bitcoin, it could have been another crypto that did well, with BTC going to zero. $800 in MSFT at IPO would have turned into around a million by now including dividends, but that is not very useful to know. Comparing diversified indexing to one asset is apples and oranges.

MSFT from IPO to now: http://quotes.morningstar.com/chart/fun ... A%5B%5D%7D

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