EnjoyIt wrote: ↑Mon Sep 14, 2020 1:03 pm
mmcmonster wrote: ↑Mon Sep 14, 2020 5:28 am
EnjoyIt wrote: ↑Sat Aug 29, 2020 12:13 am
What bitcoin really is, is a speculative tool. People who buy it, do so with no other purpose than the hope that one day it will be worth a lot more than the purchase price. That’s why I own a fraction of a coin. I do so because I am enjoying the ride and maybe, if I get lucky, I can sell it for far more than what I bought it for. You never know.
Interesting. So would you consider Bitcoin a surrogate for world disposable income?
ie: The more disposable income the world has, the more likely they'll put it in a speculative investment. And since Bitcoin has a low barrier of entry and is available for purchase anywhere, the price of Bitcoin will continue to go up (so long as the general population considers it an investment).
This sort of makes sense to me. In times like now, where some people have extra cash and confused/wary about entering the stock market, they turn to Bitcoin.
It is not uncommon for those skeptical of equities to put their cash elsewhere. Very common locations are real estate, commodities, and collectibles. I find bitcoin to be pretty complex compared more tangible assets such the aforementioned real estate, collectibles, or commodities. If I want, I can easily buy gold/silver coins or purchase a collectible car, painting, or some other trinket. With bitcoin one needs to have a baseline understanding and then figure out what type of wallet they want and how to get access to it. It may not be difficult for the younger crowed or those who deal with tech on a regular basis, but that is not the case for most.
Either way, I believe most people turn to bitcoin because of greed, fear of missing out, and/or a desire to gamble a little. This is especially true once one realizes that bitcoin is a speculative play based on the desire to sell one day to someone else at a higher price. They are basically following "the greater fool theory." With such a volatile play, one can get lucky and win some decent cash in the process.
Real estate generates an inherent return from rent plus decent chance of value appreciation. It's clearly the "third leg of the stool" alongside stocks + bonds.
Commodities don't generate an inherent return *except* arguments about "roll return"? Once large amounts of institutional investor money started chasing these, that went away. Commodity markets are not deep and liquid enough to accommodate large amounts of institutional money. Commodities may be inflation hedges, but you have storage costs.
Collectibles? Generally I would say they are pretty bad bets, because fashions change. Unless you are in a position to trade Old Masters - that Van Gogh your great aunt left you, etc. Wine. Fine art. Classic cars. I look at the indices and wonder how much reality there is underlying them. We have many threads here about people trying to unload their baseball card collections for example.
However collectibles provide the opportunity for insider knowledge & skill. Perhaps it was obvious 25 years ago that Dodge Chargers 1968-72, would become hot properties. All of us watching "Dukes of Hazard
" as kids
. I might then also predict that when we start to sell to pay for our nursing homes, the values will fall (my brother says that has already happened to Ford Model Ts & As, from the older generation of collectors & their estates). The bid-ask spreads are also astronomic. I think Sotheby's and Christies start at 25% commission?
Gold has a particular place - although it has some uses, the main uses are decorative and as a form of financial reserve eg by Central Banks. Silver, because it is less valuable, and perhaps because of supply-demand, is also less of a store of value, it seems.
Negative real interest rates, and now negative nominal rates, have tended to push up the value of *all* of these assets. They've become another set of examples of the carry trade (borrow cheaply and invest in something riskier with a higher prospective return).