Cryptocurrencies

[rkbabang]

13 minutes ago, Buckeye said:

Hello SD, thank you for your reply. And thank you for making me a portfolio analyst in your example!
 

However, I am just Buckeye, the boner of the Midwest, but I am beholden to no one. 
 

If I were to buy 1 Bitcoin with plans to hold for the next 5-10 years, what are some of the reasons (if any) why my Bitcoin investment would not work out? 

Certainly with the 100’s of hours you and the other Bitcoin bulls have spent reading up on this subject, there should be some reasons, correct?
 

If so, can you please help me understand one or two of them?

 

And any other Bulls please feel free to add your reasons. 

 

Thank you! 

 

 

Some reasons:

• There is a flaw in the encryption that no one has noticed yet and a hacker discovers this and starts spending Bitcoin that aren't his.  Panic ensues and Bitcoin goes to $0 pretty quickly.
• Quantum computing happens before the Bitcoin code upgrades to use fully quantum resistant encryption.  Panic ensues... see above.
• Another type of crypto currency is so much better than Bitcoin somehow in some way that Bitcoin can not be forked to adopt the new features that everyone just switches to that instead. 
• We are wrong and no one wants a hard asset which can't be inflated away. 
• People really do prefer government money. 
• Long term, there isn't much use for the most secure network ever created.

Edited Wednesday at 08:16 PM by rkbabang

[rkbabang]

12 minutes ago, rkbabang said:

 

 

Some reasons:

• There is a flaw in the encryption that no one has noticed yet and a hacker discovers this and starts spending Bitcoin that aren't his.  Panic ensues and Bitcoin goes to $0 pretty quickly.
• Quantum computing happens before the Bitcoin code upgrades to use fully quantum resistant encryption.  Panic ensues... see above.
• Another type of crypto currency is so much better than Bitcoin somehow in some way that Bitcoin can not be forked to adopt the new features that everyone just switches to that instead. 
• We are wrong and no one wants a hard asset which can't be inflated away. 
• People really do prefer government money. 
• Long term, there isn't much use for the most secure network ever created.

 

And since you said risks in the next 5-10 years:  I'll add:

• Even though Bitcoin maxis are eventually correct, you buy at a cycle high and it takes years before you return to break even.  Think of people who bought at almost $20K seeing it go down to $4K or people who bought at $60k watching it fall to $15K. There are definitely short term risks in an asset this volatile. 

[SharperDingaan]

36 minutes ago, Masterofnone said:

Think about what you just wrote. Is that truly how you would act if you found the cure for cancer?

 

Incomplete phrasing; I would patent the cure and licence it out to one/two pharma's for royalties + stock. The cure becomes available to those who can pay, and I hopefully end up having to file a report anytime I trade the pharma's stock  Decades later (after the patent expires) I work with the UN, a low cost knock-off is made available to the 3rd world, and my name goes up on the side of some building. Just a different PoV.

 

SD

 

 

 

 

[wachtwoord]

29 minutes ago, 73 Reds said:

Well, in that sense I'm not sure what you mean by "store of value".  I'd argue real estate trumps (sorry) gold by miles.  Equities, for as long as they've been in existence.  Just about anything that generates a return.  If you've owned gold for (pick a time period) what do you have to show for it?  And I own gold [coins] but for reasons entirely unrelated to a store of value.

 

Protection of purchasing power. Equity and real estate have an enormous history of being seized or otherwise stolen from the owners.

 

Gold the least out of all of these, plus it's the most portable out of whatever location it is in. Of course it is beaten on all of these by bitcoin, but definitely not by equities or (much worse) real estate. Real estate is really the last thing I'd want to "own" (between quotes as you cant really own it, gov can force you to give it up whenever it likes).

[wachtwoord]

45 minutes ago, Buckeye said:

Hello SD, thank you for your reply. And thank you for making me a portfolio analyst in your example!
 

However, I am just Buckeye, the boner of the Midwest, but I am beholden to no one. 
 

If I were to buy 1 Bitcoin with plans to hold for the next 5-10 years, what are some of the reasons (if any) why my Bitcoin investment would not work out? 

Certainly with the 100’s of hours you and the other Bitcoin bulls have spent reading up on this subject, there should be some reasons, correct?
 

If so, can you please help me understand one or two of them?

 

And any other Bulls please feel free to add your reasons. 

 

Thank you! 

 

Losing ownership. Either due to not holding the keys yourself or due to holding the keys but not properly and safely causing you to either lose access or be stolen from.

[Buckeye]

32 minutes ago, rkbabang said:

Some reasons:

• There is a flaw in the encryption that no one has noticed yet and a hacker discovers this and starts spending Bitcoin that aren't his.  Panic ensues and Bitcoin goes to $0 pretty quickly.
• Quantum computing happens before the Bitcoin code upgrades to use fully quantum resistant encryption.  Panic ensues... see above.
• Another type of crypto currency is so much better than Bitcoin somehow in some way that Bitcoin can not be forked to adopt the new features that everyone just switches to that instead. 
• We are wrong and no one wants a hard asset which can't be inflated away. 
• People really do prefer government money. 
• Long term, there isn't much use for the most secure network ever created.

Thank you for your thoughtful reply RK.  These all seem like valid concerns that I can add to my understanding of Bitcoin.  I hope to possibly hear some other examples from the other experts.  It is a little scary to me that your first 3 examples most likely end up in a complete loss of capital.  But as they say...scared money don't make money.  Whoever "they" are. Thank you! 

[SharperDingaan]

54 minutes ago, Buckeye said:

So then you do agree that there are methods to value Bitcoin? Because it seemed to me like you saying “Folks just can't get past that the price of BTC cannot be supported by DCF valuation; the reality is that it doesn't exist yet, 'cause it's just too early. Not much different to trying to value a relationship” implies to me that the valuation method for Bitcoin does not yet exist.  
 

So which is it? Or am i misunderstanding your quote?  Thank you! 

 

It's just not a DCF valuation; same as every other methodology, you end up with a number in a given time frame that you have to ascribe confidence to. As usual, one could be bang on with the value .... but way-off on the timing. Sadly, sh1te is still going to happen!   

 

SD

[Buckeye]

2 minutes ago, wachtwoord said:

 

Losing ownership. Either due to not holding the keys yourself or due to holding the keys but not properly and safely causing you to either lose access or be stolen from.

Thanks Wacht!  Sounds like another possibility at a total loss of capital.  That is quite some downside.  It seems like most of the reasons I have heard thus far could result in a total loss of capital.  But that's what I asked for!  My name may be Buckeye, but it sounds like I may need bigger nuts than a Buckeye to jump into the Bitcoin boat. 

[wachtwoord]

3 minutes ago, Buckeye said:

Thank you for your thoughtful reply RK.  These all seem like valid concerns that I can add to my understanding of Bitcoin.  I hope to possibly hear some other examples from the other experts.  It is a little scary to me that your first 3 examples most likely end up in a complete loss of capital.  But as they say...scared money don't make money.  Whoever "they" are. Thank you! 

 

They do. They are also unlikely to an extreme degree. I'd say a 6 sigma event for each of them.

 

Eg look into quantum computing. It's quite unlikely to even be possible with the laws of out universe at a useful scale.and even if it is, it is by far the most likely that it's a gradual development rather than an overnight thing. It wouldnt take more than a few months (mostly political and logistical) to roll out Bitcoin update too. So indeed a 6 sigma event is needed for that to be dangerous in the slightest (overnight quantum computers at scale).

 

The only real consequence is that really old addresses (think Satoshi's million) can potentially become possible to take ownership of relatively cheaply/easily. That alone won't wipe out the value though.

[Buckeye]

36 minutes ago, SharperDingaan said:

 

It's just not a DCF valuation; same as every other methodology, you end up with a number in a given time frame that you have to ascribe confidence to. As usual, one could be bang on with the value .... but way-off on the timing. Sadly, sh1te is still going to happen!   

 

SD

Hello SD, thank you for your reply.  I completely understand everything you are saying here.  It's just that your comment about "there not being a way to currently value Bitcoin" seems to contradict all of the other valuation techniques provided by the other Bulls.  And this small detail may be one reason why Newbs like myself, Reds and Luke are having a difficult time assigning a value to Bitcoin.   Do you care to correct your original comment?  Thanks.  

Edited Wednesday at 09:32 PM by Buckeye

[Buckeye]

3 minutes ago, wachtwoord said:

 

They do. They are also unlikely to an extreme degree. I'd say a 6 sigma event for each of them.

 

Eg look into quantum computing. It's quite unlikely to even be possible with the laws of out universe at a useful scale.and even if it is, it is by far the most likely that it's a gradual development rather than an overnight thing. It wouldnt take more than a few months (mostly political and logistical) to roll out Bitcoin update too. So indeed a 6 sigma event is needed for that to be dangerous in the slightest (overnight quantum computers at scale).

 

The only real consequence is that really old addresses (think Satoshi's million) can potentially become possible to take ownership of relatively cheaply/easily. That alone won't wipe out the value though.

Thanks Wacht!  I understand that I need to assign a probability to the potential outcome, just trying to first understand what the potential outcomes are/could be. Thanks.  

[rkbabang]

14 minutes ago, Buckeye said:

Thank you for your thoughtful reply RK.  These all seem like valid concerns that I can add to my understanding of Bitcoin.  I hope to possibly hear some other examples from the other experts.  It is a little scary to me that your first 3 examples most likely end up in a complete loss of capital.  But as they say...scared money don't make money.  Whoever "they" are. Thank you! 

 

 

They are very unlikely, but not impossible.  Bitcoin has been around for 15 years, is open source, and is now worth $1.7T

Anyone can examine the code and try to find a bug. That is a huge pot for a potential hacker just sitting there for the taking.  Yet no one has hacked it yet by finding some critical flaw.  That is a good indication that it is unlikely to happen.

[james22]

2 hours ago, changegonnacome said:

 

Yeah these are increasingly outlandish with ever higher hurdles IMO....but totally understand.......BTC keeps confounding expectations.......like a growth stock with higher and higher multiples....what begins to be required for it move higher over time are increasingly ever more implausible scenarios.......but the holders think past is prologue cause a bunch of implausible things have ALREADY happened.

 

Outlandish?

 

1. Bitcoin regulation (allowing bank holding) and 2. US strategic asset reserve. 

 

Since November 2021, the three prudential banking regulators – the Federal Reserve, the Federal Deposit Insurance Corporation, and the Department of the Treasury's Office of the Comptroller of the Currency – have discouraged banks from holding actual bitcoin in their balance sheets or providing crypto custody services.

 

https://www.forbes.com/sites/digital-assets/2024/11/13/big-banks-likely-gained-more-than-1-billion-from-bitcoin/

 

That is changing/will change.

 

 

"The GOP's commitment to clear crypto regulations and making bitcoin a strategic reserve asset is set to be a game-changer for industry growth," Jean-Marie Mognetti, the chief executive of alternative asset manager CoinShares, said in emailed comments alongside a report.

 

https://www.forbes.com/sites/digital-assets/2024/11/07/a-trump-us-strategic-bitcoin-reserve-game-changer-is-suddenly-hurtling-toward-the-bitcoin-price/

 

3. Nation-state (game theory) adoption. 

 

 

4. Institutional adoption.

 

 

[SharperDingaan]

2 hours ago, Buckeye said:

Hello SD, thank you for your reply.  I completely understand everything you are saying here.  It's just that your comment about there "not being a way to currently value Bitcoin" seems to contradict all of the other valuation techniques provided by the other Bulls.  And this small detail may be one reason why Newbs like myself, Reds and Luke are having a difficult time assigning a value to Bitcoin.   Do you care to correct your original comment?  Thanks.  

 

Lets leave it as an object lesson on the immutability of blockchain .... make a mistake, you can't erase it!

 

The real value to this technology is blockchain; BTC is just the payment app that demonstrates the use of blocks on a chain, and bitcoin protocol/smart contracts to chain them. Granted, it's a pretty damn good application! but its only a small part of the whole enchilada.     

 

It's new technology, there's nothing else remotely like it, and most all recognise that it is an industrial revolution. Just as cars replaced horse/buggy, and steel/steam replaced wood/sail/water, it's a leap of faith; but if you don't familiarise yourself with it, and it comes about ..... you could get badly burnt in the coming change.

 

Lot of posters on this board were sceptics at first; today BTC is now a material portion of their portfolio, with much of it from rising asset valuation. What could have gone wrong ??? they hadn't learnt further, and remained poor.

 

An added benefit is that some of the posters on this board, go back to near the beginning of BTC in 2008.

 

Step away, put in your hours, then come back.

 

SD 

 

 

 

Edited Wednesday at 11:33 PM by SharperDingaan

[james22]

What percent of investors have ever heard of SAB 121 and/or the FASB accounting change?

 

Zero would be far, far closer than 1%.

 

That's an informational advantage.

 

There's a reason bitcoin is a Trump trade:

 

https://cryptobriefing.com/trumps-crypto-agenda-presidency/

[Buckeye]

When I look at the past 15 year performance of Bitcoin, it is clear that it has gone up in price by a lot!  One thing that gives me pause tough, is that this 15 year time frame happens to coincide with zero to negative interest rates.  Money during this time has been essentially free.  We saw that this free money led to some huge distortions in the price of all types of things. Most of those things have returned back to earth. 

 

It now seems like the current period, and the next couple of years, may be marked by more normalized interest rates.  Is there any concern from the Bulls that the out performance of Bitcoin over the past 15 years could have been caused (at least partially) by ZIRP? 

 

And before someone responds to say "Well, interest rates have gone up a lot in the past 2 years, and look at how Bitcoin has performed," I recognize that.  I also recognize that just because Bitcoin has performed well in the past 2 years, does not necessarily mean that it will perform well in the next 5-10 years if rates were to stay where they are (or even go up). Correct?

 

Thoughts?

  

Edited Thursday at 02:23 AM by Buckeye

[james22]

3 minutes ago, Buckeye said:

Thoughts?

 

Like the catalysts I mentioned above, this is something that you'd know if you did the reading.

 

Spoon feeding you this answer will only prompt the next question.

[gfp]

Perhaps ironically, Bitcoin, the economy and risk assets in general will probably do much better in a higher interest rate environment than in a low interest rate or ZIRP environment.  It may be counterintuitive since people are taught that opportunity cost is such a big factor.

 

Low interest rates -> bad things happening / stagnation / lots of demand for safety and liquidity / risk-off

 

Higher interest rates -> reflation/inflation / growth / risk-on

[73 Reds]

1 hour ago, wachtwoord said:

 

Protection of purchasing power. Equity and real estate have an enormous history of being seized or otherwise stolen from the owners.

 

Gold the least out of all of these, plus it's the most portable out of whatever location it is in. Of course it is beaten on all of these by bitcoin, but definitely not by equities or (much worse) real estate. Real estate is really the last thing I'd want to "own" (between quotes as you cant really own it, gov can force you to give it up whenever it likes).

Gold can be lost or stolen.  You pay to store it and it has little to no utility.  Not my idea of a store of value.  In the U.S. I absolutely own RE.  There is a legal process for government takings in the US and owners are compensated.  Elsewhere gold can be confiscated and its portability therefore works against it to your very point.  Never heard of equities being seized or stolen - you'll have to explain that one and why it wouldn't be just as easy to seize or steal gold, if not easier.

[james22]

23 minutes ago, Buckeye said:

When I look at the past 15 year performance of Bitcoin . . .

 

If you believe history predictive, you might look at how the gold ETFs performed after they were introduced.

[rkbabang]

48 minutes ago, Buckeye said:

When I look at the past 15 year performance of Bitcoin, it is clear that it has gone up in price by a lot!  One thing that gives me pause tough, is that this 15 year time frame happens to coincide with zero to negative interest rates.  Money during this time has been essentially free.  We saw that this free money led to some huge distortions in the price of all typs of things. Most of those things have returned back to earth. 

 

It now seems like the current period, and the next couple of years, may be marked by more normalized interest rates.  Is there any concern from the Bulls that the out performance of Bitcoin over the past 15 years could have been caused (at least partially) by ZIRP? 

 

And before someone responds to say "Well, interest rates have gone up a lot in the past 2 years, and look at how Bitcoin has performed," I recognize that.  I also recognize that just because Bitcoin has performed well in the past 2 years, does not necessarily mean that it will perform well in the next 5-10 years if rates were to stay where they are (or even go up). Correct?

 

Thoughts?

  

I wouldn’t expect Bitcoin to do quite as well in the next 15 years as it did in the last 15. Bitcoin was basically worthless 15 years ago in 2009. It traded in 2010, but never hit $1.  Bitcoin first hit $1 in early 2011, so it’s up 90,000X in a little less than 14 years. I wouldn’t expect it to go up 90,000X from here in the next 15 years. Maybe 25X-1000X if I had to give an 80% confident range.

[TwoCitiesCapital]

4 hours ago, changegonnacome said:

 

Guess one might classify the current Trump BTC rally as one of these moments!?!

 

 

It's not a Trump rally. It's the traditional post-halving rally that has happened every 4 years regardless of who was elected. It just happens to coincide with the election cycle this time around. 

 

Historically Bitcoin has gone vertical ~6 months post halving. Halving was in April. October was 6-months after that. 

 

If it plays out like prior cycles - it'll rally for 10-12 months and a face melting vertical climb with some major 30-50% pull backs along the way. 

 

Eventually this cycle will break - enough people will front run it to void the prior trading history. But every cycle people say that is going to happen then it plays out the same so waiting for it to break rather predicting when it will. 

Edited Wednesday at 11:26 PM by TwoCitiesCapital

[wachtwoord]

1 hour ago, 73 Reds said:

Gold can be lost or stolen.  You pay to store it and it has little to no utility.  Not my idea of a store of value.  In the U.S. I absolutely own RE.  There is a legal process for government takings in the US and owners are compensated.  Elsewhere gold can be confiscated and its portability therefore works against it to your very point.  Never heard of equities being seized or stolen - you'll have to explain that one and why it wouldn't be just as easy to seize or steal gold, if not easier.

 

I wrote that ...

 

Just less than anything else except Bitcoin which is simply better gold on all metrics that matter.

[james22]

19 minutes ago, TwoCitiesCapital said:

It's not a Trump rally.

 

I disagree. It's mostly a Trump rally (if not wholly).

 

 

Observers will note disagreement is not uncommon among bitcoiners.

[Buckeye]

4 hours ago, SharperDingaan said:

 

Lets leave it as an object lesson on the immutability of blockchain .... make a mistake, you can't erase it!

 

The real value to this technology is blockchain; BTC is just the payment app that demonstrates the use of blocks on a chain, and bitcoin protocol/smart contracts to chain them. Granted, it's a pretty damn good application! but its only a small part of the whole enchilada.     

 

It's new technology, there's nothing else remotely like it, and most all recognise that it is an industrial revolution. Just as cars replaced horse/buggy, and steel/steam replaced wood/sail/water, it's a leap of faith; but if you don't familiarise yourself with it, and it comes about ..... you could get badly burnt in the coming change.

 

Lot of posters on this board were sceptics at first; today BTC is now a material portion of their portfolio, with much of it from rising asset valuation. What could have gone wrong ??? they hadn't learnt further, and remained poor.

 

An added benefit is that some of the posters on this board, go back to near the beginning of BTC in 2008.

 

Step away, put in your hours, then come back.

 

SD 

 

 

 

Thank you for your clarification SD!