Do you think Bitcoin is a safe store of value?

[rb]

I think you're over analyzing.  It's basically exactly what Peter Lynch talks about in his books.  When you start to hear regular people talking about a new hot investment concept often, it is a red flag for excesses.  It's just crazy right now.  I know of at least two people, who probably couldn't explain what a mutual fund is, that are buying bitcoin.  When easy money is being made, that is also a huge warning for speculation.  Howard Marks always mentions, "What the wise man does in the beginning, the fool does in the end." 

I got housewives asking about bitcoin and eager to get in on the action.

[DeepSouth]

Tulipmania!

 

Just curious, at what age and price point would this move from being tulips to being an actual store of value ala gold?  Ignore volatility, bc it seems obvious to me that at a certain market cap volatility will be similar to that offild today. 

 

This was written in April/2013:  ( https://fee.org/articles/bitcoin-for-beginners/ )

 

"As of this writing, a Bitcoin is trading for $88.249.  Just three years ago, it hovered at $0.14. Many people look at the current market and think, surely this is a speculative bubble. That could be true, but it might not be. People are exchanging an unstable, fiat paper for something with a real title that cannot be duplicated. Everyone knows precisely how many Bitcoins exist at any time. Anyone can observe the transactions taking place in real time. A Bitcoin’s price can go up and down, and that’s fine, but there is no real speculation going on here that is endogenous to the Bitcoin market itself.  Is it a pyramid scheme? The defining mark of a pyramid scheme is that more than one person has an equal claim on the same money or good. This is physically impossible with Bitcoin. The way the program is set up, it is a strict property rights regime with no exceptions."

 

 

Do you believe that this parabolic spike up is driven by the world suddenly realizing the fundamental value of bitcoin?  What is that fundamental value?  Every other knucklehead on the planet is picking up a little bc right now to play the rush.  They have no clue how the technology works or what its intrinsic value is. I'm not saying bc is valueless, its actually has some neat uses.  So do tulip bulbs, they can grow lovely flowers. 

 

Please show me an example of an asset that has spiked in value like this that wasn't a bubble.

 

 

 

People all over the world (rich and poor, dumb and smart, educated and ignorant) use the USD every day. Do you think 1 in 10 has a deep understanding of the Federal Reserve system and how it works?

 

Even if Bitcoin replaces all money on Earth the average person won’t understand the technology behind it anymore than they have a deep understanding of how the cellphone in their pocket works.

 

As an American resident or citizen, if you don't use USD you go to federal prison. That's a good reason to use USD that smart/dumb people should both be able to understand.

[SharperDingaan]

“Whatever state issued “digital cash” comes out in the near future, I’m suspecting it will be centralized with mandatory key private key custody or escrow. When that happens it shouldn’t even be called crypto-currency, call it something else like “pseudo-crypto” or “fauxcoin” to differentiate.”  This is the CBDC/I-CBDC spoken of by the BoC researchers.

 

“Backed by nothing” The Bitcoin owner places ‘trust’ in the hash to confirm no double spend, and the design of the Distributed Ledger. Hence the Bitcoin is backed by the ‘trust’ in its design; the same ‘trust’ that backs the widespread use of a fiat currency. The issue is that the ‘trust’ just looks different.

 

‘Tulipmania’ is not a perfect comparison, but it has many similarities.

Ultimately the ‘winner’ discovers the prize is only worth what someone else can pay for it (ie: liquidity is the limitation). And we've all learned - repeatedly - that even the worst bond in a strong wind (high liquidity) will get a strong bid; but when that liquidity dries up, the bond goes ‘no bid’, and its price falls into the low teens.

 

There's nothing wrong with riding the train - just don't drink the cool aid.

It tends to disagree with ones disposition.

 

SD

 

[rkbabang]

Tulipmania!

 

Just curious, at what age and price point would this move from being tulips to being an actual store of value ala gold?  Ignore volatility, bc it seems obvious to me that at a certain market cap volatility will be similar to that offild today. 

 

This was written in April/2013:  ( https://fee.org/articles/bitcoin-for-beginners/ )

 

"As of this writing, a Bitcoin is trading for $88.249.  Just three years ago, it hovered at $0.14. Many people look at the current market and think, surely this is a speculative bubble. That could be true, but it might not be. People are exchanging an unstable, fiat paper for something with a real title that cannot be duplicated. Everyone knows precisely how many Bitcoins exist at any time. Anyone can observe the transactions taking place in real time. A Bitcoin’s price can go up and down, and that’s fine, but there is no real speculation going on here that is endogenous to the Bitcoin market itself.  Is it a pyramid scheme? The defining mark of a pyramid scheme is that more than one person has an equal claim on the same money or good. This is physically impossible with Bitcoin. The way the program is set up, it is a strict property rights regime with no exceptions."

 

 

Do you believe that this parabolic spike up is driven by the world suddenly realizing the fundamental value of bitcoin?  What is that fundamental value?  Every other knucklehead on the planet is picking up a little bc right now to play the rush.  They have no clue how the technology works or what its intrinsic value is. I'm not saying bc is valueless, its actually has some neat uses.  So do tulip bulbs, they can grow lovely flowers. 

 

Please show me an example of an asset that has spiked in value like this that wasn't a bubble.

 

 

 

People all over the world (rich and poor, dumb and smart, educated and ignorant) use the USD every day. Do you think 1 in 10 has a deep understanding of the Federal Reserve system and how it works?

 

Even if Bitcoin replaces all money on Earth the average person won’t understand the technology behind it anymore than they have a deep understanding of how the cellphone in their pocket works.

 

As an American resident or citizen, if you don't use USD you go to federal prison. That's a good reason to use USD that smart/dumb people should both be able to understand.

 

My point was that you don't need to know how something works to use it.  You give a 9 year old a dollar to run into the store and buy a candy bar and it doesn't work any different for him than a 45 year old with a PhD in Economics buying a candy bar.  You only need to know how to use it.  It is the same with any technology. You can drive a car without understanding how the engine works and you can use a computer without understanding solid state physics.

 

Your point about force is a good one though.  People accept the dollar because they have to, they value things like gold, silver, or bitcoin, because they want to.

 

[clutch]

Your point about force is a good one though.  People accept the dollar because they have to, they value things like gold, silver, or bitcoin, because they want to.

 

Splitting hairs but... One could argue that people are forced to value the dollar now because people in the past *wanted* to set up the financial system in a particular way.

 

(I guess my point is that nothing is forced upon on people except the nature... Although we have to put up with our self-imposed force from the past)

[wachtwoord]

Your point about force is a good one though.  People accept the dollar because they have to, they value things like gold, silver, or bitcoin, because they want to.

 

Splitting hairs but... One could argue that people are forced to value the dollar now because people in the past *wanted* to set up the financial system in a particular way.

 

(I guess my point is that nothing is forced upon on people except the nature... Although we have to put up with our self-imposed force from the past)

 

So forced by people of the past to set it up and (some) people in the present keeping it up. Deginitely force is involved as opting out is not an option.

[rkbabang]

:)

 

[DeepSouth]

Your point about force is a good one though.  People accept the dollar because they have to, they value things like gold, silver, or bitcoin, because they want to.

 

Splitting hairs but... One could argue that people are forced to value the dollar now because people in the past *wanted* to set up the financial system in a particular way.

 

(I guess my point is that nothing is forced upon on people except the nature... Although we have to put up with our self-imposed force from the past)

 

No. If you don't use dollars you will be sent to prison today, not in the past. The IRS still demands dollars. I guess you could choose to accept prison, but you will very much be forced to go there if you demand to pay your taxes in bitcoins.

[InvestingOnSale]

Tulipmania!

 

Just curious, at what age and price point would this move from being tulips to being an actual store of value ala gold?  Ignore volatility, bc it seems obvious to me that at a certain market cap volatility will be similar to that offild today. 

 

This was written in April/2013:  ( https://fee.org/articles/bitcoin-for-beginners/ )

 

"As of this writing, a Bitcoin is trading for $88.249.  Just three years ago, it hovered at $0.14. Many people look at the current market and think, surely this is a speculative bubble. That could be true, but it might not be. People are exchanging an unstable, fiat paper for something with a real title that cannot be duplicated. Everyone knows precisely how many Bitcoins exist at any time. Anyone can observe the transactions taking place in real time. A Bitcoin’s price can go up and down, and that’s fine, but there is no real speculation going on here that is endogenous to the Bitcoin market itself.  Is it a pyramid scheme? The defining mark of a pyramid scheme is that more than one person has an equal claim on the same money or good. This is physically impossible with Bitcoin. The way the program is set up, it is a strict property rights regime with no exceptions."

 

 

Do you believe that this parabolic spike up is driven by the world suddenly realizing the fundamental value of bitcoin?  What is that fundamental value?  Every other knucklehead on the planet is picking up a little bc right now to play the rush.  They have no clue how the technology works or what its intrinsic value is. I'm not saying bc is valueless, its actually has some neat uses.  So do tulip bulbs, they can grow lovely flowers. 

 

Please show me an example of an asset that has spiked in value like this that wasn't a bubble.

 

This is a good point. There are plenty of examples whereby a chart of five bubbles is created and "the next bubble" (bitcoin in this case) is shown next to them. But no one asks the inverse question.

 

See this thread for two examples of assets that saw big increases in price and turned out not to be bubbles, plotted alongside bitcoin.

 

[rkbabang]

I don’t know when it will happen, but I think this is what will trigger the first major panic. When one or more of these guys decide to do some selling in a big way it is going to be ugly for a while.

 

https://www.bloomberg.com/news/articles/2017-12-08/the-bitcoin-whales-1-000-people-who-own-40-percent-of-the-market

[clutch]

Your point about force is a good one though.  People accept the dollar because they have to, they value things like gold, silver, or bitcoin, because they want to.

 

Splitting hairs but... One could argue that people are forced to value the dollar now because people in the past *wanted* to set up the financial system in a particular way.

 

(I guess my point is that nothing is forced upon on people except the nature... Although we have to put up with our self-imposed force from the past)

 

No. If you don't use dollars you will be sent to prison today, not in the past. The IRS still demands dollars. I guess you could choose to accept prison, but you will very much be forced to go there if you demand to pay your taxes in bitcoins.

 

You missed my point. I didn't say anything about whether you are free to not use dollars.

[Jurgis]

Cryptokitties iz da safist store ov mieuw:

https://www.cnbc.com/2017/12/06/meet-cryptokitties-the-new-digital-beanie-babies-selling-for-100k.html

 

All your bitcoinz are belong to catz!  8)

[Gregmal]

Excuse me for being new to this, and admittedly uninformed, but I was having a talk with someone earlier today and couldn't believe what I was hearing. Is it accurate that one can buy Bitcoin on these exchanges using a credit card?

[rkbabang]

Excuse me for being new to this, and admittedly uninformed, but I was having a talk with someone earlier today and couldn't believe what I was hearing. Is it accurate that one can buy Bitcoin on these exchanges using a credit card?

 

You can buy bitcoin and ether with a cc on Coinbase.  Or you can link your bank account. Or you can use cash at a bitcoin ATM, there is probably one near you.

[Gregmal]

Excuse me for being new to this, and admittedly uninformed, but I was having a talk with someone earlier today and couldn't believe what I was hearing. Is it accurate that one can buy Bitcoin on these exchanges using a credit card?

 

You can buy bitcoin and ether with a cc on Coinbase.  Or you can link your bank account. Or you can use cash at a bitcoin ATM, there is probably one near you.

 

I think that's incredibly dangerous given the majority of what's driving this insanity is the retail investor. Getting rich quick. Allowing people to speculate with high interest, non secured credit is mind boggling.

[clutch]

Excuse me for being new to this, and admittedly uninformed, but I was having a talk with someone earlier today and couldn't believe what I was hearing. Is it accurate that one can buy Bitcoin on these exchanges using a credit card?

 

You can buy bitcoin and ether with a cc on Coinbase.  Or you can link your bank account. Or you can use cash at a bitcoin ATM, there is probably one near you.

 

I think that's incredibly dangerous given the majority of what's driving this insanity is the retail investor. Getting rich quick. Allowing people to speculate with high interest, non secured credit is mind boggling.

 

You can deposit money into online casino / betting sites with a credit card. What's the difference? :P

[SharperDingaan]

Excuse me for being new to this, and admittedly uninformed, but I was having a talk with someone earlier today and couldn't believe what I was hearing. Is it accurate that one can buy Bitcoin on these exchanges using a credit card?

 

What should really raise eyebrows is that retail isn't the 'dumb' money. These things can now be shorted, traded with up to 100x leverage, and for the most part - entirely unregulated. The money made in the run up to the GR is essentially 'tip', when compared to these.

 

https://cointelegraph.com/news/hedging-bitcoins-with-options-on-the-world-wide-web-expert-blog

https://www.bloomberg.com/news/articles/2017-11-27/calling-a-bitcoin-top-here-s-how-you-can-short-the-digital-coin

https://www.bitmex.com/

 

Roll up, roll up! Spin the dial. Everyone's a winner!

 

SD

[Guest zgrendi]

Full disclosure - as much as I think this is a bubble and you may call me a hypocrite, I bought a little bc over the weekend, just a micro position to track and play out an experiment for fun.  I'm going to tag along for the ride here to see if I can find a chair before the music stops.  Up 8% already :)  I'm only in this to see if a greater fool will buy me and my wife a nice dinner.  It may not be value investing, but I think its important to understand/explore how manias like this work.

[Sharad]

I am hoping a Bitcoin expert or two can answer a couple of questions for me:

 

1. Currently, my understanding is that Bitcoin can be broken down to 8 decimal points (0.000 000 01), meaning there will be 2.1 quadrillion individual subunits of Bitcoin. Does the program allow for further fractionalization of Bitcoin (i.e. 9 decimal points and so on)? Also, with so many cryptocurrencies out there, why it Bitcoin the anointed one?

 

2. I'd like to understand cryptocurrencies more, and I will find a copy of Friedrich Hayek's "Denationalisation of Money" to start my journey. What other reading materials do you recommend for the average investor to read?

[Gregmal]

This is getting absurd.

 

https://www.cnbc.com/2017/12/11/people-are-taking-out-mortgages-to-buy-bitcoin-says-joseph-borg.html

 

On a related note, easy money trade... shorting longer dated OTM calls on RIOT seems like a sure thing. A company that is more or less worthless and then added "blockchain" to its name becomes a multibagger within weeks.

[SharperDingaan]

We sold off 75% of our Bitcoin holding today.

A little over 9 token at an average price of USD 17,160 after an incredible run-up.

 

We're still stunned, and think we're among the sane ones!

But it looks like the smart thing now is to take a page from the HF's ......

1) As at today, to arbitrage Bitcoin - a HF has to go long the coin, sell a call, and buy a put. A one-way trade on Bitcoin.

2) To get more coin, the HF has to buy the dips as everyone panic sells existing coin for fear of missing out.

3) To keep up the flow of coin, the HF needs to progressively run the price of Bitcoin up and down.

 

Not our preferred way of making a buck,

but we couldn't ask for a better learning experience.

 

SD

 

 

   

[SharperDingaan]

I am hoping a Bitcoin expert or two can answer a couple of questions for me:

 

1. Currently, my understanding is that Bitcoin can be broken down to 8 decimal points (0.000 000 01), meaning there will be 2.1 quadrillion individual subunits of Bitcoin. Does the program allow for further fractionalization of Bitcoin (i.e. 9 decimal points and so on)? Also, with so many cryptocurrencies out there, why it Bitcoin the anointed one?

 

2. I'd like to understand cryptocurrencies more, and I will find a copy of Friedrich Hayek's "Denationalisation of Money" to start my journey. What other reading materials do you recommend for the average investor to read?

 

1. Watchwoord is the better person to answer this. Bitcoin is the anointed one because the underlying Nakamoto paper showed how to do it on a distributed ledger via a blockchain, and named the currency. When Moses comes off the mountain and gives you the tablets to do it, everyone else is pretty much a wannabe. 

 

2. Add a few texts on manias through the ages, and the psychology of crowds. Integrate it with the Rules for Rulers, and you're going to be pretty hard to sway!

 

SD

 

 

[InvestingOnSale]

I am hoping a Bitcoin expert or two can answer a couple of questions for me:

 

1. Currently, my understanding is that Bitcoin can be broken down to 8 decimal points (0.000 000 01), meaning there will be 2.1 quadrillion individual subunits of Bitcoin. Does the program allow for further fractionalization of Bitcoin (i.e. 9 decimal points and so on)? Also, with so many cryptocurrencies out there, why it Bitcoin the anointed one?

 

2. I'd like to understand cryptocurrencies more, and I will find a copy of Friedrich Hayek's "Denationalisation of Money" to start my journey. What other reading materials do you recommend for the average investor to read?

 

1. Bitcoin is a software-based protocol, so, one day, the software could be changed to allow for any number of decimal places.

2. The book "Mastering Bitcoin" is great, although somewhat technical.

[tede02]

As I read more about blockchain I'm starting to see a possible outcome as the technology having a big impact on many things while the currency aspect becomes worthless. I don't have any strong conviction either way as my knowledge is extremely limited but it just reminds me of the late 90s when the internet was going to change everything.  It did change everything but most of the companies from that era never panned out. 

[rkbabang]

As I read more about blockchain I'm starting to see a possible outcome as the technology having a big impact on many things while the currency aspect becomes worthless. I don't have any strong conviction either way as my knowledge is extremely limited but it just reminds me of the late 90s when the internet was going to change everything.  It did change everything but most of the companies from that era never panned out. 

 

I agree completely.

 

"but most of the companies from that era never panned out."

 

And some of the companies from that era turned into great companies and phenomenal life changing investments.

You just have to ask yourself if you are investing in Amazon.com or pets.com.  And if you will panic when the first crash comes or not?  I think there is a good chance that there is at least 1 amazon.com of cryptocurrencies/blockchains on this list: BTC, BCH, ETH, XTZ, XMR, DASH, NEO.  Which is why I own all of them.  If all but one of them ends up being worth 0 I think that I still might do OK.  And of course we haven't had our year 2000 yet (I'd say we are still in 1997 with 3 years to go), so will I be able to force myself to hold through it and even buy more?    I don't know.

 

The reason I think it isn't anywhere near the top yet is that almost everyone thinks that it is.  Everyone I talk to, many of which never heard of bitcoin until this year, says its a bubble and references tulips, etc.  That is more like 1995-1996 when the first internet stocks went crazy catching everyone's attention and almost everyone just knew that it was a crazy bubble, than 1999-2000 when almost no one was saying it was a bubble anymore and everyone was all in.