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Yet, if you had invested in bitcoin 5 years ago you would have outperformed Berkshire Hathaway's lifetime performance. In my opinion if you are young, it makes

by josu 10y ago

Yet, if you had invested in bitcoin 5 years ago you would have outperformed Berkshire Hathaway's lifetime performance. In my opinion if you are young, it makes sense to make these kind of bets, and it doesn't necessarily mean that you are misinformed. Cryptocurrencies are certainly onto something, and it's still not clear which one(s) is(are) going to win, so by buying them you are not only making an investment but also voting with your money. I do believe that the DAO will crash and burn, but the truth is that among the people that bought DAO tokens, I don't know anybody that invested a significant amount of their savings. Furthermore most of the people used the Ether they bought at 100th the current price when it first launched. Last but not least, as an economist, the DAO is a fascinating experiment, but I do hope that nobody loses their life savings because of it, which brings me back to your initial comment that raises a good point.

powera 10y ago
Is Bitcoin supposed to be an investment or a currency?
- jonny_eh 10y ago
  Yes
  - conception 10y ago
    Exactly. Is the dollar a currency or an investment. It's both.
    - colanderman 10y ago
      The dollar undergoes inflation. That makes it a pretty terrible investment. (It is, by definition, outperformed by near-zero-risk I-bonds.)
      - ptaipale 10y ago
        The dollar doesn't necessarily have inflation in comparison to my national currency... and it may be the most readily available investment opportunity that helps you avoid poor national economic policies.
        aminorex 10y ago
        Yes, this. Hence its worldwide popularity. The dollar is the #1 u.s. export by an order of magnitude; because it is a terrible investment for u.s. persons and a marvelous investment for non-u.s. persons.
  - SyneRyder 10y ago
    "Yes" is a surprisingly good answer. While in many (most?) countries Bitcoin is regarded as digital currency, there are a few countries (like Australia) where the tax authorities treat Bitcoin as an investment, ie "an asset for capital gains tax (CGT) purposes". https://www.ato.gov.au/General/Gen/Tax-treatment-of-crypto-currencies-in-Australia---specifically-bitcoin/ https://www.ato.gov.au/General/Gen/Tax-treatment-of-crypto-c...
argonaut 10y ago
> Yet, if you had invested in bitcoin 5 years ago you would have outperformed Berkshire Hathaway's lifetime performance. I have some penny stocks to sell you...
ceejayoz 10y ago
> Yet, if you had invested in bitcoin 5 years ago you would have outperformed Berkshire Hathaway's lifetime performance. People who get in on a ponzi or bubble in the early days tend to do well, yes. Plenty of folks picked up BTC when they were $1k+, though.
- drcode 10y ago
  If you bought bitcoin at 1k you'd be down 28% right now... Not exactly a fantastic investment, but no worse than the nasdaq on some years.
bduerst 10y ago
This is textbook Gamblers Fallacy.
- mquander 10y ago
  No, it isn't. They have nothing in common besides making a bet. https://en.wikipedia.org/wiki/Gambler%27s_fallacy https://en.wikipedia.org/wiki/Gambler%27s_fallacy
  - bduerst 10y ago
    They're literally saying that because bitcoin had a bubble and "outperformed", any of the new younger cryptocurrencies "are onto something" and could go big at any moment. It's a system of independent probabilities, hence gambler's fallacy.
andkenneth 10y ago
I was thinking about getting into bitcoin mining when it was still plausible to do it by yourself. Kicking myself now, but really it was a weird longshot thing at the time.
chimeracoder 10y ago
> I don't know anybody that invested a significant amount of their savings You weren't hanging around the right IRC channels the day after MtGox went under, I take it.
slg 10y ago
I agree that these can be interesting experiments. I first played around with Bitcoin 5+ years ago when I could mine 50 Bitcoin every couple days on a cheap laptop. And like you I also have also have a background in economics. My conclusion at the time is the same as it is today. Most of these cryptocurrencies were a bunch of software developers thinking they knew more about economics that economists. That is where my comment comes into play. The issues discussed in this article are stuff you would learn about in any intro econ class. The fact that an apparently large percentage of people are "investing" in these currencies without knowing these concepts leads me to believe that they are a rather uninformed lot (uninformed is not necessarily the same as misinformed). That is the easiest sign that this is a bubble, people that know very little about it parking their money there and calling it "investing". Regarding the returns, I will refer you to our old friend Keynes. "Markets can remain irrational a lot longer than you and I can remain solvent." Cryptocurrencies and related technologies have potential, but I have seen little evidence to suggest that current prices aren't completely irrational.
deciplex 10y ago
> Yet, if you had invested in bitcoin 5 years ago you would have outperformed Berkshire Hathaway's lifetime performance. Berkshire Hathaway's net income last year alone was 24 billion USD. I don't think you would be able to generate this income no matter when you invested in Bitcoin, to say nothing of matching it in a single year. I get that you are talking about the return on investment as a percentage of stake, but the scale we are talking about, as well as the difference in risk profile, means you are very nearly comparing apples and oranges. I can point out any number of various schemes which have gotten people rich over the years - that doesn't make them sound investments.
hueving 10y ago
>Yet, if you had invested in bitcoin 5 years ago you would have outperformed Berkshire Hathaway's lifetime performance. Same thing if you had invested in the winning lottery numbers. Just because something paid off once doesn't mean it will continue to pay off. Especially when you are talking about bubbles/ponzi-schemes.

by josu 10y ago

powera 10y ago

Is Bitcoin supposed to be an investment or a currency?

jonny_eh 10y ago
Yes
- conception 10y ago
  Exactly. Is the dollar a currency or an investment. It's both.
  - colanderman 10y ago
    The dollar undergoes inflation. That makes it a pretty terrible investment. (It is, by definition, outperformed by near-zero-risk I-bonds.)
    - ptaipale 10y ago
      The dollar doesn't necessarily have inflation in comparison to my national currency... and it may be the most readily available investment opportunity that helps you avoid poor national economic policies.
      - aminorex 10y ago
        Yes, this. Hence its worldwide popularity. The dollar is the #1 u.s. export by an order of magnitude; because it is a terrible investment for u.s. persons and a marvelous investment for non-u.s. persons.
- SyneRyder 10y ago
  "Yes" is a surprisingly good answer. While in many (most?) countries Bitcoin is regarded as digital currency, there are a few countries (like Australia) where the tax authorities treat Bitcoin as an investment, ie "an asset for capital gains tax (CGT) purposes". https://www.ato.gov.au/General/Gen/Tax-treatment-of-crypto-currencies-in-Australia---specifically-bitcoin/ https://www.ato.gov.au/General/Gen/Tax-treatment-of-crypto-c...

argonaut 10y ago

> Yet, if you had invested in bitcoin 5 years ago you would have outperformed Berkshire Hathaway's lifetime performance. I have some penny stocks to sell you...

ceejayoz 10y ago

> Yet, if you had invested in bitcoin 5 years ago you would have outperformed Berkshire Hathaway's lifetime performance. People who get in on a ponzi or bubble in the early days tend to do well, yes. Plenty of folks picked up BTC when they were $1k+, though.

drcode 10y ago
If you bought bitcoin at 1k you'd be down 28% right now... Not exactly a fantastic investment, but no worse than the nasdaq on some years.

bduerst 10y ago

This is textbook Gamblers Fallacy.

mquander 10y ago
No, it isn't. They have nothing in common besides making a bet. https://en.wikipedia.org/wiki/Gambler%27s_fallacy https://en.wikipedia.org/wiki/Gambler%27s_fallacy
- bduerst 10y ago
  They're literally saying that because bitcoin had a bubble and "outperformed", any of the new younger cryptocurrencies "are onto something" and could go big at any moment. It's a system of independent probabilities, hence gambler's fallacy.

andkenneth 10y ago

I was thinking about getting into bitcoin mining when it was still plausible to do it by yourself. Kicking myself now, but really it was a weird longshot thing at the time.

chimeracoder 10y ago

> I don't know anybody that invested a significant amount of their savings You weren't hanging around the right IRC channels the day after MtGox went under, I take it.

slg 10y ago

I agree that these can be interesting experiments. I first played around with Bitcoin 5+ years ago when I could mine 50 Bitcoin every couple days on a cheap laptop. And like you I also have also have a background in economics. My conclusion at the time is the same as it is today. Most of these cryptocurrencies were a bunch of software developers thinking they knew more about economics that economists. That is where my comment comes into play. The issues discussed in this article are stuff you would learn about in any intro econ class. The fact that an apparently large percentage of people are "investing" in these currencies without knowing these concepts leads me to believe that they are a rather uninformed lot (uninformed is not necessarily the same as misinformed). That is the easiest sign that this is a bubble, people that know very little about it parking their money there and calling it "investing". Regarding the returns, I will refer you to our old friend Keynes. "Markets can remain irrational a lot longer than you and I can remain solvent." Cryptocurrencies and related technologies have potential, but I have seen little evidence to suggest that current prices aren't completely irrational.

deciplex 10y ago

> Yet, if you had invested in bitcoin 5 years ago you would have outperformed Berkshire Hathaway's lifetime performance. Berkshire Hathaway's net income last year alone was 24 billion USD. I don't think you would be able to generate this income no matter when you invested in Bitcoin, to say nothing of matching it in a single year. I get that you are talking about the return on investment as a percentage of stake, but the scale we are talking about, as well as the difference in risk profile, means you are very nearly comparing apples and oranges. I can point out any number of various schemes which have gotten people rich over the years - that doesn't make them sound investments.

hueving 10y ago

>Yet, if you had invested in bitcoin 5 years ago you would have outperformed Berkshire Hathaway's lifetime performance. Same thing if you had invested in the winning lottery numbers. Just because something paid off once doesn't mean it will continue to pay off. Especially when you are talking about bubbles/ponzi-schemes.