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Will Bitcoin Make a Good Investment?
- xiphias2 7y agoThere's no such thing as secure third-party custody, as the insurance companies (rightly) limit the amount of total insured Bitcoin volume. For years I heared people talking about how important role institutions play, but luckily so far Bitcoin remained people's money.
- thefounder 7y agoPeople's money? The majority of bitcoin is held by various "people" but that doesn't make it people's money.
- pmiller2 7y agoNot one word here about why BTC should be worth anything at all. Who cares if someone spent time and electricity to mine it? The USD is, along with every other major, government-backed currency, already an almost 100% digital currency. I don’t see any advantage there. In fact, BTC has the disadvantage of no major government backing it. If nobody is required to accept it, and I can’t do anything with it otherwise, what good is it?
- sedeki 7y agoWhat exactly does it mean when people say that a currency is backed by a government? ”Backed” to me implies, e.g., redeemable for gold which is clearly not the case for the US dollar. Is it that the government issue bonds denominated in that currency? But that has nothing to do with the money supply per se...? Please explain.
- Pinckney 7y agoThe US government accepts payment for taxes in USD. Even if an American wants nothing to do with USD, and conducts all their exchanges through bartering, they will need to acquire some at some point in order to make tax payments. The value of USD can't fall to 0 as long as the federal government retains the ability to impose taxes.
- Udik 7y agoThat sounds like a strange argument. Nobody can pay their taxes in gold, still gold has a value, right? And on the other hand, the value of the USD can fall to practically zero, as it happened to many other currencies before, despite the governments of the respective countries imposing taxes in those currencies. Bitcoins are, of course, nothing. But it's a nothing that is pretty guaranteed to stay, to be in rigidly limited supply, and that is easily exchangeable. People give it a value that depends on their expectations of other people's willingness to buy them. Would you buy 10 bitcoins from me at $1000 each? I bet you would without hesitation. We're talking of giving a $1k value to something that is useless and completely immaterial, yet you just know it's an excellent deal.
- pmiller2 7y agoGold has value because it’s useful, among other things. That base level of value is why people started making coins out of it in the first place. It’s properties as a physical metal make it easy to store, transport, and protect, all of which are good properties to have as a currency.
- mopsi 7y agoIndustrial demand is only half the story. The value of gold also lies within the fact that unlike fiat currency, it cannot be created out of thin air. Global stockpiles of gold are well known, annual production is small and predictable. This means that if you sell a car for gold, you can expect that gold to be worth the value of a car a year or two from now. Fiat money does not offer such assurance, it can lose most of its value almost overnight if government turns on printing presses or fucks up in some other way (see Turkish lira or Venezuelan bolivar). Cryptocurrencies mimick the same properties of gold. Their "base value" comes from the speed/ease of transactions and other useful features (eg cannot be confiscated). Their supply is algorithmically limited and well-known in advance.
- pmiller2 7y agoIndustrial demand isn’t the entire source of gold’s value, that’s true. I was more referring to it’s usefuln being the source of its value 2700 years ago when people started making coins out of it. I would argue that, beyond industrial demand and use in jewelry, the thing driving the price is primarily speculation. > ...if you sell a car for gold, you can expect that gold to be worth the value of a car a year or two from now. What you’re saying is that the car to gold ratio should be constant if your understanding is correct, right? I don’t have data for cars, but I do for houses, and your conclusion is false: https://www.jmbullion.com/investing-guide/pricing-payments/us-house-to-silver-ratio-us-home-to-gold-ratio/ https://www.jmbullion.com/investing-guide/pricing-payments/u... Re:your criticism of fiat money, I would accept that if I lived in Venezuela, Zimbabwe, or Turkey. But, I’m talking about specifically the USD and other established currencies such as GBP and EUR. There is literally no danger that the US, UK, or EU is going to experience hyperinflation short of near total governmental collapse. Oh, and if you think BTC can’t be confiscated, I have news for you: https://www.theblockcrypto.com/2018/11/07/analysis-the-u-s-has-seized-nearly-200000-bitcoins-to-date-global-confiscations-are-up-to-453000/ https://www.theblockcrypto.com/2018/11/07/analysis-the-u-s-h...
- pmiller2 7y agoIt means it’s legal tender for all debts, public and private.
- sedeki 7y agoThe Zimbabwe government forced everyone to use their currency (Zimbabwe dollar, up until 2008 iirc, pretty sure they still have problems today...). Of course forcing everyone to use this currency created artificial demand for it. However, I don't see why adding "artificial demand" is an argument against bitcoin. EDIT: But sure, if government-backed means they force people to accept the currency, then it will have value. I don't see this as a good selling point though. Not trying to be sarcastic.
- pmiller2 7y agoHaving value isn’t a selling point? You’re digging yourself into a hole here.
- sedeki 7y agoI was referring to government force. "Please respond to the strongest plausible interpretation of what someone says, not a weaker one that's easier to criticize. Assume good faith." https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html
- pmiller2 7y agoYou said it had value. That’s literally what you wrote. The reason is irrelevant. Value is value. If you could think of a way to show BTC has value, I’d accept that as a selling point of BTC.
- sedeki 7y agoBy that reasoning the Zimbabwe dollar had value, because it was ”””backed by the government””” according to your own definition! Of course it did not! Money or money supply should not be determined by government, it should be a result of market mechanisms!
- ProblemFactory 7y agoBacked by a government means that it's backed by the ability of a government to tax work and production happening in the country. Every year the US government collects about 25% of all economic activity as taxes payable only in USD. Every person and business in the country must sell on average 25% of their productive output for USD, and you can buy all those things with USD.
- mdorazio 7y agoIn addition to the other responses here, the US government (through FDIC) guarantees that you won't lose your money in a bank account if something bad happens to the bank. That's a lot more important than most people give credit for.
- icebraining 7y agoThat gives value to the banks, not to the currency. I could create my own currency and give you the exact same guarantees as the FDIC (since I can always print more), yet that wouldn't give it value, because all you get is more units of the same thing. If you disagree, I have some $IBs to sell you, and an insured account to store them!
- pmiller2 7y agoNo, it doesn’t give value to the banks. Banks only have value because you can use them to store and borrow money which has value. Your theoretical bank has no value because your theoretical currency does not, either. FDIC insurance reinforces the value that banks (and the currency one can access through them) already have.
- simonsarris 7y ago> What exactly does it mean when people say that a currency is backed by a government? I think the de facto meaning of backed, despite what people say about gold/silver/etc is actually this: American dollars have value because the US Government taxes things, like land, and if you do not pay those taxes they will send you mean letters (trust me) before resorting to other means (trust Al Capone). You pay these taxes in US dollars. You just having dollars does not make them valuable. And dollars are not valuable because they are backed by gold or silver or sea shells. What makes dollars valuable is that the government wants them back. From something I wrote a while ago about why being "backed" is important: https://medium.com/@simon.sarris/the-guns-of-bitcoin-1f779309a718 https://medium.com/@simon.sarris/the-guns-of-bitcoin-1f77930...
- Lordarminius 7y agoWait until there is a crisis and see how 'backed' your currency is.
- ulzeraj 7y agoIts going to happen soon. The signs are all around.
- Toine 7y agoI agree, right now Bitcoin and other cryptocurrencies are nothing more than pure speculative assets. Until they're completely decoupled from other currencies and are used as a real national/international currency, I'll stand here wondering what the hell is going on with all of this.
- icebraining 7y agoWhat do you mean by "decoupled from other currencies"?
- nikanj 7y agoIt's proven to be very, very useful for anonymous blackmail à la Cryptolocker. Also quite useful for buying all sorts of contraband, from guns to drugs.
- tim333 7y agoAlso as Warren Buffett put it: "It’s a gambling device… there’s been a lot of frauds connected with it. There’s been disappearances, so there’s a lot lost on it. Bitcoin hasn’t produced anything." But it's a good gambling device and people like to gamble. I both think it's kind of nuts and hold a few bitcoins.
- Lordarminius 7y agoWarren Buffet is biased and ignorant. I'd give an arm to hear what he said about Google, FB and other dotcoms when he passed on investing in the 2000's
- tim333 7y agoHe's always used to say he didn't understand tech and was sticking to things he understood. Which has served him well though he now is invested in Apple and regrets missing Amazon.
- deleted 7y ago[deleted]
- sanbor 7y agoIt doesn't have to be backed by a government to have value, just as gold or diamonds have value and are not backed by governments.
- icebraining 7y ago> Not one word here about why BTC should be worth anything at all. There's no "should". Moral theories about the propriety of the value of currencies are not material. Bitcoin has value because people are willing to trade valuable stuff for it
- pmiller2 7y ago“Should” is not a moral judgement. Substitute the word “logically,” if you want. What can you buy with BTC besides drugs and the occasional coffee at a Silicon Valley coffee shop? How does that compare to what you can buy with USD? Call me when you can buy a house with BTC reliably.
- icebraining 7y agoAre you saying nothing has value unless it can be directly and reliably used to buy houses? If you're saying "BTC is less useful than some other currencies", then I don't disagree, but then you should have said that in the first place, rather than motte-and-baileying.
- pmiller2 7y agoNice straw man. I’m saying it’s value is equal to its utility for facilitating transactions, and there’s nothing worthwhile you can buy with it. If I can’t buy a pizza, a bus ticket, a TV, a house, a car, a beer, or dinner with it, then what good is it?
- 2bitencryption 7y agoOnce thing I've noticed about Bitcoin is that there are many "alt-coins" that seem to deliver better on Bitcoin's promises from a technical perspective, but those coins are forever stuck in Bitcoin's shadow because BTC has that first-mover advantage. And as a currency, the first-mover advantage is HUGE, because who wants to convert their investments from a hugely popular coin to one that could disappear tomorrow? So everyone seems stuck -- we agree cryptocurrency can be an amazing idea, and the first version of it is something of a technical (and economic?) miracle, but now we're stuck with the V1 flaws forever (unless the group governing it decides to 'fix' those flaws, but there's another issue, I don't want you messing with how my money works...)
- eugeniub 7y agoWhat first mover advantages does it have exactly? I know many people who have bought bitcoins, but absolutely zero people who use it in their day to day lives.
- isoprophlex 7y agoThey use it to talk endlessly about their coins, that might be an end in itself...
- ziddoap 7y agoThe first mover advantage in this case is the fact that early adopters of crypto bought BTC, because BTC was all there was. Now that those people already have BTC, they are less likely to purchase a second coin. For one, they already have money invested in the space. Secondly, BTC has shown that it has staying power - outlasting many altcoins which came after it - which further solidifies BTC as the top contender (for now). So, those already invested in BTC have little impetus to change from BTC to another coin == a first mover advantage.
- citrablue 7y agoIsn't it just as plausible that early adopters bought BTC because that's all there was, then bought altcoins as they appeared in order to diversify their crypto portfolio? It'd be interesting to find out if there are more investors in "crypto" as a strategy versus BTC specifically.
- jamisteven 7y agoShort answer: hell no. What gives currency value is how often people use said currency to purchase goods, nobody uses Bitcoin, not to the extent of any real currencies anyways.
- zed88 7y agoBy that logic, gold should be worthless. It isn't. Bitcoin will probably never be a currency equivalent to fiat, but it surely is a store of value in the long term.
- baq 7y agoGold has practical, useful applications. Bitcoin is pretty much wishful thinking at best. I’m not sure if bitcoin is worth the CO2 emissions mining it created.
- Udik 7y ago> Gold has practical, useful applications. Yes. But they don't remotely justify its value, which has been established long before its technological applications.
- Donzo 7y agoYes. It will make a good investment: https://twitter.com/CL207/status/1142651211310485504?s=20 https://twitter.com/CL207/status/1142651211310485504?s=20 50-100k a coin by December 2021 is what many are targeting this time.
- kleer001 7y agoIMHO there's only one thing that makes Bitcoin valuable and that's human emotion. And people LOVE Bitcoin, forever.
- thefounder 7y agoThey love it until they loose. It's same with the casino.
- kleer001 7y agoSure, and casinos are insanely profitable. Unless you fiddle with them too much. One can bankrupt a casino, but it takes a certain insanity.
- thefounder 7y agoThe casino can refuse to pay so I doubt one can bankrupt a casino.
- kleer001 7y agoI meant as a casino owner with over leveraging, the same way that individuals can bankrupt themselves.
- naveen99 7y agoBitcoin forces reexamination of custody issues from first principles. Do countries smaller than the largest 100 corporations really need their own central banks ? And if they are themselves consumers of the ecb or the fed, they have custody issues also. Democracy is the custody of people’s power with elected representatives. With immigration people can reallocate the custody of that power. Not all people need 100% 3rd party custody of money. Also, bitcoin makes it easy to detect theft and audit 3rd parties more easily.
- dhosek 7y agoNo.
- srib 7y agoExcept for a small window around the peak in December 2017, if anyone bought bitcoin anytime during its existence, they would be profitable now.
- kartan 7y ago> Except for a small window around the peak Most people bought during the peak, that's why it was a peak. As any other pyramidal Scheme the only way to win is to be there first. Later on you are just trying to put other people into the scheme to regain some losses.
- srib 7y ago> Most people bought during the peak, that's why it was a peak. There is no cure for jumping in with your emotions and money into markets. How is it any different from buying stocks at its peak? If you bought SPY during 2008 peak bubble, you had to wait for 6-7 years to even break even!
- juanbyrge 7y agoBitcoin is not an investment. It has no underlying rate of return. When you invest in stocks you get dividends. When you invest in bonds you collect coupons. When you invest in real estate you collect rent. Bitcoin is speculation. You are just hoping somebody comes.along and pays more for it than you did. In that sense it's more like gold and silver.
- srib 7y agoIn the conventional way, you are right. However, there is a system that is evolving to generate returns for your open lightning network channels. They do generate small amount of returns. [0] [0] https://medium.com/@timevalueofbtc/the-lightning-network-reference-rate-98e41a9dadfa https://medium.com/@timevalueofbtc/the-lightning-network-ref...
- dawhizkid 7y agoThis is a very blanket statement. Not all stocks have dividends. Most don't. Some bonds have negative yields. Some consider a store of value to be an investment (like, as you mentioned, gold or silver). Unlike gold or silver, though, there's a hard limit to the number of bitcoin that will ever be mined. It's not inconceivable that in the not too distant future we'll mine gold/silver/other precious metals from space, and prices will plummet. Bitcoin can certainly provide dividends, not necessarily in the traditional sense, via future hard forks. Anyone who has held bitcoin in the last 2 years or so have already received equivalent amount of Bitcoin Cash and Bitcoin SV. Those chains can, in turn, hard fork, and assuming you have held you'd receive equivalent amounts of those forks, and so on.
- liquidise 7y agoThis strikes me as a somewhat semantic argument. Many stocks don't pay dividends. Flipping houses would also fall outside of your definition of investing. Buying gold has also been a relatively safe "investment" strategy as well, speculation or not. Every form of investment is, at its core, speculation on some level. If i pour my savings into Apple and they tank, the dividends would pale in comparison to my losses.
- 7y ago
- thefounder 7y agoLet me translate that for you: Would x spins on a slot machine make a good investment? Btw I have 1.x bitcoin in my wallet. Not as an investment though.
- ThatPlayer 7y agoIf the slot machine had a > 50 percent chance of winning, yes. Not saying Bitcoin is a good investment.
- rtempaccount1 7y agoAny article which talks about Bitcoin as an investment without mentioning (at least in passing) the currently unregulated exchanges and the role of Tether in the price, is missing a large part of the picture. The current set of exchanges which are setting the price are totally unregulated banks (effectively) and with Tether (a "stablecoin" that isn't 1:1 backed and which has been rapidly inflating it's supply) there are significant concerns about how much of the price is really reflective of demand.
- ziddoap 7y agoSeeing so many comments (some here, but in general everywhere) still trying to argue and convince people that BTC has no value and you might as well burn your money. BTC has been around for a decade, how many more decades does it need to be around before people will admit that hey, maybe, for some reason, this has some sort of value? People still arguing that BTC has no use.. 10 years of usage, adoption, and rising value would seem to offer a different opinion. Is it going to be around forever? Who knows. Maybe it goes bust tomorrow, I don't know. What I do know is this: people are willing to buy it, sell it, and trade for it. The value goes up and down. To me, that makes it a currency that you may be able to invest some money into. Maybe you make some money, maybe you don't. I would even argue BTC falls under the traditional definition of invest, which is: >expend money with the expectation of achieving a profit or material result by putting it into financial schemes, When people buy BTC, they are expecting to achieve a profit. BTC is a financial scheme. Seems fairly cut and dry to me.
- pmiller2 7y agoOk, what can I buy with BTC vs what can I buy with USD? BTC is useless in comparison. What exactly do people mean when they say they expect to make money on BTC? Do they mean they’ll get more BTC, or that they can sell it for USD or some other currency? Why do you think that is?
- ziddoap 7y agoI don't remember saying anything you can buy with USD you can buy with BTC. I never even hinted that BTC was a replacement for USD in any sense. I don't know about everyone else, but here's what I mean when I say you can make money on BTC: Buy low, sell high.
- pmiller2 7y agoYou said people were arguing BTC had no use. I’m asking what I can use it for? And, when you say buy low, sell high, low and high relative to what?
- thtthings 7y agocheck out what Munger says about bitcoin, speculate if you want but don't bet the house on it! https://www.youtube.com/watch?v=NBVDqAHQ4-M https://www.youtube.com/watch?v=NBVDqAHQ4-M
- pessimizer 7y agoI'm starting to turn the corner on this; if you can pick it up on one of its lows, which are pretty extreme as far as I know, like 1/4 of peak, and hold without regard for daily movement, you will probably make money. I think Bitcoin is largely taking value from individuals trying to stash money pilfered from the public in some way (usually through their public offices, but sometimes through embezzlement, theft, or a previous illegal accumulation that has to be moved in the face of imminent arrest), and opportunities for this sort of large-scale theft come rarely. So upward movements are caused by small groups and happen very quickly. After the theft is made, the first priority is to get the money out of the country (or tied for first with getting your children out of the country), then to get one's self out of the country. The tolerance for loss in exfiltrating this cash is virtually unlimited, in exchange for speed. Small pops and falls caused by individual incidents will sometimes coincide making a larger pop, and periodically some legal loophole (or prosecution pressure) will open up in come country that puts a lot of people in this situation at the same time. This is inevitable. The small pops are muted due to the selling of previous market moving buyers. The big pops are virtuous circles; they exhaust the supply of previous smugglers, who cash out, and the resulting acceleration in the upward price movement filters to the media, where knife-catchers step in. You probably want to time your sales to the knife-catchers, anticipating the first articles reporting on the price rise. There will always be western countries where you can cash out. There's no way to suppress a currency designed for money laundering in a west that is entirely financial services and intellectual property; there will always be some official that can be bribed, or a country that needs the tax receipts. Bitcoin can do to nations what Uber and AirBnB do to cities. I'd bet the floor on bitcoin would probably be a good measure to determine growth in the general world corruption rate; the more good pops, the more people feel like they can hold a little bit longer. Think of cartels burying cash in fields, and how much they'd be willing to pay to make it spendable. The only other option is to burn it. Going into business to help them from the comfort of your living room is not a bad business. This article is not good, though, just nonsense reassurance mostly (bitcoin is small, but things that become big start small, so bitcoin will be big.) Worse, the more large institutions are holding bitcoin, the less benefit for individual investors, not more, because they'll absorb the big pops, and do it in a way that they end up holding an optimum amount of BTC all the time using their international nature and their ability to shift losses to offset gains for tax purposes (in short, regulatory arbitrage.) Bitcoin could ultimately end up as an exclusive partnership between thieves avoiding capture and banks avoiding taxes. A sort of high-speed virtualized real estate. /flight of fancy
- human_banana 7y agobeth.technology Solid source.