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Bitcoin 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. Wh

Bitcoin 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 ago
In 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 ago
This 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 ago
This 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.
- braythwayt 7y ago
  Stocks that don't pay dividends are absolutely speculations. Flipping houses is absolutely speculating in real estate if you neither occupy them nor rent them out during the time you own them. Not all forms of investment are speculations at some level. If I own a landscaping business and invest in a truck, I can drive it until it goes to the junkyard. I generate a return that hopefully offsets the depreciation, and I might not get even a dollar for it when I'm done... I may even have to pay to get it towed away.
  - mdemare 7y ago
    Berkshire Hathaway does not pay a dividend - is it therefore speculation? Surely not - its valuation is based on it’s earnings.
  - ProxCoques 7y ago
    And stocks that do pay dividends are also speculations because they might cut the divi the day you buy them, or their price might crash, or they might go bust. All investment is speculation. Bitcoin is no different in that regard to stocks of any kind.
- prepend 7y ago
  Stocks that don’t pay dividends invest in new capital and directly increase stakeholder equity. Not entirely, but apple’s price is based on a predicted future cash flow and growth in cash flow and assets. This is different from bitcoin.
- koolba 7y ago
  Houses are tangible assets which can be rented out for a direct rate of return. Gold is a better analogy though the physical existence and thousands of years of use as a store or value give it a pass compared to anything crypto.
- thtthings 7y ago
  Every asset that produces an Income or has a possibility of producing income in the future is an investment. Everything else is speculation. Buying a commercial property and renting it out is an investment. Buying a house in the hope of selling it for more in the future is not investment. Same goes for Gold, Bitcoin, momentum trading in stocks in not investment. Buying a stock that does not pay dividend but is a real business that produces something is an investment.
braythwayt 7y ago
People use the terms "invest" and "speculate" interchangeably, or they try to suggest that an "investment" has a lower risk than a "speculation," but your disambiguation is the correct one and it is vital to understand the difference between: 1. Putting money into something that generates a return of some kind, and which may also be sold to someone else, and; 2. Putting money into something where the only return you get is from selling it to someone else for more money. Both practices can even involve the same kind of entity: If you buy a condominium and live in it, it is an investment. Your use of the property as a home is a return. If you rent it out, it is more obviously an investment. Whereas, if you buy an empty plot of land and do not use it or rent it out as a parking lot/whatever, you are speculating in real estate.
deleted 7y ago
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soniman 7y ago
You're half way there. Investments promise a return to investors by creating value, or that's the goal, at least. Speculation does not create value; commodities, options, and shorting do not create value, they are zero-sum.
founderling 7y ago
I beg to differ. Alice wants to send $1 to Bob via Bitcoin. Alice needs some Bitcoin to do so. Hoddler sells some Bitcoin to Alice for $1.01 Alice sends that to Bob. Now Bob wants to change it to $. Hoddler buys back for $1 Hoddler has a return on his investment.
- pmiller2 7y ago
  You left out transaction fees. Factor that in, and transferring directly via USD is simpler, more secure (if not technically, then via insurance), and probably cheaper.
  - icebraining 7y ago
    That's irrelevant to the question of whether it's an investment or not. Bad investments are still investments.
    - pmiller2 7y ago
      That’s correct. I was refuting the idea that BTC has any advantages over USD in this scenario.
      - icebraining 7y ago
        Since nobody claimed it did, you're attacking a strawman.
        pmiller2 7y ago
        Pay attention, because you’ll miss it if you don’t up your game, apparently. “Hodler” doesn’t make money here. She loses. Losing $0 is superior to losing $X for any X > 0.
        icebraining 7y ago
        Hodler will obviously only make the trade when the spread is larger than the transaction costs. The question is why would Alice and Bob be willing to pay, but the reality is that some are. Whether it be by pure foolishness or because your theory is simply incomplete.
pmiller2 7y ago
Exactly. I tend to phrase this as “BTC has no fundamentals.” Stocks go up because profits go up along with GDP (this is the reason non-dividend paying stocks are also investments). None of this applies to BTC.
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ChainOfFools 7y ago
There is a widely held sentiment among "serious" bitcoiners that the entire financial system will ultimately cede to cryptocurrency, with bitcoin on top, and it is at this point they expect to rent-seek the utter bejeezus out of the rest of society. goes by the meme "hyperbitcoinization"

srib 7y ago

In 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 ago

This 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 ago

This 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.

braythwayt 7y ago
Stocks that don't pay dividends are absolutely speculations. Flipping houses is absolutely speculating in real estate if you neither occupy them nor rent them out during the time you own them. Not all forms of investment are speculations at some level. If I own a landscaping business and invest in a truck, I can drive it until it goes to the junkyard. I generate a return that hopefully offsets the depreciation, and I might not get even a dollar for it when I'm done... I may even have to pay to get it towed away.
- mdemare 7y ago
  Berkshire Hathaway does not pay a dividend - is it therefore speculation? Surely not - its valuation is based on it’s earnings.
- ProxCoques 7y ago
  And stocks that do pay dividends are also speculations because they might cut the divi the day you buy them, or their price might crash, or they might go bust. All investment is speculation. Bitcoin is no different in that regard to stocks of any kind.
prepend 7y ago
Stocks that don’t pay dividends invest in new capital and directly increase stakeholder equity. Not entirely, but apple’s price is based on a predicted future cash flow and growth in cash flow and assets. This is different from bitcoin.
koolba 7y ago
Houses are tangible assets which can be rented out for a direct rate of return. Gold is a better analogy though the physical existence and thousands of years of use as a store or value give it a pass compared to anything crypto.
thtthings 7y ago
Every asset that produces an Income or has a possibility of producing income in the future is an investment. Everything else is speculation. Buying a commercial property and renting it out is an investment. Buying a house in the hope of selling it for more in the future is not investment. Same goes for Gold, Bitcoin, momentum trading in stocks in not investment. Buying a stock that does not pay dividend but is a real business that produces something is an investment.

braythwayt 7y ago

People use the terms "invest" and "speculate" interchangeably, or they try to suggest that an "investment" has a lower risk than a "speculation," but your disambiguation is the correct one and it is vital to understand the difference between: 1. Putting money into something that generates a return of some kind, and which may also be sold to someone else, and; 2. Putting money into something where the only return you get is from selling it to someone else for more money. Both practices can even involve the same kind of entity: If you buy a condominium and live in it, it is an investment. Your use of the property as a home is a return. If you rent it out, it is more obviously an investment. Whereas, if you buy an empty plot of land and do not use it or rent it out as a parking lot/whatever, you are speculating in real estate.

deleted 7y ago

[deleted]

soniman 7y ago

You're half way there. Investments promise a return to investors by creating value, or that's the goal, at least. Speculation does not create value; commodities, options, and shorting do not create value, they are zero-sum.

founderling 7y ago

I beg to differ. Alice wants to send $1 to Bob via Bitcoin. Alice needs some Bitcoin to do so. Hoddler sells some Bitcoin to Alice for $1.01 Alice sends that to Bob. Now Bob wants to change it to $. Hoddler buys back for $1 Hoddler has a return on his investment.

pmiller2 7y ago
You left out transaction fees. Factor that in, and transferring directly via USD is simpler, more secure (if not technically, then via insurance), and probably cheaper.
- icebraining 7y ago
  That's irrelevant to the question of whether it's an investment or not. Bad investments are still investments.
  - pmiller2 7y ago
    That’s correct. I was refuting the idea that BTC has any advantages over USD in this scenario.
    - icebraining 7y ago
      Since nobody claimed it did, you're attacking a strawman.
      - pmiller2 7y ago
        Pay attention, because you’ll miss it if you don’t up your game, apparently. “Hodler” doesn’t make money here. She loses. Losing $0 is superior to losing $X for any X > 0.
        icebraining 7y ago
        Hodler will obviously only make the trade when the spread is larger than the transaction costs. The question is why would Alice and Bob be willing to pay, but the reality is that some are. Whether it be by pure foolishness or because your theory is simply incomplete.

pmiller2 7y ago

Exactly. I tend to phrase this as “BTC has no fundamentals.” Stocks go up because profits go up along with GDP (this is the reason non-dividend paying stocks are also investments). None of this applies to BTC.

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ChainOfFools 7y ago

There is a widely held sentiment among "serious" bitcoiners that the entire financial system will ultimately cede to cryptocurrency, with bitcoin on top, and it is at this point they expect to rent-seek the utter bejeezus out of the rest of society. goes by the meme "hyperbitcoinization"