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I recommend you read some of Stephen Deihl's thoughts on the subject[0]. You're not alone if you feel that cryptocurrency doesn't make sense as an investment v

I recommend you read some of Stephen Deihl's thoughts on the subject[0]. You're not alone if you feel that cryptocurrency doesn't make sense as an investment vehicle, but the HN community will make you feel crazy for not seeing what a great thinking this is an incredible new opportunity and "things are different this time!" There is no better indication of a bubble then people telling you that you're the crazy one for questioning it. I remember people telling me I was crazy for not buying a house in 2007, and crazy for not trading tech stocks in 1999. [0] https://www.stephendiehl.com/posts/crypto.html https://www.stephendiehl.com/posts/crypto.html

Alex3917 6y ago
As a store of value it's better than gold in some ways, because you don't need to physically store it. But unlike gold, which can appreciate in value indefinitely, Bitcoin is mathematically capped in how much it can appreciate in value because the expected value of mining and purchasing need to go to par.
- gruez 6y ago
  >But unlike gold, which can appreciate in value indefinitely, Bitcoin is mathematically capped in how much it can appreciate in value because the expected value of mining and purchasing need to go to par. I don't think you're using the term "appreciate in value" correctly. I think what you meant to say is that gold can be mined infinitely (on earth, in space) and therefore has potentially infinite supply, whereas the total supply of bitcoins is capped at 21 million.
Infinitesimus 6y ago
> There is no better indication of a bubble then people telling you that you're the crazy one for questioning it. I remember people telling me I was crazy for not buying a house in 2007, and crazy for not trading tech stocks in 1999. I'm not sure that's a good indicator with so many counter examples: the internet, large touch screen phones, Cloud in the earlier days, etc. We truly have no idea what the future if Cryptocurrencies are.
- vesinisa 6y ago
  > We truly have no idea what the future of X is What an excellent reason not to invest in X!
  - cortesoft 6y ago
    That is what risk is.... not knowing. If you want high reward from an investment, you need to take high risks, which means you will invest without knowing something. Now, some risks are smarter than others...
    - fractionalhare 6y ago
      That's not necessarily a good idea. You don't need to take on higher risk for a higher return. It's usually better to leverage risk-adjusted returns rather than chase high total returns with commensurate risk. You can take on more risk that if you have the appetite, but if that's the case you could also just use levered beta (e.g. 3x levered S&P 500). This would significantly improve your portfolio while still being fundamentally much easier to understand than a novel asset. If your portfolio has a decent risk adjusted return and very low volatility and beta exposure, it's safer to just leverage it up to the same risk as the S&P 500. This reduces the chance of you blowing up your capital in the long run. I would argue there are very few investment goals for which extreme risk is sound (especially if it's unhedged!).
      - anythingdude321 6y ago
        if you leverage your risk for a higher return you _also_ increase your risk
        fractionalhare 6y ago
        Yes, but you can choose how much risk to take on using your leverage weight. You don't have to accept the baseline risk of the inherently riskier asset. It's easier to start with a less risky portfolio and weight it accordingly than it is to derisk a portfolio which is intrinsically riskier.
ozorOzora 6y ago
"The Politics of Bitcoin: Software as Right-Wing Extremism"... just wow. Is it crazy to consider that crypto companies might simply provide better tools than a lot of banks, therefore driving worldwide adoption?
- baron_harkonnen 6y ago
  Your argument here makes it sound like people are using crypto for practical applications on a scale approaching banks. If that was the case I would be far less skeptical, but, aside form a few enthusiasts that make crypto transactions to make a point that "people use these" I don't know of anyone that uses crypto for practical, everyday financial transactions. Can you provide me some evidence that people are using crypto at a large scale, and that that scales in increasing in a way that it is anywhere near competing with banking services? It seems that even after a decade of enthusiasm people are still mostly "investing" in it.
  - anythingdude321 6y ago
    yes but that is a use. bitcoin is useful as a savings technology. that is how monetary technology should work, especially at first
seibelj 6y ago
> but the HN community will make you feel crazy for not seeing what a great thinking this is an incredible new opportunity and "things are different this time!" The HN community is strongly hostile to crypto. Few people here like the downvotes when they speak positively about crypto, although I keep taking them!
Der_Einzige 6y ago
You are crazy for not buying a house in 2007. I can't think of a better investment to have right now than a house purchased in 2007...
- lotsofpulp 6y ago
  The price of the house structure itself decreases with time. The price of the land the house sits on might increase, depending on where it is. Land prices in very, very few areas have increased sufficiently to match a risk adjusted return (or even the nominal return) of a broad market index fund, such as VOO or VTI. Especially considering the liabilities and ongoing maintenance costs with owning housing structures. The labor adjusted return is far better too, you spend minutes and a few clicks investing in an index fund, versus hours and days on real estate.
  - pashamur 6y ago
    *with the caveat that those very few areas also hold a large percentage of the population, since land prices are correlated with population density and zoning regulations (i.e. see Hong Kong for ex.) One thing to not forget is the amount of leverage provided for you in the housing market is disproportionate compared to the leverage you would get in stocks (20% down is 5x leverage, and there are some options to get in on a house with even less than that). If you look at the real rate of return on everything (paper from 2017, analyzing the period between 1870 and 2015 in several developed countries), they claim the return on property is around 8% per year, which is comparable to stocks but with a lower variance. A caveat though is that housing outperformed equity slightly 1870-1950, and equity has outperformed 1950-today. Housing is also a very locale-specific thing, since there is no global private 'housing' market you can invest in. https://www.frbsf.org/economic-research/files/wp2017-25.pdf https://www.frbsf.org/economic-research/files/wp2017-25.pdf
    - lotsofpulp 6y ago
      Absolutely right about the advantages of leverage. And with real estate, you can do a 1031 tax exchange and continue growing your wealth tax free indefinitely as long as you can pay the property taxes. Although, residential real estate offers a pittance in returns compared to commercial. But I think almost everyone who doesn't have an interest in doing the grunt work of real estate investing would be better served sticking their money in an index fund ETF rather than real estate. It's drastically less work, less worry. Extremely low cost broad market index funds and ETFs are relatively new too, I'd be interested in seeing an analysis of performance after they went mainstream.
ur-whale 6y ago
Apologies for posting something borderline meme-ish on HN, but I think this video actually answers your question (watch the whole thing): https://www.youtube.com/watch?v=XbZ8zDpX2Mg https://www.youtube.com/watch?v=XbZ8zDpX2Mg

Alex3917 6y ago

As a store of value it's better than gold in some ways, because you don't need to physically store it. But unlike gold, which can appreciate in value indefinitely, Bitcoin is mathematically capped in how much it can appreciate in value because the expected value of mining and purchasing need to go to par.

gruez 6y ago
>But unlike gold, which can appreciate in value indefinitely, Bitcoin is mathematically capped in how much it can appreciate in value because the expected value of mining and purchasing need to go to par. I don't think you're using the term "appreciate in value" correctly. I think what you meant to say is that gold can be mined infinitely (on earth, in space) and therefore has potentially infinite supply, whereas the total supply of bitcoins is capped at 21 million.

Infinitesimus 6y ago

> There is no better indication of a bubble then people telling you that you're the crazy one for questioning it. I remember people telling me I was crazy for not buying a house in 2007, and crazy for not trading tech stocks in 1999. I'm not sure that's a good indicator with so many counter examples: the internet, large touch screen phones, Cloud in the earlier days, etc. We truly have no idea what the future if Cryptocurrencies are.

vesinisa 6y ago
> We truly have no idea what the future of X is What an excellent reason not to invest in X!
- cortesoft 6y ago
  That is what risk is.... not knowing. If you want high reward from an investment, you need to take high risks, which means you will invest without knowing something. Now, some risks are smarter than others...
  - fractionalhare 6y ago
    That's not necessarily a good idea. You don't need to take on higher risk for a higher return. It's usually better to leverage risk-adjusted returns rather than chase high total returns with commensurate risk. You can take on more risk that if you have the appetite, but if that's the case you could also just use levered beta (e.g. 3x levered S&P 500). This would significantly improve your portfolio while still being fundamentally much easier to understand than a novel asset. If your portfolio has a decent risk adjusted return and very low volatility and beta exposure, it's safer to just leverage it up to the same risk as the S&P 500. This reduces the chance of you blowing up your capital in the long run. I would argue there are very few investment goals for which extreme risk is sound (especially if it's unhedged!).
    - anythingdude321 6y ago
      if you leverage your risk for a higher return you _also_ increase your risk
      - fractionalhare 6y ago
        Yes, but you can choose how much risk to take on using your leverage weight. You don't have to accept the baseline risk of the inherently riskier asset. It's easier to start with a less risky portfolio and weight it accordingly than it is to derisk a portfolio which is intrinsically riskier.

ozorOzora 6y ago

"The Politics of Bitcoin: Software as Right-Wing Extremism"... just wow. Is it crazy to consider that crypto companies might simply provide better tools than a lot of banks, therefore driving worldwide adoption?

baron_harkonnen 6y ago
Your argument here makes it sound like people are using crypto for practical applications on a scale approaching banks. If that was the case I would be far less skeptical, but, aside form a few enthusiasts that make crypto transactions to make a point that "people use these" I don't know of anyone that uses crypto for practical, everyday financial transactions. Can you provide me some evidence that people are using crypto at a large scale, and that that scales in increasing in a way that it is anywhere near competing with banking services? It seems that even after a decade of enthusiasm people are still mostly "investing" in it.
- anythingdude321 6y ago
  yes but that is a use. bitcoin is useful as a savings technology. that is how monetary technology should work, especially at first

seibelj 6y ago

> but the HN community will make you feel crazy for not seeing what a great thinking this is an incredible new opportunity and "things are different this time!" The HN community is strongly hostile to crypto. Few people here like the downvotes when they speak positively about crypto, although I keep taking them!

Der_Einzige 6y ago

You are crazy for not buying a house in 2007. I can't think of a better investment to have right now than a house purchased in 2007...

lotsofpulp 6y ago
The price of the house structure itself decreases with time. The price of the land the house sits on might increase, depending on where it is. Land prices in very, very few areas have increased sufficiently to match a risk adjusted return (or even the nominal return) of a broad market index fund, such as VOO or VTI. Especially considering the liabilities and ongoing maintenance costs with owning housing structures. The labor adjusted return is far better too, you spend minutes and a few clicks investing in an index fund, versus hours and days on real estate.
- pashamur 6y ago
  *with the caveat that those very few areas also hold a large percentage of the population, since land prices are correlated with population density and zoning regulations (i.e. see Hong Kong for ex.) One thing to not forget is the amount of leverage provided for you in the housing market is disproportionate compared to the leverage you would get in stocks (20% down is 5x leverage, and there are some options to get in on a house with even less than that). If you look at the real rate of return on everything (paper from 2017, analyzing the period between 1870 and 2015 in several developed countries), they claim the return on property is around 8% per year, which is comparable to stocks but with a lower variance. A caveat though is that housing outperformed equity slightly 1870-1950, and equity has outperformed 1950-today. Housing is also a very locale-specific thing, since there is no global private 'housing' market you can invest in. https://www.frbsf.org/economic-research/files/wp2017-25.pdf https://www.frbsf.org/economic-research/files/wp2017-25.pdf
  - lotsofpulp 6y ago
    Absolutely right about the advantages of leverage. And with real estate, you can do a 1031 tax exchange and continue growing your wealth tax free indefinitely as long as you can pay the property taxes. Although, residential real estate offers a pittance in returns compared to commercial. But I think almost everyone who doesn't have an interest in doing the grunt work of real estate investing would be better served sticking their money in an index fund ETF rather than real estate. It's drastically less work, less worry. Extremely low cost broad market index funds and ETFs are relatively new too, I'd be interested in seeing an analysis of performance after they went mainstream.

ur-whale 6y ago

Apologies for posting something borderline meme-ish on HN, but I think this video actually answers your question (watch the whole thing): https://www.youtube.com/watch?v=XbZ8zDpX2Mg https://www.youtube.com/watch?v=XbZ8zDpX2Mg