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I see Bitcoin as a hedge against the USD and EUR as I feel the currencies will be in trouble in the coming years. I see Bitcoin as a store of value. Keeping so

by wsc981 6y ago

I see Bitcoin as a hedge against the USD and EUR as I feel the currencies will be in trouble in the coming years. I see Bitcoin as a store of value. Keeping some of my assets in Bitcoin keeps some of my assets out of the hands of governments and banks and will not be affected by devaluation. There's no risk of a bail-in [0] for example. I don't invest all my assets in Bitcoin, currently perhaps 10% of my net worth. I do feel Bitcoin will rise to 100.000 USD in the next few years and possibly even 1.000.000 USD in 10+ years, my aim is to gain a total of at least 3 BTC or so in the next year. I just hope Bitcoin doesn't rise too quick in value in that time period, since I can only afford to buy for maybe 1.000 USD per month. I might sell a bit of my Bitcoin assets after my total Bitcoin asset value reach around 500.000 USD, since at that point I should be able to take things slow. At that point I would diversify a bit more into ETFs or stocks. Perhaps this video [1] by Raoul Pal can give you some insight in my point of view, as I agree with him on most points. --- [0]: https://www.forbes.com/sites/nathanlewis/2013/05/03/the-cyprus-bank-bail-in-is-another-crony-bankster-scam/?sh=e83ff8c26856 https://www.forbes.com/sites/nathanlewis/2013/05/03/the-cypr... [1]: https://www.youtube.com/watch?v=qL2LfVRl3J0 https://www.youtube.com/watch?v=qL2LfVRl3J0

misnamed 6y ago
If you want to hedge against inflation, I suggest TIPS and maybe a bit of gold. I would also point out that the market expectation clearly isn't aligned with currencies being 'in trouble' - very low inflation in general right now.
- wsc981 6y ago
  > If you want to hedge against inflation, I suggest TIPS and maybe a bit of gold. I need to read up on TIPS, haven't heard about that before. Yes, gold is a decent option as well. However I view Bitcoin as digital gold and it has a few nice properties that gold doesn't have (of course gold has some good properties that Bitcoin doesn't have). One of the aspects of Bitcoin that I appreciate the most, is that it's very easy to carry around with me, for example when travelling on an airplane to another country. The same is not true for gold. > I would also point out that the market expectation clearly isn't aligned with currencies being 'in trouble' - very low inflation in general right now. Inflation is actually really high, but its mostly hidden in rising prices for stocks and real estate.
  - pashamur 6y ago
    > Inflation is actually really high, but its mostly hidden in rising prices for stocks and real estate. Sort of. There's inflationary forces (fiscal / stimulatory policy) battling deflationary forces (mainly technological innovation), mainly netting out to a low inflation rate at the moment, as defined by the CPI. Assets that are not affected by the deflationary forces (such as land, and some types of housing), do tend to increase in value, though some of that is increase is just due to interest rates being so low (since for most consumers the house payment is more important than the absolute price; when interest goes down, prices normally go up). It would be interesting to do a graph of interest-normalized house/asset prices over time.
  - misnamed 6y ago
    I won't get into the 'is the CPI accurate?' debate, but will just say I haven't seen a better metric. So I'll stick with: inflation is low. As for the portability of Bitcoin ... OK, but then Bitcoin > Bitcoin ETF, if your goal is to transport and spend it outside of online brokerages.
- pashamur 6y ago
  Generally, the only way to make outsized returns in the market is to go against market expectations, otherwise you would just make market returns. So yes, a bet on crypto is a bet against the market consensus, sort of by definition :)
  - misnamed 6y ago
    A good way to get high returns is to simply use a low-cost, tax-efficient combination of stock and bond index funds. After taxes and fees, the results compound in your favor. I have no interest in gambling on even higher returns - those are plenty for me. If you want to maximize your chances of getting rich as well as getting poor, yes, you can put it all on Bitcoin, or Tesla, or 32 at the roulette wheel, but I'm more interested in growing a nest egg than taking those risks.
vladimirralev 6y ago
I have a lot of respect for Raul Pal, but when he talks about crypto you start to see his limits in understanding. He still thinks governments can't ban crypto if they wanted, he is very wrong about that. He also thinks that governments would allow a crypto to rival a state currency. The most likely success story for crypto is it will be only for banks while regular people will be banned from owning it. There is simply no way a government will allow irreversibly hackable assets in the wild. There are no limits to the damage entities can do with anonymous GDP-scale wealth.
- wsc981 6y ago
  But if you look at his video, he does say governments might attempt to ban crypto, but it would be hard to totally ban, since other governments might adopt cryptos. For an effective ban all world governments have to work together on this, and that's quite unlikely to happen. Actually Iran is using cryptos right now to circumvent some bans from the US government. Certainly Iran would not be in favour for banning crypto. As Raoul Pal mentions, this is the state of game theory. One country might ban, another might adopt. If you can't spend (or exchange for fiat) the cryptos in your own country, you might move to another country. I don't believe Bitcoin will be banned ... at least not while Bitcoin is still a relatively small asset class. Especially since institutional investors are now entering the crypto markets. And perhaps at some point, if enough institutional investors have entered the crypto markets, governments might hesitate to ban crypto, as it could destroy a lot of wealth in pension funds, etc...
  - vladimirralev 6y ago
    He gives the gold ban as an example of "failure" for governments to ban it. He thinks the technology behind bitcoin is somehow so advanced that it is even better protected from governments than gold is. Those are his main points. And I think they are both wrong. The gold example is from ancient times without KYC/AML and absolute surveillance. There is nothing substantial you could possibly do nowadays without proper invoicing and inventory tracking. Regulators will notice instantly. The tech behind bitcoin isn't really that advanced and hiding from the government was never a focus. The tech used by regulators has evolved significantly from the times of previous "defeats". People don't realise how much work goes into tracing payments worldwide. Remember FATCA took only two years to deploy worldwide along with a roadmap to tighten control over the next decade.

by wsc981 6y ago

misnamed 6y ago

If you want to hedge against inflation, I suggest TIPS and maybe a bit of gold. I would also point out that the market expectation clearly isn't aligned with currencies being 'in trouble' - very low inflation in general right now.

wsc981 6y ago
> If you want to hedge against inflation, I suggest TIPS and maybe a bit of gold. I need to read up on TIPS, haven't heard about that before. Yes, gold is a decent option as well. However I view Bitcoin as digital gold and it has a few nice properties that gold doesn't have (of course gold has some good properties that Bitcoin doesn't have). One of the aspects of Bitcoin that I appreciate the most, is that it's very easy to carry around with me, for example when travelling on an airplane to another country. The same is not true for gold. > I would also point out that the market expectation clearly isn't aligned with currencies being 'in trouble' - very low inflation in general right now. Inflation is actually really high, but its mostly hidden in rising prices for stocks and real estate.
- pashamur 6y ago
  > Inflation is actually really high, but its mostly hidden in rising prices for stocks and real estate. Sort of. There's inflationary forces (fiscal / stimulatory policy) battling deflationary forces (mainly technological innovation), mainly netting out to a low inflation rate at the moment, as defined by the CPI. Assets that are not affected by the deflationary forces (such as land, and some types of housing), do tend to increase in value, though some of that is increase is just due to interest rates being so low (since for most consumers the house payment is more important than the absolute price; when interest goes down, prices normally go up). It would be interesting to do a graph of interest-normalized house/asset prices over time.
- misnamed 6y ago
  I won't get into the 'is the CPI accurate?' debate, but will just say I haven't seen a better metric. So I'll stick with: inflation is low. As for the portability of Bitcoin ... OK, but then Bitcoin > Bitcoin ETF, if your goal is to transport and spend it outside of online brokerages.
pashamur 6y ago
Generally, the only way to make outsized returns in the market is to go against market expectations, otherwise you would just make market returns. So yes, a bet on crypto is a bet against the market consensus, sort of by definition :)
- misnamed 6y ago
  A good way to get high returns is to simply use a low-cost, tax-efficient combination of stock and bond index funds. After taxes and fees, the results compound in your favor. I have no interest in gambling on even higher returns - those are plenty for me. If you want to maximize your chances of getting rich as well as getting poor, yes, you can put it all on Bitcoin, or Tesla, or 32 at the roulette wheel, but I'm more interested in growing a nest egg than taking those risks.

vladimirralev 6y ago

I have a lot of respect for Raul Pal, but when he talks about crypto you start to see his limits in understanding. He still thinks governments can't ban crypto if they wanted, he is very wrong about that. He also thinks that governments would allow a crypto to rival a state currency. The most likely success story for crypto is it will be only for banks while regular people will be banned from owning it. There is simply no way a government will allow irreversibly hackable assets in the wild. There are no limits to the damage entities can do with anonymous GDP-scale wealth.

wsc981 6y ago
But if you look at his video, he does say governments might attempt to ban crypto, but it would be hard to totally ban, since other governments might adopt cryptos. For an effective ban all world governments have to work together on this, and that's quite unlikely to happen. Actually Iran is using cryptos right now to circumvent some bans from the US government. Certainly Iran would not be in favour for banning crypto. As Raoul Pal mentions, this is the state of game theory. One country might ban, another might adopt. If you can't spend (or exchange for fiat) the cryptos in your own country, you might move to another country. I don't believe Bitcoin will be banned ... at least not while Bitcoin is still a relatively small asset class. Especially since institutional investors are now entering the crypto markets. And perhaps at some point, if enough institutional investors have entered the crypto markets, governments might hesitate to ban crypto, as it could destroy a lot of wealth in pension funds, etc...
- vladimirralev 6y ago
  He gives the gold ban as an example of "failure" for governments to ban it. He thinks the technology behind bitcoin is somehow so advanced that it is even better protected from governments than gold is. Those are his main points. And I think they are both wrong. The gold example is from ancient times without KYC/AML and absolute surveillance. There is nothing substantial you could possibly do nowadays without proper invoicing and inventory tracking. Regulators will notice instantly. The tech behind bitcoin isn't really that advanced and hiding from the government was never a focus. The tech used by regulators has evolved significantly from the times of previous "defeats". People don't realise how much work goes into tracing payments worldwide. Remember FATCA took only two years to deploy worldwide along with a roadmap to tighten control over the next decade.