Some thoughts and questions about cryptocurrencies

1) That's a tricky one. I think a dominate crypto currency will emerge at most four or five dominate ones. For Bitcoin it all depends if they can pull off the lightning network or not. It seems like a very complex technical feat. If they pull it off, Bitcoin almost certainly dominates. Say $10trillion market cap. That would put the price around $350,000. If they can't pull off the lightning network then it's probably already overvalued. It fall very low maybe to $100 or so. So that's a bit of a difference $350k versus $100. :-)

2) People can deal with price instability via hedging instruments. Plus there are plenty of people out there who will lend you USD if you given them a faster appreciating asset as collateral, i.e. BTC, they might even be so lucrative that they would do this even in the face or short term price swings that caused paper losses. Also is that mass adoption itself increases liquidity which will decrease price fluctuations. Finally with institutional buyers showing up on the scene, they will probably what they do with stocks: hold for the long term and put effective short term bottoms in under the price. That will help with stability.

Some people have speculate that central banks might even start buy crypto-currencies. Those are the ultimate deep pockets buyers to help put a floor under prices if they hold them on their balance sheets. (Laws would have to be passed to allow this in the US.)

I think the amount of power required to produce more Bitcoin makes the whole Ponzi scheme unsustainable- an economic and ecologic nightmare in the making. Libertarians padding the present and hurtling us all to extinction just to say the mantra :" Look Mom, no Central Bank " One EMP- its all gone, too.

@Dougster,

Is there a timeframe for the lightning network? How will we know if and when it happens? Other than that, my biggest concern would be that BTC is running out of catalysts. (It's already been embraced by major futures exchanges.) Also, I doubt that most laymen would be willing to use a payments system that requires hedging, but I could be wrong.

@Hugh_G._Rection,

The fact that the supply of BTC is limited by energy inputs is a feature, not a bug. Otherwise the supply would grow unsustainably, just like fiat currency.

Also, it's an "economic nightmare," as you put it, only in the sense that it's an obvious bubble - but no one's being forced to own it (unlike dollars).

I hadn't considered the effects of an EMP. But I'm sure it would be no different than your stock brokerage account: easily recoverable once the lights come back on. And of course, if they never come back on, then we have much bigger problems to worry about than the value of Bitcoin.

If power is out in the US, 1 year or more, US estimates are 90% dead. I wouldn't be worried about value of Bitcoin if power was out across the US past 1 month. At that point, I think we get to a mad max world. I believe our government can keep nuke plants from melting down releasing radiation across the world if military equipment can keep cooling the nuke reactors. I hope.

As far as cyrpto currency investing, I found out the other day if you want to speculate, you can already buy related stocks in a regular brokerage. I saw one yesterday go from up 33% to up 51% then only up 28% in about an hour or 2. It rose 20% and then dropped over 20% in less than 2 hours. It was a RIOT. Haha.

One ceo the other day that had a stock that rose over 1000% in a week said the price wasn't justified in the after hours on CNBC. His stock dropped 36% in seconds or minutes to only down less than 12% to 20% 30 to 60 minutes later. He seemed agitated. Don't know why. Maybe they showed him a big screen where his company stock tanked 36% in seconds and his every word affected the price. If he suddenly lost millions worth of stock, that might agitate someone. I found it all entertaining to watch.

@BHF you are demonstrating very unlibertarian signs in this thread. The actual reason most wage earners are not able to make money from markets is demonstrated by your questions. What needs to be remembered there is no perfect investment rather there are opportunities some will pan out others won’t. What you need to do especially as you are substantially younger than me is get your feet wet and decide how high you are willing to let the water rise. Fear of losing money even small amounts is what keeps most from gaining. If you have a diversity of well reasoned investments some will pay off some won’t. If your reasoning is sound more will than won’t. If you can spend a few hundred on a night of hanging out with strippers you can buy a small position in crypto. I bet the odds are better that you will get a return on crypto than on a dancer.

@twentyfive,

I'm not sure how my questions are anti-libertarian. Everyone has their own level of risk tolerance. I've certainly gotten my feet wet with investing. In fact, I used to work in the finance industry. I've been using this current bull market to lighten my equity holdings. Sold some Valero, Goldman Sachs, MetLife, dumped Sears a while back on bankruptcy rumors, etc. I probably missed the tops in all of these stocks by a mile, but I still have plenty of stock left to sell if the market keeps gaining steam. I've built up a pretty decent cash stockpile over the past year, just waiting for a pullback that never came. Still, what I've learned over the years is that the absolute worst time to buy something is right when you're convinced that you just have to buy it. Pull up a chart of the Dow and you'll see it's starting to look a little parabolic.

Anyway, I've never traded currencies before, let alone cryptocurrencies. It's different from stock. With a stock there are fundamentals, there are discrete events that are specific to the individual company that you can place bets on, such as earnings releases. With a currency, the fundamentals are the underlying balance sheet of the issuing government. But cryptocurrencies have no issuing government: no public debt, no deficits, no elections, no central bank decisions, no balance of trade, etc. All of this is a good thing, but I still wouldn't know the first thing about when to buy it or sell it. Anyway, like I said, I still support the general idea of cryptocurrencies.

My point wasn’t what you took out of that it was simplely put trying to time markets results in most just sitting on the sidelines doing nothing that won’t payoff even in a lottery.

Although many claim that timing is important and it is longevity beats timing eventually.

I have brokerage accounts for both retirement and non-retirement money.

Can I acquire a position in Bitcoin through those accounts? Never done currency trading before. As mentioned above, might be interesting to have a small position.

^^^coinbase.com

@Burlington: next will decide it decided it for the lightning network. It started a testing phase recently.

Meant next year. 2018.


@joc13: the only way you get exposure through stock brokers is through ETFs like GBTC (trading at 100% NAV, so about impossible to justify) or stocks dealing blockchain which so far are pretty sketchy but rocketing in terms of price. I guess you could go with futures, but you'll have to meet their margin requirements for that, show you are willing to take on high speculative investments, and pass other tests that you would have the means to survive losses.

Crypto-currency retirement investment is possible now, but that one even I won't touch. I'll stick to S&P index funds there.

Should reading that GBTC is trading around a 100% premium to NAV. How is this justified? If anyone can figure it out let me know, because I sure can't.

You have a much better chance of making money at the racetrack or sports betting room than with bitcoin.

Bitcoin is raw speculation and gambling. Some will make fortunes and some will go broke.

Do you feel lucky? Well, do you?

I made $10 on a cyrpto stock. Bought a Hardee's hamburger. I'm a big winner in cyrpto.
Glad I sold yesterday. Down even. More today. I'd like to play poker online too but we have too many stupid laws against it wherevI live.

Poker is more fun to play and is considered a game involving skill in my opinion. We wouldn't have poker tournaments if skill wasn't involved. However stupid South Carolina aw outlaws games involving chance. Being successful trading stocks involves chance, so does driving to work or even going shopping or living life with terrorists, gunmen, traffic accidents, etc, governments pass laws protecting us way too much and then some work to keep the laws on the books based on their own moral religious beliefs even if most others don't have the same religious beliefs. It's much harder to change existing laws. However we can invest in cyrpto that went up 1000% in a week. Can't play poker online .

You guys that bail after a few down days show me that you don’t have a clue how markets work. Guys that know how markets work love to see you guys bailing we call that a sale or markdown.

I'd like it better if atheists fighting to remove in God we trust from currency instead fought against old laws supporting one or two religions against gambling by fighting laws restricting gambling arguing the laws favor one religion over another. I don't have any moral issue with gambling. Life is a gamble. Driving in heavy traffic or the rain is a gamble. Going to see a movie or to work is a gamble. You can die, get shot, get killed in a car wreck. You can stay home and die of a heart attack from lack of activity. Life is a big gamble. Religions that say gambling is against their beliefs are full of crap in my opinion.

Actually I like going with the flow. Waiting for things to start going back up. Not holding while it goes down.

Even the bible says in the last days when people say they have peace and security, doom will come to them. Dealing with North Korea is a gamble. Life is full of risks and taking chances. Not being able to play games where you can bet some money because risk is involved is stupid beyond belief in my opinion and I'm sure one or two religions drilled something into their followers against gambling for money. We have to gamble or take risks for everything else. Even the whole insurance business is based on estimating risks and making money from calculating chances of disasters striking and getting everyone to pay for the risks. Tyere is a chance if a disaster wiped out millions of people's properties, insurance companies could go bankrupt and if you buy insurance, you are taking a risk you won't get funds in the event of a mega disaster if you go with the wrong insurer. You could also die if you live in a flood plain or along the coast if a tsunami hits. People take risks every day. Can't legally play card games in South Carolina. Ok I'll stop griping.

^^^quite the optimist aren’t you.

@Rick999,

I agree with what you're saying about gambling. And I believe that every form of gambling should be legal for adults, with no restrictions. But you are clearly part of the problem. People like you are the reason why we have these laws, unfortunately. In previous threads you've said that you would support laws against victimless crimes if you believed that people were really hurting themselves! Basically, you're saying that you agree with the voters who support these laws, but you just have a slightly higher threshold for proving harm than they do. You're not really questioning the underlying assumption that one group of adults should be able to prevent another group of adults from doing what they wish with their own money, bodies, etc. Hence you are part of the problem.

Rick999, you may want to double down on RIOT if it takes another dip. I know of no other blockchain start up that has as much capital invested lately as that company. I’ve made 400% on it in a month, and will find another opportunity to pull the trigger on some more purchases.

You could also leverage your bets on the financials. If tax reform goes through, that sector stands to win big with corporate taxes falling. I’m triple leveraging that andbif it falls then so be it, I’m just using my profits to take extra risk.