Some thoughts and questions about cryptocurrencies
BurlingtonHoFactory
New Jersey, near the Shore
Earlier this year I considered buying some Bitcoin when it was below $5,000. I thought it over, acknowledged that I had no idea why the market was causing it to go up in price in the first place; further acknowledged that I just don't have the balls to invest in something with little or no intrinsic value; and ultimately took a pass. Laziness and inertia probably played a big role in my decision, too.
So obviously, that was a mistake. Anyway, I haven't changed my view of cryptocurrencies - I still like the general idea and I always have. It's not a gold standard, but it's a move in the right direction. Plus if it helps even one person to conduct financial transactions that the government doesn't approve of, then that's a great thing.
But I never really considered this to be an investment opportunity until this year. Realistically, it *shouldn't* even be an investment opportunity at all. It needs to have price stability for it to work as intended (and an investment that only goes up at the rate of inflation wouldn't be very exciting). Prices need to stabilize quickly for this to ever become a viable payment system. So my questions for the crypto aficionados are:
1) What price do you believe Bitcoin will ultimately go to? And why do you think it's worth that price?
2) If the price doesn't stabilize soon, how can people ever use it as a real currency or payment system?
So obviously, that was a mistake. Anyway, I haven't changed my view of cryptocurrencies - I still like the general idea and I always have. It's not a gold standard, but it's a move in the right direction. Plus if it helps even one person to conduct financial transactions that the government doesn't approve of, then that's a great thing.
But I never really considered this to be an investment opportunity until this year. Realistically, it *shouldn't* even be an investment opportunity at all. It needs to have price stability for it to work as intended (and an investment that only goes up at the rate of inflation wouldn't be very exciting). Prices need to stabilize quickly for this to ever become a viable payment system. So my questions for the crypto aficionados are:
1) What price do you believe Bitcoin will ultimately go to? And why do you think it's worth that price?
2) If the price doesn't stabilize soon, how can people ever use it as a real currency or payment system?
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25 comments
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.)
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.
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.
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.
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.
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.
@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.
Bitcoin is raw speculation and gambling. Some will make fortunes and some will go broke.
Do you feel lucky? Well, do you?
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.
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.
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.