Bitcoin

[Tim Link]

A lot of what I've been reading suggests that Bitcoin's intrinsic value is in its general utility as a currency, and its non-centralization that prevents it from being printed at will by a government, causing inflation. But what happens when people just keep creating new crypto-currencies? These new ones have the same utility and non-centralization as Bitcoin, and perhaps some newer, better features. So people may want to trade their Bitcoins for these new currencies, or buy the new ones instead of Bitcoin. Essentially, they're flooding the market with available cryptocurrencies, which seems highly analogous to governments printing more money. In this case there's no central control over printing more money! Anybody can do it.
Some of these currencies will be worth more than others. Why? It'll be sentiment, and perhaps perceived features and benefits of one over the other. Bitcoin seems to be the most valuable right now. What makes it better than the others? Just that it's been around longer?

From my perspective US currency has solid backing. The government can demand taxes that have to be paid in US dollars. If the government required payment of taxes in Bitcoin or some other cryptocurrency, we'd all be scrambling to secure some of it, and then it'd have real backing. Bitcoin needs something specific and ubiquitous and vital that can only be bought with it. Maybe it already has that and I just don't understand exactly what it is.

 

[andromedaaudio]

Really, because I see basically a decade gap of being trapped in lack of profit. Maybe it is just a perspective based on how many decades you have been alive.

The issue is there are gold puffers left and right telling you it will be the answer to all your investing woes and is completely resistant to changes in market yada yada yada. The liquidity of something that can take a decade slump when markets are basically only going up is not something I would be interested in. Real estate is more liquid than that.

Now if you bought gold when you got your first job I am sure you did very well, but that is, I believe, longer than my entire life. So you can be very appreciative of it but realistically no one wants to be faced with putting off retirement for a decade to not take a loss, yet every weirdo attached to some weird political non-following is raging on about their gold affiliate code. And worse yet common people preach the virtues of it all day long, which is merely secondary information from affiliate peddlers or maybe a coin collector.

I fully agree .
But which investor can time the market like Buffet , compound investing like he does is the way to go
He rode the whole way up with apple and and got rid off of half his stock in the second quarter at the top of the market .
He probably get its in again when the market is 30 -50 % lower.
41 % of his portfolio was apple iirc
Timing is everything but thats the same for gold ( miners ) and Bitcoin .

Being right doesn t mean you make money.
Most investors get out at the bottom and in at the top

 

[Folsom]

I fully agree .
But which investor can time the market like Buffet , compound investing like he does is the way to go
He rode the whole way up with apple and and got rid off of half his stock in the second quarter at the top of the market .
He probably get its in again when the market is 30 -50 % lower.
41 % of his portfolio was apple iirc
Timing is everything but thats the same for gold ( miners ) and Bitcoin .

Being right doesn t mean you make money.
Most investors get out at the bottom and in at the top

Him selling Apple was simple IMO. Fed claims September rate cuts. He is taking what like a decade worth of profit? To me it sure looks like take profit times as September and December can mark massive down turns.

 

[andromedaaudio]

Him selling Apple was simple IMO. Fed claims September rate cuts. He is taking what like a decade worth of profit? To me it sure looks like take profit times as September and December can mark massive down turns.

Probably , but the same could be said last year with all those rate hikes
Looking back wards it all seems easy .
But i bet many investors got out during covid times and in again
Making a straight run like that is quit something imo.

 

[Tim Link]

Most investors get out at the bottom and in at the top

I tried to avoid this once by buying in when a stock was low, with my plan being long term patience. It went to zero forever. I didn't know that just having the best product produced most efficiently that could be sold at a lower price for a better profit wasn't enough. I think there are dumping laws, but they're hard to enforce, so a competitor with a lot of cash on hand dumped their product at a loss and took them out. That was good lesson for me. It hurt, but I wasn't in too deep. As an individual who isn't invested full time in to studying companies and fully understanding the environment they are working in, I'm in no position to be guessing where their stock price is going.

 

[MRubey]

A lot of what I've been reading suggests that Bitcoin's intrinsic value is in its general utility as a currency, and its non-centralization that prevents it from being printed at will by a government, causing inflation. But what happens when people just keep creating new crypto-currencies? These new ones have the same utility and non-centralization as Bitcoin, and perhaps some newer, better features. So people may want to trade their Bitcoins for these new currencies, or buy the new ones instead of Bitcoin. Essentially, they're flooding the market with available cryptocurrencies, which seems highly analogous to governments printing more money. In this case there's no central control over printing more money! Anybody can do it.
Some of these currencies will be worth more than others. Why? It'll be sentiment, and perhaps perceived features and benefits of one over the other. Bitcoin seems to be the most valuable right now. What makes it better than the others? Just that it's been around longer?

From my perspective US currency has solid backing. The government can demand taxes that have to be paid in US dollars. If the government required payment of taxes in Bitcoin or some other cryptocurrency, we'd all be scrambling to secure some of it, and then it'd have real backing. Bitcoin needs something specific and ubiquitous and vital that can only be bought with it. Maybe it already has that and I just don't understand exactly what it is?

Keep digging.
There is Bitcoin, then there is crypto.

There is a “thing” called the blockchain trilemma.
This refers to the qualities that are available and choices that must be made in creating a blockchain.
These are 1. Security. 2. Decentralization. 3. Scalability (also associated with speed)
You can have two. You have to chose two. You can’t have all three.
Bitcoin is optimized for security and decentralization. These are its superpowers. It is the largest most powerful computer network in the world. No one owns it. It just runs. Rules without rulers. A trust-less system. A maximum distribution of 21M coins forever. The protocol is very difficult to adjust requiring agreement across tens of thousands of “nodes” of the network. So the monetary policy of Bitcoin can be relied upon to be unchanging over time. Last years bank crisis was precipitated by the Fed raising rates after promising banks it would not. Banks were caught holding treasuries unexpectedly decreasing in value which put many of them underwater in terms of collateral. Several were shutdown. We need to be able to know what monetary policy is going to be so we can plan accordingly.
Bitcoin is a proof of work network. It takes energy to verify and protect transactions, to build the blockchain. The “miners” are paid for performing this work. In this way Bitcoin monetizes energy.
The crypto’s that matter: Etherium, Solana, XRP, Cardano. All of them have chosen scalability over decentralization. You are trusting that group to do the right thing vis-à-vis their investors and network partners over time. The lesson of fiat is that you cannot trust people to do the right thing. When push comes to shove people will inflate a currency for their own benefit. History has shown this to be the rule rather than the exception.
Bitcoin is the first actual scarcity ever created by human beings. This is its primary intrinsic value. Along with that, it is a *digital* scarcity which makes it equally available anywhere in the world. Local jurisdiction not withstanding.

The US dollar is now backed by nothing but debt.
$35T of it.
This is why no one wants to purchase our treasury bonds anymore.
Check it out.

 

[Folsom]

Probably , but the same could be said last year with all those rate hikes
Looking back wards it all seems easy .
But i bet many investors got out during covid times and in again
Making a straight run like that is quit something imo.

How so? Rate hikes traditionally do not see declines but lowering does. That has been true the entire time in this situation as well.

 

[Tim Link]

Keep digging.
There is Bitcoin, then there is crypto.

There is a “thing” called the blockchain trilemma.
This refers to the qualities that are available and choices that must be made in creating a blockchain.
These are 1. Security. 2. Decentralization. 3. Scalability (also associated with speed)
You can have two. You have to chose two. You can’t have all three.
Bitcoin is optimized for security and decentralization. These are its superpowers. It is the largest most powerful computer network in the world. No one owns it. It just runs. Rules without rulers. A trust-less system. A maximum distribution of 21M coins forever. The protocol is very difficult to adjust requiring agreement across tens of thousands of “nodes” of the network. So the monetary policy of Bitcoin can be relied upon to be unchanging over time. Last years bank crisis was precipitated by the Fed raising rates after promising banks it would not. Banks were caught holding treasuries unexpectedly decreasing in value which put many of them underwater in terms of collateral. Several were shutdown. We need to be able to know what monetary policy is going to be so we can plan accordingly.
Bitcoin is a proof of work network. It takes energy to verify and protect transactions, to build the blockchain. The “miners” are paid for performing this work. In this way Bitcoin monetizes energy.
The crypto’s that matter: Etherium, Solana, XRP, Cardano. All of them have chosen scalability over decentralization. You are trusting that group to do the right thing vis-à-vis their investors and network partners over time. The lesson of fiat is that you cannot trust people to do the right thing. When push comes to shove people will inflate a currency for their own benefit. History has shown this to be the rule rather than the exception.
Bitcoin is the first actual scarcity ever created by human beings. This is its primary intrinsic value. Along with that, it is a *digital* scarcity which makes it equally available anywhere in the world. Local jurisdiction not withstanding.

The US dollar is now backed by nothing but debt.
$35T of it.
This is why no one wants to purchase our treasury bonds anymore.
Check it out.

No need for me to speculate. If it's great we'll all benefit from it in time. The savvy speculative investors who saw it early enough can be ultra wealthy and I won't resent them one bit(coin). I hold assets. I don't invest in dollars. I just use dollars for mundane transactions, and so as long as dollars are not super unstable it doesn't matter to me if they inflate over time. If the government needs more labor and goods to function than society can produce, no kind of currency is going to help that problem.

 

[MRubey]

No need for me to speculate. If it's great we'll all benefit from it in time. The savvy speculative investors who saw it early enough can be ultra wealthy and I won't resent them one bit(coin). I hold assets. I don't invest in dollars. I just use dollars for mundane transactions, and so as long as dollars are not super unstable it doesn't matter to me if they inflate over time. If the government needs more labor and goods to function than society can produce, no kind of currency is going to help that problem.

I think the discussion is academic for almost everyone. You can buy small fractions (it’s divisible by 100M) but when people see a $60,000 or more price tag most just pass.
That said it’s beginning to be put into mainstream portfolios by investment managers because it improves the Sharps ratio.
It’s uncorrelated so it smooths volatility in an otherwise traditional portfolio. It won’t be long before almost everyone who uses a money manager will have a small allocation
It’s also beginning to be adopted by retirement funds.

 

[andromedaaudio]

How so? Rate hikes traditionally do not see declines but lowering does. That has been true the entire time in this situation as well.

I bought some AEX 880 October puts , its a bit gambling.
If this inflated Market drops 30 % , it means a lot of points

 

[Ron Resnick]

But what happens when people just keep creating new crypto-currencies?

Hello Tim,

Read about and understand proof of work versus proof of stake as a consensus mechanism. Only Bitcoin, Bitcoin Cash, Ethereum pre-fork and Litecoin (as well as a few smaller trivial sh#tcoins) employ proof of work as their consensus mechanism.

 

[Tangram]

It won’t be long before almost everyone who uses a money manager will have a small allocation

The day this happens is the day I fire my money manager.

 

[AnonymousAudiophile]

If I had bitcoin, I would have sold out a month ago. I think we've seen the peak. The energy usage is completely unsustainable, its potential use as a digital currency has bore no fruits and likely never will, and it can (and likely will) be made less and less desirable by federal regulations in the coming years (not to mention greater tax enforcement). At least gold can be used to make jewelry (although I would also argue its mining is ecologically unsustainable as well).

 

[Folsom]

The day this happens is the day I fire my money manager.

I would have fired mine if he did not invest in BTC circa 2019 or even 2015. Ethereum as well.

 

[Folsom]

If I had bitcoin, I would have sold out a month ago. I think we've seen the peak. The energy usage is completely unsustainable, its potential use as a digital currency has bore no fruits and likely never will, and it can (and likely will) be made less and less desirable by federal regulations in the coming years (not to mention greater tax enforcement). At least gold can be used to make jewelry (although I would also argue its mining is ecologically unsustainable as well).

Peaked at a non-supply crunch maybe. Within 1-2 years the peak will blow everyone's socks off.

The energy usage is not that big of a deal. Over played trash talk compared to other industries. The best appreciating asset that is globally secured is damn good fruit.

Gold is largely not mined because the price is too low. The chart on gold is a lifetime chart, BTC is every 4 years ish.

 

[MRubey]

Bitcoin monetizes waste energy, it also balances grids. It is seen as an asset by the energy companies in Texas.
A power company wants to run at a constant rate with consistent predictable draw.
Bitcoin miners are able to power up or power down to keep a grid running at a steady rate.

“To love or hate a thing, you first have to understand it.”
Leonardo Da Vinci

 

[MRubey]

The day this happens is the day I fire my money manager.

Then don’t use Blackrock, Fidelity, Morgan Stanley, Wells Fargo, Goldman Sachs, or almost any other Wall Street firm.
Vanguard doesn’t buy or sell it. For now.

 

[AnonymousAudiophile]

The best appreciating asset that is globally secured is damn good fruit.

…but ultimately worthless like all Ponzi schemes.

I agree the science of it is brilliant, and it wasn’t designed as a Ponzi scheme, but it was never meant to be your “appreciating asset” either. And it will not be forever.

BTC brought me some amount of wealth over the years, and I’ll always be grateful. But I’m not going down with that ship.

 

[AnonymousAudiophile]

Bitcoin monetizes waste energy, it also balances grids. It is seen as an asset by the energy companies in Texas.
A power company wants to run at a constant rate with consistent predictable draw.
Bitcoin miners are able to power up or power down to keep a grid running at a steady rate.

"Waste energy"? Those fossil fuels would just be burning themselves?

Also, don't power companies like anyone who buys energy from them, particularly if they are willing to adjust their demand at the request of the power company? That doesn't make it ecologically sound or sustainable.

 

[andromedaaudio]

All time high for Gold in USD.
2500.