GoSeigen wrote:geoff1309 wrote:Does anyone have experience with Bitcoin? my broker has been pushing me to get into this , many thanks
Buy as much as you can. Nothing could possibly go wrong.
Seriously, what is the investment case according to your "broker". Where will your return come from?
GS
Hi all,
I have benefited immensely from TMF Boards and now Lemonfool for over 10 years and the experienced and reasonable investors who have shared their views and taught me so many things. Due to posters like Goseigen, Hiriskpaul, Gengulphus, tjh290633, I have grown the wealth that my family and I are currently benefiting from. I am not the most eloquent of writers and I mostly lurk while absorbing the wisdom from my heroes here in Lemonfool.
Then came Bitcoin. I initially dismissed this as a fad albeit an interesting fad and experiment. Over a year ago I had the need to transfer "money" to a friend overseas. He requested for it in Bitcoin as it saved us both Western Union fees, Banking fees, as well as the delays that come with those. After the ease of my first transaction in Bitcoin, my interest was sparked and I looked into this further and basically went down the rabbit hole looking into cryptocurrencies.
I could see 95% of the Cryptomarket were filled with scammers and Ponzis. However Bitcoin stood out in comparison.
Bitcoin sparks a lot of debate because it is many things. Many people see it as a unit of exchange, a form of currency.
This is because it shares the following propertes:
Scarcity, Fungibility, Divisibility, Durability, and Transferability. It makes us ask the question, "
What is money?" Over the course of time, we Humans have used all sorts of things as "money", Cowries, Tobacco etc. and more recently Gold and other precious metals. In fact some of the earlier coins were made of such precious metals, until Caesars,Kings and similar powers began eroding the value of those coins with more copper and less precious metals over time "inflating" the currency. Paper in the form of National currency was also used and in fact at a time was still backed by Gold. Skip over to the 70's when the US mandated that its own US Dollar would no longer be backed by Gold when it went off the Gold standard.
Even thereafter, arguably, Gold has been seen as a store of value even up on till today, It has its detractors such as Warren Buffett who asked why he should own Gold. What would he do with it? Stroke it everyday? It produces no dividends. However, that has not stopped countries from storing huge amounts of bullion. And in fact giving Gold a value. That is because many people
think it is a store of value. Many think Gold offers an alternative to money printing and the creation of new money via QE.
The case for Bitcoin is similar. Its proponents argue that it shares
similar properties, but better.
For example, it is scarce. There will only ever be 21million Bitcoins created. With Gold we know the resource is scare, however new mining fields may be found in the future. We
know how many bitcoins would be mined by August 2nd 2049 (Pick a random date).
Then there is
the State. During the next financial crisis, we are reminded that savings deposits at Banks would qualify for
Bail-ins. In fact Cyprus has already been the first test case for this with depositors loosing a percentage of their nominal cash at Banks over a weekend at the whim of the Authorities. Bitcoin offers an alternative whereby decentralization makes such authorities impotent in accessing or confiscating wealth. You cannot steal my wealth if its secured on an immutable Blockchain.
In times of stress, like in periods of war, many transfer their Gold to safe havens. However this is cumbersome, as with Bitcoin its as easy as memorizing 12 words.
Even in good times, I can see the advantage of what a Global, immutable, border-less payment system can do for free trade both in the context of Merchants and Consumers. With the internet, Technology has transformed/decimated whole industries eg Retailers, Communications, Entertainment. Could Banking be next? With Bitcoin we can do business on a global scale without the use of a third party intermediary.
Valuations: The problem has been how does one value something like Bitcoin. It offers no yield which makes it difficult. Perhaps again, a comparison with the Gold market may offer a clue. If it captures a fraction of the Gold market (worth Trillions of dollars), it does make current valuations appear undervalued.
Basically the return comming from the laws of supply and Demand on a scarce resource that offers
Trustless, Secure solution based on comming together of Game theory, economics and Technology. I admit it takes a lot to compare a centuries old market such as Gold and compare it to a fledgling technology such as Bitcoin however, Technology has shown no respect for entire industries thus far, explaining the current huge valuations of Tech companies.
As with most investments, especially a speculative one such as Bitcoin is, it does have to overcome substantial risk. I might highlight some of these in my next post.
My effort here was just to highlight that there might be more for us as investors to look into when it comes to Bitcoin, even though there appears to be a "mania" of sorts in the press. I do not know if there is a bubble in Bitcoin, but many are concerned there is a bubble in Government balance sheets across the world which in turn risk the value of Fiat currency. Does Bitcoin offer a lifeboat?
thanks,
JF
