Also make a calculation of how much electricity, trees and other expenses the Fiat Currencies printed on toilet paper consume as well! The real test of if you should be a cryptocurrency supporter:would you be exactly as passionate and spend the same amount of time thinking about it,if Bitcoin were still an obscure piece of code, worth less than one cent, and offered no chance of ever earning you any money? You are correct to note that Since the late 1990s when Shiller started promoting the CAPE ratio stocks have regularly been in bubble territory. months) so other storage mechanisms are needed. Its a vicious cycle, but Ive just got to bite the bullet instead of going Wah, it was $2 cheaper a week ago.. Mr. Money Mustache That could be securely moving value around, but could be many other things. Rick Gardner One of the 3 points MMM stated it needs. Please dont take the Proof of Work Blockchain like Bitcoins as the Blockchain. Dr-In-Debt I am broadly in agreement with what you state, except the part where you think USD would not get replaced soon (depends on what soon is of course). In the US we call it the full faith and credit of the United States. We will have to see if that new blockchain style will win out. Bond *prices* are higher than ever today, which is the reciprocal of them having a high yield. Or streaming music, and streaming movies! Theres nothing fraudulent about Bitcoin its mass hysteria driving demand. For a long answer you need to understand the technicalities of it which I am not going to educate you on! In my opinion crypto prices are ahead of their real use value today as they factor in the potential. Take a look at the German Mark after WW1. But again, that value is likely to be closer to $1/bulb than $10,000/bulb. The financial strategist has established a large audience by favoring slower-paced bets on surer outcomes over cryptocurrency's notorious high-risk-high-reward scenarios. Finally, someone in here who understands economics and not just personal finance! A stock is a share of an actual company, bound by rules and regs (however imperfectly administered, at least they exist). 15 Replies 10705 Views March 26, 2020, 05:23:27 PM . Even if youre the only one doing it. And yet this is exactly whats happening with Bitcoin. As for spending your Bitcoin, I digress. There is no intrinsic value in ALL FIAT CURRENCIES. if they dont open one day, the fragile world crumbles. And you should be prepared for it. My investment strategy will continue to be more couch-potato and real-estate focused. Some people like owning pretty jewelry. If you know anyone heavily vested in bitcoin, stay in touch with them. Ive been investing steadily over a 20 year period. Yes, you can hedge in other things, but gold is fungible, dividable, small enough to hide, and has been valuable for centuries. How is that even possible? As has the MMM investing sub-furum. We dont need to prey on their consumerism also. January 3, 2018, 4:56 pm. To keep things non-promotional, please use a real name or nickname(not Blogger @ My Blog Name). Well, that is not what we are discussing are we? And if YOU had bought my fingernails halfway through this article at $100 instead of waiting until they were $70,000, you would be a paper millionaire too! Vivek Prasannan . However, taking a very small gamble doesnt hurt 99% is invested in s&p 500 and that will remain like that :). Think about it and I know you realise what is happening. Do I still get the full bag or just a portion of your pinky fingers latest clipping? Then in November I sold it and bought GBTC, which is a OTC fund holding bitcoins. Im only a mediocre computer scientist. So If Jihan wakes up on the wrong side of the bed and decides to dump all his coins then it will open up hell hole for every one else. babysitting, lawn mowing, snow shoveling, etc..) So, how is Bitcoin replacing that? The people that buy into bitcoin will be hurting enough financially. It has a track record though ill give you that. That is a fairly dumb sock puppet, since he never spoke about them. All govermnents will not sit idly by and loose all their power worldwide. Use it or lose it. Mattheus Which happened 47 years ago, not 40. Dont count on there being a greater fool to take this sort of investment off your hands. Millions of people streaming interactive video games. January 3, 2018, 9:49 am. January 2, 2018, 6:23 pm. Hell isnt that why we are here in the first place? Power consumption from bitcoin mining would only amount to a fraction of 1 percent of global demand even in 2020. One way or another, at some point, the cycle will end, and the cycle will start again. I like the way he analyzes investments. Not likely, bitcoin mining farms are in China because of the cheaper energy costs. Alright, time for a thought experiment. How else should people behave? Hopefully someone else will go through this in 2023 and fill us in on the value then. When you make this kind of purchase, which you should never do, you arespeculating,which is not a useful activity. Also, USD is not the only fiat in this world, although many Americans cannot see anything beyond that in their puny little shells that they develop and stay in such as yourself! More than triple the speed of Visa/MC. They seem less wise and more credentialed. Also if youre going to start the whole not everywhere is like the U.S. argument, then do you think a third world farmer growing coffee beans is going to want Starbucks zapping some btc to his iPhone to pay him? So, I PayPald you the $100 for your fingernail clippings before I got to the part about them going for $70,000. We dont buy average cars or average homes we buy older cars, and smaller homes to cut costs and live a modest life. They are set at the margin, by the marginal buyer. but fail to recognize that the USD also has no intrinsic value. It all depends on how much personal enjoyment they get compared to the cost to own them. Glad to see some sense being written to the red necks who seem to inhabit this blog! A real, usable currency CANNOT have such huge fluctuations. This is not going to happen. Not saying thats why he wrote the article, but just that there are certain advantages to being an Internet Celebrity, one of which is that everything you write turns to gold, er, uh, bitcoin, er, uh, whatever. WHY??? To call gold a non-productive asset misses the point entirely. Doesnt mean you cant speculate to help you get to FIRE sooner though. But some people actually DO value rare baseball cards and stuffed animals and gold and tulips at current prices, as goods in and of themselves. It is the main currency by which you can obtain other cryptocurrencies. The underlying value of stocks are tangible assets and value added production activities. Cryptocurrencies are the key to humanitys survival. Cryptocurrencies are extremely risky. As soon as I read you were selling a bag of your nail clippings for $100, I thought to myself that is a great deal! If not, you may want to think about selling., Scott Nicholson Im always reminded of VHS versus beta max but on a few thousand options scale (rather then two) and a higher risk if you choose wrong (at current prices). Great article! Thats cool. Personally, I think this article shows that Mr Adeney has had his blog hijacked by the Anti-satoshi ;). Devs in their mid 20s who owe the IRS 50k and lost most everything. Barak PazTal That is where we are with Bitcoins. Read your history, it happens occasionally. You know what else they have at bars? Calling this a waste of human energy is NUTS. January 3, 2018, 12:55 pm. The blockchain is only 1 part of Bitcoin. It then proceeded to burst in spectacular fashion just ahead of the financial crisis, plunging all the way back to $30 before rebounding. Just Keep Calm, and Keep Investing Despite all of this hype and all the froth in stock prices, a true investor's plan can remain stable through the seasons. Even in a police state like China their actions have failed! I dont know, why gold and not platinum or palladium? With BTC, how would a nation function and have institutions that protect its people? Trust is important. And regarding Bitcoin as currency, it is already not usable as that TODAY. This is yet another extreme example. . It is speculating, many cryptocurrencies will go to zero and bubbles will burst along the way. 3. While silver and copper has been used as a form of money (notably imperial China, it was a silver based society with gold used as a high currency), golds special attributes has always been seen as a form of value storage and trusted trade medium. April 2, 2018, 7:38 am. For me, its just like watching a show that I dont know the ending of yet. January 3, 2018, 4:28 pm. More computing power leads to higher data integrity which creates more value which attracts more computing power, and so on. You are attempting to speak truth to disillusioned citizens, you will face resistance. So every time I say Bitcoin/altcoins are a stupid idea, I chuckle. The very definition of an unsophisticated investor is Being more willing to buy something, the more its price goes up.. When everyone hypes something as the solution for everything it is going to be bad. Very good article! Started by myrrh. Yes, it is true that bonds are *also* in a bubble at the present timeand that the bond bubble is so big that it makes stocks look relatively cheap by comparison. Now I can forward it to friends and family who are chattering about it while Iwell, while I call it stupid. E.g. And society is comprised of them, and nothing else. You have unwittingly tripped up your own argument here. I am so happy to see this article! Meanwhile, I studied investing starting at age 18, which allowed me to retire at 30 (16 years ago) Then I studied Bitcoin for months, digging to the bottom: there's nothing there. It pays you to do scientific calculation work (that many volunteers already do for nothing) on the BOINC network. Should I just get out now? Theyre stunningly shiny, surprisingly heavy duty, and generating plenty of buzz on Twitter where Im giving them away. Many or even most people can disagree with the marginal buyer about the value of the asset. Hes helped thousands of people improve their lives. Thank you Jane, I have been waiting for someone to point this out! The comment about 1999 investors didnt receive their investment back from stocks until this year well, for the rest of us that dont invest 100% of our money in the stock market in one instance AND we reinvest dividends, this type of situation is almost impossible. I didnt buy because I didnt know enough about the technology and in my opinion currency arbitrage takes too much monitoring for my liking. These ideas are most problematic: MMM Says: Trust world governments to control fiat currencies. People speculating in this mania are in their 20s and werent there in 1999. Real investments require production and income. It grew to $240k. :) If youd like a link, just holler! Gold is relatively inert (wont rust except for very tiny amounts of oxydation), it is relatively easy to verify its authenticity (its malleable, the good ol biting the coin to see if it dents, you can melt it to look for impurities as well as hard to fake the colour with lead based forgeries). So I also read a lot about investment bubbles and fundamentals and how to tell those apart. Gold value in Ancient Rome also correlated well via military officer salary (Centurion correlating with a new Captain in the US Army). Any efficiency brought to commerce through blockchain technology are very likely to show up as increased dividends from index funds. Consensus destroyed. Before stating something, do your research of what is a Ponzi and what is a Pyramid Scheme and whether Bitcoin fits that or not? Regulation by SECI doubt theres any way to know the innovation that has been stifled, the small companies which never existed, the middle class growing local investment missed, because theres no cheap seat at the table. Im not sure why the author is so angry at people who speculate. :) https://www.youtube.com/watch?v=g-zIbVEjVpQ, Another great satire- Seth Myers take in bitcoin. Peter Mevoin So Im going with no. Bitcoin has very little potential for the long term. January 4, 2018, 4:25 pm. Crypto currencies are a must have component of your investments and should constitute not more than 10% of your overall investments, based on your risk appetite. Let me know which one consumes more energy overall? Is the theory that eventually there wont be anymore banks? Absolutely! This is the greatest use of human energy and capital the world has ever seen. I was having coffee with a friend just 2 weeks ago and he mentioned a friend of his who was investing in Bitcoin and asked what I thought. Stocks and bonds and real estate can all enter into bubbles. Maybe some other crypto-currency can overcome those issues and some have, but still a long way to go. other currencies already provide faster, cheaper transactions. Of course there is speculation. Sure.. that is until the government keep printing it until its worthless. The price went on a historic and seemingly unstoppable run all the way to $150 per barrel in 2008. Im a regular reader and respect your opinion. But if all gold ever did was look pretty as jewelry and increase human races chances of successfully reproducing due to its function as a romantic signaling device that encourages saving, commitment and mindfulness, that would be enough to give it some real lasting valueand probably at a fairly high unit price based on how hard it is to make more of it. Bitcoin has just 200 billion capitalization currently. Inexpensive computers thousands of times more powerful than the best you could buy for $10K in 1990. We will see you on the other side of the crash. A digital advertising ecosystem to fund it all. No one controls it, so no one can rewrite the data. Thank you. MentalArson If youre in cryptos early, that difference skyrockets in favor of cryptos. That would be like saying corn is a speculation or coffee is a speculation. WHY HAVE YOU NOT INVESTED YET!?!?! This instability just further proves that it would make a terrible currency and a recent study reveals that about 95% of even the trading volume is fraudulent. This bubble is going to break, the environmental waste is awful, and CNBC legitimizing this as investing with ticket symbols must stop. It makes you want to laugh and cry. to convince them myself. Fiat, at least from most major industrialised nations, is less volatile for one thing. If people are creating an bubble out of it, people is stupid, not bitcoin. January 2, 2018, 8:01 pm. January 5, 2018, 12:35 pm. Some companies are already testing it in main net as well! About the Comments Section:Normally, I try not to publish comments that are just emotional reactions or totally uninformed. I dont think so. Well, SOMEONE has to keep the bankers & wealthy rich, right??? No guarantees that if bitcoin drops that it will ever come back. Even if Mining gets centralised, Bitcoins future cannot be dictated to by them! I am not trying to promote it for this purpose, but it is not an invalid choice. Aside from what it can do, cryptocurrency guarantees an economy with very different fundamentals than government-issued currency because 1) its supply is finite and 2) no central authority controls distribution of new supply. Maybe you know about Mr. Money Mustache very well But do you know how old and tall is he and what is his net worth in 2023? I believe this is currently the second longest expansion in US history. But thats just the software side (Blockchain). January 3, 2018, 7:12 am. Talk of being blissfully ignorant! Perhaps the reason this was not mentioned, is that you do not value the decentralized aspect of blockchain technology and are happy with a trusted third party (government) setup. Staying the Course in War-Time. We also both wear wedding rings made of gold and are quite happier with them than if they were made of copper or tin or lead or nickel or mercury. A large proportion of other coins are long term holds. In that forest there are old bricks. Why not somebody else's fingernail clippings? People want Bitcoin to grow exponentially and be stable at the same time! How much of your net worth is in this investment? Incredible comment. January 2, 2018, 5:49 pm. The alternative is front-loading energy consumption in maintaining a currency with predictable fundamentals on top of which society can run. Well then Biglaw Investor, youd better stop using websites or stop supporting any company that does big data research, because thats consuming considerably more electricity and its not fundamentally vital to us existing. If THAT does happen (BTC=100K), it will prove once more that BTC is not a currency at all. You are just parroting what every novice tells about Money. This has happened with EVERY speculative event throughout recent history. When we talk about Bitcoin, or Ethereum or any other digital coin, for that matter, neither ponzi nor pyramid are perfectly accurate descriptions for how these systems actually work., The cryptocoins represent a new kind of scam, a Nakamoto Scheme: https://prestonbyrne.com/2017/12/08/bitcoin_ponzi/. The issue with the .com bubble was internet companies were given a high valuation with no demonstration that they were profitable or even provided a service/product. January 2, 2018, 7:03 pm. January 5, 2018, 8:29 pm. People like planting gardens. We? But they dont have to go down for there to be a US stock market crash in real terms. BigTasty1212 Because of this, newspapers start reporting on prices daily, triggering so many tales of instant riches that you notice even your barber and your massage therapist are offering tips on how to invest in this new asset class. Look at Cardano for example, they are building blockchain with built in treasury and KYC/AML endpoints. Stefan Brand Nope I am not a skeptic, and also since I was there then (with pre-internet BBS). Retweet. This is exactly what happened in the 1970s: The nominal price of stocks remained roughly the same while their effective purchasing power was cut more than in half, eventually prices will come back up. There is no reliable way to track or trace paper. I argue that fiat currency is inefficient because its supply is always increasing. It isnt enough to live off of, but its definitely nice to have a net $500 or so in my pocket at the end of each month. And gold has at least *some* practical value you can make attractive jewelry that doesnt tarnish, use it in electronics, dental fillings. And of course, the purpose of this whole aside is that I want to establish credibility with you, so you will give this article some consideration. This is Part 1 of 2. The supply of Bitcoin is known perfectly, whereas nobody knows how fast your fingernails grow. Who would help the poor, elderly and uneducated those without BTC? You are as usual missing the point and are behind trivia! It is, above all else, pure wealth, other substances, and activities may be valued in gold bullion. Thats what happens when a real bonafide bubble bursts. You may be smart enough to recognize why one currency is going up and another isnt and to not go all-in on something. WantNotToWantNot Again, this is really only true for FIAT CURRENCIES. Own as much Bitcoin as matches your understanding of Bitcoin. Vijay how can it be a useful currency without a relatively stable value? That is what is pissing me off. January 2, 2018, 6:06 pm, Agreed! Are you sure Amazon pays someone in unusable (to them) gift cards? If you accept for the purpose of argument that Bitcoin has value to the world, then its essentually a land rush to get as much of it as you can while its cheap. Mr. Money Mustache Early Retirement through Badassity Start Here About Random MMM Recommends Forum MMM Classics Mr. Money Mustache View: Fancy Magazine | Classic Blog Welcome New Readers! FullTimeFinance Is having 1-2% of my overall portfolio in cryptocurrency stupid? No, not to me. It seems to me that whats needed here on both sides is touch of humility. Amazing. Because I advocate something, I am not raving Mad! But maybe an iteration of that will be. Thats what I have been saying guys. What if anything gives a compelling reason that bitcoin or any one of these other currencies will end up in the group? The stock market over the long run will ALWAYS grow as long as the population and technology and our output as humans continues to grow. Pretty much. Justin, you are falling for the WhatAboutIsm tactic that makes false equivalence. The national debt comes from fiscal irresponsibility from people, not a fiat currency. 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