Cryptocurrency

[techwiz]

I tried to search to see if there was any posts on Bitcoin or other cypto-currencies here, however I keep getting a database error when I try using the searching feature.
(If there is already detailed posts on the subject please point in the right direction)
https://en.wikipedia.org/wiki/Cryptocurrency

I understand the math and technical stuff behind crypto-currency ,but would like get the mustachian viewpoint on the subject.

Does anyone use crypto-currency?  Would you invest in it, or hold it?

My feeling is investing in cypto-currencies would be purely speculating. However, some of the first Bitcoin miners\investors made some great gains. Bitcoins value is down from peak but seems to spike up every time it is mentioned in mainstream news.  Most cypto-currencies actually increase in value as the time and processing power to mine them increases so it does have an advantage over cash which inflation affects.  There are a number of competing cypto-currencies battling to become widely accepted. http://www.toptenreviews.com/money/investing/best-cryptocurrencies/ if you could pick the right one there could be a big upside. Not sure how you would invest in it other than holding the cypto-currency itself. Downside would be the risk of losing it (hacking/no longer accepted or trusted) and the complexity of safe guarding and managing your digital wallet.

So far I stayed away, but I do believe in the idea of cypto-currencies being mainstream in the near future.   


 

[thd7t]

The forum's search has never worked. You have to go through Google.

Regarding cryptocurrency, it's a form of speculation, not investment. It's also been shockingly insecure.

I stay away from it.

[Tjat]

Unless we have a major change in our financial system, there is not a chance in hell I would gamble with these. It's not investing.

[dougules]

Bitcoin is a currency, so holding it is just holding cash like dollars, euros, dinars, or kwacha.  You can play exchange rate fluctuations like any other currency, but you're not getting a true investment return like profit, interest, or rent. 

The difference between bitcoin and dollars or yen is that you're playing with a currency that's speculative and not really trusted yet.  A lot of people have heard about bitcoin, but how many people are ok actually getting paid in it?  People just about anywhere are happy to get dollars.  Bitcoin may very well go mainstream, but that's just a bet right now. 

[FLBiker]

In June 2011, I transferred $1000 to Dwolla to buy BitCoin but I chickened out.  I think it was a few dollars per coin.  Owell.

At this price, though, I'm not remotely interested.

[Syonyk]

I made quite a bit of money in it a few years back when I learned some of my "gold rush" history and figured out that the shovel sellers made a lot more than the miners.

So I found a way to sell shovels by betting against Butterfly Labs and their "two more week" delays.

I bought about $25k of FPGA miners, and turned them around for a very tidy profit, which did include mining with some while I was selling others.  Have to test my goods, you know.  ;)  That was producing over 1 BTC/day back when it was around $100, which I proceeded to use to purchase a lot of silver.

Did I net more than I would have purchasing a bunch at $1 and selling at $1000?  No, but one can't exactly know what's coming ahead, so I chose a low risk, moderate return path.  Worst case, I could sell the FPGA boards to people doing numerical analysis and the like (which is what I did with some leftovers from my mining when they weren't worth running anymore).

I still hold some as one of many long term hedges against the dollar tanking.  I tend a bit more pessimistic about the dollar than many people on this forum, so I have a non-trivial chunk of my wealth in assorted hedges and non-dollar value stores.

If you want to get into it now, though?  You're too late to really do much other than day trading with it.  The miners are all heavily industrial era mining now, with huge factories run by people who design and fab their own ASICs.

[techwiz]

I agree Crypto-currencies should not be an investment.

In the future I could see crypto-currencies having a role in "Capital Preservation". Where crypto-currencies use could increase as global currencies are devalued.
 
Much like how gold is being used now.  The benefit is it's a lot easier to transfer electronic blockchains then physical gold in transactions. As dougules pointed out not really trusted or accepted mainstream but in the future I could see this happening. Some big banks and governments are now getting involved which might help adding more trust and speed up adoption. 

There will only ever be 21 million bitcoins which is why it should be able to hold it's value. Moving wealth out of a currency that is losing purchasing power into a crypto-currency that is holding its own or even gaining in purchasing power would not be such a bad move.

I find it a really interesting topic. I also wondered what would happen if a crypto-currency became a reserve currency. Maybe that would not happen in my lifetime ,but the technology is already here. 

[dougules]

I agree Crypto-currencies should not be an investment.

In the future I could see crypto-currencies having a role in "Capital Preservation". Where crypto-currencies use could increase as global currencies are devalued.
 
Much like how gold is being used now.  The benefit is it's a lot easier to transfer electronic blockchains then physical gold in transactions. As dougules pointed out not really trusted or accepted mainstream but in the future I could see this happening. Some big banks and governments are now getting involved which might help adding more trust and speed up adoption. 

There will only ever be 21 million bitcoins which is why it should be able to hold it's value. Moving wealth out of a currency that is losing purchasing power into a crypto-currency that is holding its own or even gaining in purchasing power would not be such a bad move.

I find it a really interesting topic. I also wondered what would happen if a crypto-currency became a reserve currency. Maybe that would not happen in my lifetime ,but the technology is already here.

The fact that there will only ever be 21 million bitcoins is kind of bad IMHO.  Sounds like the path to price instability to me.  Gold has the same problem. A loaf of bread could go from 20mg to 50mg and then back to 20mg over the course of a few years.

[ketchup]

I haven't touched it, but it would definitely speculation more than an "investment."

But I do know a guy who put his life savings (not sure the amount but my guess is high-five-figures) into Bitcoin pretty early on (at less than $1/btc), and he did quite well.  But then he went on to sell Oculus Rift to Facebook for $2B, so he would have been fine either way.

[techwiz]

The fact that there will only ever be 21 million bitcoins is kind of bad IMHO.  Sounds like the path to price instability to me.  Gold has the same problem.

I would think the opposite is true the fact that a government can't just print off or create more dollars out of thin air like the governments are doing with QE (quantitative easing) this should allow bitcoins to be more stable and eliminate inflation risk.   

The gold standard is one that lasted for centuries here is a link http://www.econlib.org/library/Enc/GoldStandard.html to the history and a very good explanation of the gold standard. This also provided me some insight to why governments would not want to go back to using a standard like gold or a finite crypto-currency basically it would limit the power of their monetary policy.

[thd7t]

Another thing to note is that Bitcoin is pretty high right now. Because it's not a market and is completely undiversified, buying close to a peak seems like a dicey strategy.