Author Topic: Can somebody explain the benefits of holding crypto to me like I'm five.  (Read 11664 times)

Glenstache

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Thank to all for your responses. I think I got what I was looking for by not getting what I was looking for. If that makes sense.
Exactly.

SwordGuy

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I'm not familiar with the Bogleheads discussion, but I do think there are "hidden" features of investing with brokerages like Vanguard or Merrill Lynch, things like same day liquidity, recourse to your funds if the custodian goes bankrupt, the fiduciary standard for advisement. Things that amateurs like me probably cannot list in one sitting, but many of these things are simply missing from the crypto world, and amateurs just don't think to notice them until a crisis hits, and then your money is gone.

Indeed, I was tempted to log into gemini and check on things during the recent selloff, and gemini couldn't even put Bitcoin prices on their price page. I'm sure smaller exchanges were unprepared to handle the web traffic of people panicking and trying to get in and sell, and this sort of thing affects the downside risks of investing in the asset class.

Yes, like the guy who was running an exchange who died unexpectedly.   No one knew the password to his laptop.   The money is gone, gone, gone.

firemane

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Silly boomers caught up in their old ways and not buying shiba inu coin

GuitarStv

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Silly boomers caught up in their old ways and not buying shiba inu coin

I think they're positioning to scoop up all the buttcoin while it's still cheap!

Quote
https://neironix.io/cryptocurrency/buttcoin

Morning Glory

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Silly boomers caught up in their old ways and not buying shiba inu coin

I think they're positioning to scoop up all the buttcoin while it's still cheap!

Quote
https://neironix.io/cryptocurrency/buttcoin

Your link didn't work.. Did someone's ass break the internet??? 😯

firemane

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In the year of 2022 I predict one buttcoin will be worth 1 million dollars USD

rmorris50

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In the year of 2022 I predict one buttcoin will be worth 1 million dollars USD
Sounds like something that can be redeemed at a gentleman’s club.


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theolympians

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I predict within 5 years "crypto" will be thoroughly regulated. Money laundering regs will apply and there will no "secret" holders allowed. Crypto, meaning the holder, will be taxed according when they sell. The IRS always prevails in the long run.

There still might be markets, but prices will reflect the above.

ChpBstrd

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I predict within 5 years "crypto" will be thoroughly regulated. Money laundering regs will apply and there will no "secret" holders allowed. Crypto, meaning the holder, will be taxed according when they sell. The IRS always prevails in the long run.

There still might be markets, but prices will reflect the above.

Or it might be nothing.
https://www.youtube.com/watch?v=iomRREashI0

SuperSecretName

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I predict within 5 years "crypto" will be thoroughly regulated. Money laundering regs will apply and there will no "secret" holders allowed. Crypto, meaning the holder, will be taxed according when they sell. The IRS always prevails in the long run.

There still might be markets, but prices will reflect the above.

Or it might be nothing.
https://www.youtube.com/watch?v=iomRREashI0
stablecoins are not a threat to bitcoin.  If something is pegged to the dollar, and the fed prints, oh, I don't know, a couple trillion, the stablecoin does nothing to protect you.  He seems to miss the basic value prop of bitcoin as a decentralized, non-government controlled option.  Bitcoin fought the currency vs. store of value in 2017, and store of value won.  Bitcoin is not needed to buy coffee.

If anything, central banks are MUCH more concerned about stablecoins and the effect that will have on banking.  At this point, they don't really care about bitcoin and view it as a speculative fly.  Stablecoins, if they continue to grow and suck up deposits and other safe assets, can have a destabilizing effect on the banking system.

The genie is out of the bottle.  It's never going back in.

theolympians

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I predict within 5 years "crypto" will be thoroughly regulated. Money laundering regs will apply and there will no "secret" holders allowed. Crypto, meaning the holder, will be taxed according when they sell. The IRS always prevails in the long run.

There still might be markets, but prices will reflect the above.

Or it might be nothing.
https://www.youtube.com/watch?v=iomRREashI0
stablecoins are not a threat to bitcoin.  If something is pegged to the dollar, and the fed prints, oh, I don't know, a couple trillion, the stablecoin does nothing to protect you.  He seems to miss the basic value prop of bitcoin as a decentralized, non-government controlled option.  Bitcoin fought the currency vs. store of value in 2017, and store of value won.  Bitcoin is not needed to buy coffee.

If anything, central banks are MUCH more concerned about stablecoins and the effect that will have on banking.  At this point, they don't really care about bitcoin and view it as a speculative fly.  Stablecoins, if they continue to grow and suck up deposits and other safe assets, can have a destabilizing effect on the banking system.

The genie is out of the bottle.  It's never going back in.

You are right, I don't get it. I don't understand a "store of value" when the price can fluctuate %50 on a whim. There is no inherent value than whatever someone else will pay for it on any given day. I see the proliferations of dozens of coins and wonder what purpose they have---other than everyone trying to make a fast buck on the next guy to come in and buy.

I read somewhere they benefit of of crypto was the transaction is secure even when you don't trust the other end. Why on earth am I transacting with this person(s)? Maybe tells me what they are buying......

Sure the genie will never be back in the bottle. The technology is amazing.....There are always people looking to make a fast buck and feel like they have inside knowledge. I am just saying at some point in the near future regulation will apply. There is too much money on the table for the feds to ignore.

Glenstache

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The  impact of digital currencies that I have not really gotten my brain around (and won't be known for a while yet) is the transition of electronic transactions away from traditional banking institutions. People can exchange *coins directly without having to have a bank account. I can see huge upsides to this in lowering barriers to market entry in emerging economies. However, part of what comes with banks is the stability/predictability that comes with their use of centrally governed currencies and accounting systems. The volatility issues are part of why we ditched gold and went to a federal reserve. I understand the libertarian dislike of central banking, but 2008 showed how useful it is in reducing the downside of unfettered markets (which tend to be pretty hard on the small guy).

SwordGuy

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The  impact of digital currencies that I have not really gotten my brain around (and won't be known for a while yet) is the transition of electronic transactions away from traditional banking institutions. People can exchange *coins directly without having to have a bank account. I can see huge upsides to this in lowering barriers to market entry in emerging economies. However, part of what comes with banks is the stability/predictability that comes with their use of centrally governed currencies and accounting systems. The volatility issues are part of why we ditched gold and went to a federal reserve. I understand the libertarian dislike of central banking, but 2008 showed how useful it is in reducing the downside of unfettered markets (which tend to be pretty hard on the small guy).

Funny since you mentioned it being hard on the little guys 'cause we sure bailed out a lot of the big guys that time around...

SuperSecretName

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I predict within 5 years "crypto" will be thoroughly regulated. Money laundering regs will apply and there will no "secret" holders allowed. Crypto, meaning the holder, will be taxed according when they sell. The IRS always prevails in the long run.

There still might be markets, but prices will reflect the above.

Or it might be nothing.
https://www.youtube.com/watch?v=iomRREashI0
stablecoins are not a threat to bitcoin.  If something is pegged to the dollar, and the fed prints, oh, I don't know, a couple trillion, the stablecoin does nothing to protect you.  He seems to miss the basic value prop of bitcoin as a decentralized, non-government controlled option.  Bitcoin fought the currency vs. store of value in 2017, and store of value won.  Bitcoin is not needed to buy coffee.

If anything, central banks are MUCH more concerned about stablecoins and the effect that will have on banking.  At this point, they don't really care about bitcoin and view it as a speculative fly.  Stablecoins, if they continue to grow and suck up deposits and other safe assets, can have a destabilizing effect on the banking system.

The genie is out of the bottle.  It's never going back in.

You are right, I don't get it. I don't understand a "store of value" when the price can fluctuate %50 on a whim. There is no inherent value than whatever someone else will pay for it on any given day. I see the proliferations of dozens of coins and wonder what purpose they have---other than everyone trying to make a fast buck on the next guy to come in and buy.

I read somewhere they benefit of of crypto was the transaction is secure even when you don't trust the other end. Why on earth am I transacting with this person(s)? Maybe tells me what they are buying......

Sure the genie will never be back in the bottle. The technology is amazing.....There are always people looking to make a fast buck and feel like they have inside knowledge. I am just saying at some point in the near future regulation will apply. There is too much money on the table for the feds to ignore.
I can't defend the myriad other coins.  I'm a bitcoin only guy.

The reason the value is fluctuating right now is because it is gaining adoption.  Of course it's volatile.  It has to be to go from 0 to trillions.  There is no way to do that without volatility.

The reasons it's described as a store of value is the long-term proposition - not the day to day changes.  The USD in your pocket loses half it's value in 30 years.  And that's the best case scenario!  If you happen to live elsewhere in the world, you won't be so lucky.  Not only that, but it's subjects to the whims and fancies of politicians (it's been called shmuck insurance for good reason).  Yes, you could invest it in the stock market, but should you have to?  You want a secure retirement?  It ain't gonna be with bonds.  You are forced to take risk unless you want to see it melt away like an ice cube.  There are a lot other macro arguments to be made, but that's a different argument then why have it in the first place.

To me, it's boils down to morality and sovereignty.  I should be able to save my labor for use in the future (part of the whole point of money), and not be forced to pay a hidden tax that eats away at savings (note, this is not an argument against taxes in general).  If a tax needs to be levied, then do it above board.  Inflation/monetary debasement hits the poor the hardest, as the rich have the means to earn a greater return.  Those closest to the money spigot benefit the most.  I want sovereignty over my money and not *have* to invest it to keep it's value.

re: the trust thing, you misunderstood it.  It's not that I don't trust the person paying me, it's that before bitcoin, you needed a trusted 3rd party to keep track of what everyone has. If you send me BTC, I know for 100% certainty that you actually had it, without needing to trust someone else to tell me that you do.  Bitcoin solved that problem, and that's why it's called trustless. 
« Last Edit: May 25, 2021, 08:26:16 PM by SuperSecretName »

SuperSecretName

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The volatility issues are part of why we ditched gold and went to a federal reserve.
This is not accurate as the USD was backed by gold when the federal reserve was created in 1913.  We only left the gold standard in 1971, and that's a fantastic lead in to this site.  The ability of the Fed and government to print money at will has had extreme effects on society.

https://wtfhappenedin1971.com/
« Last Edit: May 25, 2021, 07:45:12 PM by SuperSecretName »

Telecaster

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I don't understand what problem stablecoins are designed to solve. 

SuperSecretName

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I don't understand what problem stablecoins are designed to solve.
They provide an onramp into the crytpo-universe.  Once you have you fiat in, you don't really want to go back out.  Just think of it like a separate bike lane.

Early crypto exchanges couldn't get bank accounts, so couldn't denominate the trading pairs in USD.  So, enter stablecoins to serve as the other trading pair.

Since crypto is programmable, you can program it to interact and move a stablecoin.  You can't do that with fiat.

You can also use stablecoins to transfer money around the world without taking on price risk.

to sum: a lot of uses.

Telecaster

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The  impact of digital currencies that I have not really gotten my brain around (and won't be known for a while yet) is the transition of electronic transactions away from traditional banking institutions. People can exchange *coins directly without having to have a bank account. I can see huge upsides to this in lowering barriers to market entry in emerging economies. However, part of what comes with banks is the stability/predictability that comes with their use of centrally governed currencies and accounting systems.

Indeed, bringing banking-like services to the underbanked is a huge challenge.  But you don't always need a bank account to transfer money.  A phone might be good enough.
 Take M-Pesa for example:

Quote
On a continent that is still home to the largest share of the world’s unbanked population, Kenya has one of the highest mobile-money penetration rates in the world. This is largely due to the dominance of M-Pesa in the country, which stands as Africa’s sixth largest economy. Across Kenya’s population of 53 million, M-Pesa has 24.5 million customers and a network of 176,000 agents...

...Since launching M-Pesa in Kenya in 2007, Safaricom has expanded the product to additional East African countries and added to the platform financial options, such as lending and small business services.

As the article indicates M-Pesa is partnering with Visa and also has a point of sale system for merchants.  A huge fraction of the Kenyan economy now operates outside the traditional banking system.  M-Pesa is in other countries as well, but with lower market penetration. 

Morning Glory

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People can exchange *coins directly without having to have a bank account.

I think I remember a way in which we used to do that...

seattlecyclone

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The USD in your pocket loses half it's value in 30 years.  And that's the best case scenario!

Instead buy this thing that hasn't even existed for 30 years! Surely we can trust it will be a better long-term store of value than cash!

Quote
Yes, you could invest it in the stock market, but should you have to?

Instead buy this thing that has price swings so wild that they put the stock market to shame!

I admire your enthusiasm, and I do not share it.

Padonak

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Interestingly enough, our friends over at Bogleheads just banned discussion of crypto as an investment strategy.  Also anything under the greater fool theory, e.g. tulip bulbs.

They need this kind of censorship to protect rich but senile boomers from themselves. 

Glenstache

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a fiat currency is one in which a government says "make it so"
a digitial currency is one in which a developer writes some code that says "make it so"

Both require a leap of faith that it has actual value. Both have value only to the extent that people agree that they have value. The volatility (to me) means two things: 1) people don't really know what the value is right now and, 2) speculation is an accelerant on 1.

Wrenchturner

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a fiat currency is one in which a government says "make it so"
a digitial currency is one in which a developer writes some code that says "make it so"

Both require a leap of faith that it has actual value. Both have value only to the extent that people agree that they have value. The volatility (to me) means two things: 1) people don't really know what the value is right now and, 2) speculation is an accelerant on 1.
Fiats have a coercive use case and crypto is opt-in.  A significant difference imo.

Glenstache

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a fiat currency is one in which a government says "make it so"
a digitial currency is one in which a developer writes some code that says "make it so"

Both require a leap of faith that it has actual value. Both have value only to the extent that people agree that they have value. The volatility (to me) means two things: 1) people don't really know what the value is right now and, 2) speculation is an accelerant on 1.
Fiats have a coercive use case and crypto is opt-in.  A significant difference imo.
Most elements of society could be viewed as a coercive use case, but societies function better when people buy into the social contract.

SuperSecretName

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The USD in your pocket loses half it's value in 30 years.  And that's the best case scenario!

Instead buy this thing that hasn't even existed for 30 years! Surely we can trust it will be a better long-term store of value than cash!

Quote
Yes, you could invest it in the stock market, but should you have to?

Instead buy this thing that has price swings so wild that they put the stock market to shame!

I admire your enthusiasm, and I do not share it.
There is a difference between the Why bitcoin and the How bitcoin.  Price trajectory falls under the How, and is second to the Why.  There's a lot more to be said for the Why (e.g. https://bitcoinmagazine.com/culture/bitcoin-is-humanitarian-and-environmental)

Yes, it's early.  Buying BTC is speculative at this point, but looking at the full picture, adopters are rewarded. I don't think the upside is the only reason for buying, but you do receive an amazing return for the volatility.  That can be managed with appropriate position sizing.  Even 1% in the portfolio has potential to significantly juice returns, whereas if it goes to zero, the losses are minimal.

https://twitter.com/DTAPCAP/status/1397369680189435907

Since 2010, Sharpe ratio of Bitcoin (1.24) is a tick under the Sharpe ratio of simple 60/40 portfolio (1.25)..

..But #BTC 255.6% CAGR return crushes 60/40 10.3%.

Wrenchturner

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a fiat currency is one in which a government says "make it so"
a digitial currency is one in which a developer writes some code that says "make it so"

Both require a leap of faith that it has actual value. Both have value only to the extent that people agree that they have value. The volatility (to me) means two things: 1) people don't really know what the value is right now and, 2) speculation is an accelerant on 1.
Fiats have a coercive use case and crypto is opt-in.  A significant difference imo.
Most elements of society could be viewed as a coercive use case, but societies function better when people buy into the social contract.
I think coercive structures are avoided whenever possible.  Free enterprise, tcp/ip come to mind.  Yes there are regulations.

MilesTeg

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They are for people who really, really love ultra high risk for high potential reward.

Bitcoin is a pure pump and dump scam by whoever created it. It will never function as a currency -- it's only value is in the pump and dump (and bravo! to the creator(s) on that front!).

Someday there will probably be a digital currency in wide use, probably even a crypto one. But it won't be Bitcoin. It will be a digitial currency backed by a government or some other legit backing that won't also be insanely stupid as a currency (e.g. essentially all Bitcoin is owned by a dozen people/accounts; essentially all the Bitcoin that will even exist already has been "mined"; losing your password means your Bitcoin is lost to you irrevocably; as soon as someone can convince 50.01% of others that you don't own your Bitcoin you don't own it any longer; as soon as sufficiently powerful computers exist all Bitcoin becomes instantaneously worthless; etc. ).

I don't personally own any crypto, but I have made a big chunk of money off of the craze (in a sane risk level way) by buying a bunch of NVDA (Nvidia, which makes the computer parts that people "mine" bitcoin with, but those computer parts are also used heavily for actual useful activities like gaming and AI). It has had a very similar gain over the last 10 years as Bitcoin without the possibility of it becoming completely, utterly worthless instantaneously. It tracks with Bitcoin as the value of Bitcoin drives how crazy people are buying Nvidia products.
« Last Edit: May 26, 2021, 08:10:25 PM by MilesTeg »

effigy98

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Just go to portfoliocharts website, see what adding diversified assets does... Bitcoin in small amounts has been amazing.

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MustacheAndaHalf

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Bitcoin does seem to have a central authority - his name is Elon Musk.  Many of the BTC price moves follow comments by Musk, and this drop is no different.

That said, I think there's a tiny use case for crypto in a portfolio.  Large portfolios might diversify into commodities like gold and oil.  A tiny slice of that commodity allocation going to Bitcoin could make sense, if you're just using BTC for it's volatility.  If BTC moves out of sync with all other assets in your portfolio, it could smooth out drops when it moves in the opposite direction.  But I consider that a very rare use case, and quite unlike how so many people want to put everything in Dog Money.

nick663

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I see a few people mentioning BTC as a replacement for gold.  How do people reconcile BTC's behavior in Feb/Mar 2020 with that thesis?  BTC saw a huge drop during that period (larger than the stock market) which is the opposite of the behavior you would expect from a gold substitute.

We obviously have limited data but my concern with crypto in general is people are viewing them as stores of value when they're heavily traded/manipulated products.  If you're investing as a lotto ticket I get it but I don't see any basis for the idea that they're stable enough to replace typical commodities.

effigy98

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No way it is a replacement for gold. That is a dangerous narative. More like a compliment. Gold is pessimism, Bitcoin is optimism. Diversify.

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SuperSecretName

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I see a few people mentioning BTC as a replacement for gold.  How do people reconcile BTC's behavior in Feb/Mar 2020 with that thesis?  BTC saw a huge drop during that period (larger than the stock market) which is the opposite of the behavior you would expect from a gold substitute.
It's still so so early, it's not a gold substitute yet.  It was a global flight to liquidity.

talltexan

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Investing is about selecting vehicles to maximize Return per unit of risk you accept. Large risks can be justified if they buy a large return.

theolympians

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I predict within 5 years "crypto" will be thoroughly regulated. Money laundering regs will apply and there will no "secret" holders allowed. Crypto, meaning the holder, will be taxed according when they sell. The IRS always prevails in the long run.

There still might be markets, but prices will reflect the above.

Or it might be nothing.
https://www.youtube.com/watch?v=iomRREashI0
stablecoins are not a threat to bitcoin.  If something is pegged to the dollar, and the fed prints, oh, I don't know, a couple trillion, the stablecoin does nothing to protect you.  He seems to miss the basic value prop of bitcoin as a decentralized, non-government controlled option.  Bitcoin fought the currency vs. store of value in 2017, and store of value won.  Bitcoin is not needed to buy coffee.

If anything, central banks are MUCH more concerned about stablecoins and the effect that will have on banking.  At this point, they don't really care about bitcoin and view it as a speculative fly.  Stablecoins, if they continue to grow and suck up deposits and other safe assets, can have a destabilizing effect on the banking system.

The genie is out of the bottle.  It's never going back in.

You are right, I don't get it. I don't understand a "store of value" when the price can fluctuate %50 on a whim. There is no inherent value than whatever someone else will pay for it on any given day. I see the proliferations of dozens of coins and wonder what purpose they have---other than everyone trying to make a fast buck on the next guy to come in and buy.

I read somewhere they benefit of of crypto was the transaction is secure even when you don't trust the other end. Why on earth am I transacting with this person(s)? Maybe tells me what they are buying......

Sure the genie will never be back in the bottle. The technology is amazing.....There are always people looking to make a fast buck and feel like they have inside knowledge. I am just saying at some point in the near future regulation will apply. There is too much money on the table for the feds to ignore.
I can't defend the myriad other coins.  I'm a bitcoin only guy.

The reason the value is fluctuating right now is because it is gaining adoption.  Of course it's volatile.  It has to be to go from 0 to trillions.  There is no way to do that without volatility.

The reasons it's described as a store of value is the long-term proposition - not the day to day changes.  The USD in your pocket loses half it's value in 30 years.  And that's the best case scenario!  If you happen to live elsewhere in the world, you won't be so lucky.  Not only that, but it's subjects to the whims and fancies of politicians (it's been called shmuck insurance for good reason).  Yes, you could invest it in the stock market, but should you have to?  You want a secure retirement?  It ain't gonna be with bonds.  You are forced to take risk unless you want to see it melt away like an ice cube.  There are a lot other macro arguments to be made, but that's a different argument then why have it in the first place.

To me, it's boils down to morality and sovereignty.  I should be able to save my labor for use in the future (part of the whole point of money), and not be forced to pay a hidden tax that eats away at savings (note, this is not an argument against taxes in general).  If a tax needs to be levied, then do it above board.  Inflation/monetary debasement hits the poor the hardest, as the rich have the means to earn a greater return.  Those closest to the money spigot benefit the most.  I want sovereignty over my money and not *have* to invest it to keep it's value.

re: the trust thing, you misunderstood it.  It's not that I don't trust the person paying me, it's that before bitcoin, you needed a trusted 3rd party to keep track of what everyone has. If you send me BTC, I know for 100% certainty that you actually had it, without needing to trust someone else to tell me that you do.  Bitcoin solved that problem, and that's why it's called trustless.

Reference your last paragraph, you write about third party verification. Don't we have that with the banking system? If there is an issue there are enforcement orgs that investigate it openly. You may or may not be happy with the finding but there is one. Everything is tracked. BTC promoters act like this isn't the case, and they have solved a problem

If two shylocks are selling/buying something that would be seen as less than legal, I can see why you would want bitcoin. Otherwise, why not use the financial system in place?

As to a long term store of value, I can say the same for cabbage patch kids, or beanie babies. "Give it time".

I do agree, the crypto can be a destabilizing effect on the banking system and undermines a countries currency. That is never a good thing and will only create the turmoil that the promoters say it hedges against.


bwall

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Reference your last paragraph, you write about third party verification. Don't we have that with the banking system? If there is an issue there are enforcement orgs that investigate it openly. You may or may not be happy with the finding but there is one. Everything is tracked. BTC promoters act like this isn't the case, and they have solved a problem

If two shylocks are selling/buying something that would be seen as less than legal, I can see why you would want bitcoin. Otherwise, why not use the financial system in place?

As to a long term store of value, I can say the same for cabbage patch kids, or beanie babies. "Give it time".

I do agree, the crypto can be a destabilizing effect on the banking system and undermines a countries currency. That is never a good thing and will only create the turmoil that the promoters say it hedges against.

Bitcoin can also be tracked. That's how the Feds recovered millions in Bitcoin ransom paid to the Colonial Pipeline hackers. They tracked the payment to the wallet where it was stored, then seized the entire wallet.

The Feds have also been tracking the Bitcoin stored in wallets related to the Silk Road website that was shut down years ago. I suspect they're using it as bait, waiting for the owners to claim it one day. When they do, law enforcement will be there waiting.

MilesTeg

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I predict within 5 years "crypto" will be thoroughly regulated. Money laundering regs will apply and there will no "secret" holders allowed. Crypto, meaning the holder, will be taxed according when they sell. The IRS always prevails in the long run.

There still might be markets, but prices will reflect the above.

Or it might be nothing.
https://www.youtube.com/watch?v=iomRREashI0
stablecoins are not a threat to bitcoin.  If something is pegged to the dollar, and the fed prints, oh, I don't know, a couple trillion, the stablecoin does nothing to protect you.  He seems to miss the basic value prop of bitcoin as a decentralized, non-government controlled option.  Bitcoin fought the currency vs. store of value in 2017, and store of value won.  Bitcoin is not needed to buy coffee.

If anything, central banks are MUCH more concerned about stablecoins and the effect that will have on banking.  At this point, they don't really care about bitcoin and view it as a speculative fly.  Stablecoins, if they continue to grow and suck up deposits and other safe assets, can have a destabilizing effect on the banking system.

The genie is out of the bottle.  It's never going back in.

You are right, I don't get it. I don't understand a "store of value" when the price can fluctuate %50 on a whim. There is no inherent value than whatever someone else will pay for it on any given day. I see the proliferations of dozens of coins and wonder what purpose they have---other than everyone trying to make a fast buck on the next guy to come in and buy.

I read somewhere they benefit of of crypto was the transaction is secure even when you don't trust the other end. Why on earth am I transacting with this person(s)? Maybe tells me what they are buying......

Sure the genie will never be back in the bottle. The technology is amazing.....There are always people looking to make a fast buck and feel like they have inside knowledge. I am just saying at some point in the near future regulation will apply. There is too much money on the table for the feds to ignore.
I can't defend the myriad other coins.  I'm a bitcoin only guy.

The reason the value is fluctuating right now is because it is gaining adoption.  Of course it's volatile.  It has to be to go from 0 to trillions.  There is no way to do that without volatility.

The reasons it's described as a store of value is the long-term proposition - not the day to day changes.  The USD in your pocket loses half it's value in 30 years.  And that's the best case scenario!  If you happen to live elsewhere in the world, you won't be so lucky.  Not only that, but it's subjects to the whims and fancies of politicians (it's been called shmuck insurance for good reason).  Yes, you could invest it in the stock market, but should you have to?  You want a secure retirement?  It ain't gonna be with bonds.  You are forced to take risk unless you want to see it melt away like an ice cube.  There are a lot other macro arguments to be made, but that's a different argument then why have it in the first place.

To me, it's boils down to morality and sovereignty.  I should be able to save my labor for use in the future (part of the whole point of money), and not be forced to pay a hidden tax that eats away at savings (note, this is not an argument against taxes in general).  If a tax needs to be levied, then do it above board.  Inflation/monetary debasement hits the poor the hardest, as the rich have the means to earn a greater return.  Those closest to the money spigot benefit the most.  I want sovereignty over my money and not *have* to invest it to keep it's value.

I get concerned when anyone claims that Bitcoin (or any other crypto currency) is a low risk, long term store of value.

It's not.

Someday in the not to distant future computing will advance to the point where the cryptographic and other features of Bitcoin/blockchain will become obsolete at which point your Bitcoin will become instantaneously worthless. This is not a theoretical concern, this is an inevitability. As soon as computers are fast enough that the hashing algorithms uses to secure the Bitcoin blockchain are no longer a barrier the whole thing will collapse like the house of cards that it is.

Not to mention a trivial "oopsie" in maintaining your Bitcoin wallet, such as you or whatever company you have storing your wallet forgetting a password, can irrevocably separate you from your Bitcoin.

Holding Bitcoin is a very high risk proposition compared to traditional stores of values or investments.
« Last Edit: June 09, 2021, 07:48:27 AM by MilesTeg »

Simpli-Fi

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Holding Bitcoin is a very high risk proposition compared to traditional stores of values or investments.
which is why there is exponential upside...until the house of cards collapses

ChpBstrd

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Goldbugs: I put all my wealth in gold because it has been used as a store of value for 2,500 years. I'll work until I'm 72, but at least I can hold my life savings in my hand.

Cryptobugs: I put all my wealth in crypto because it could potentially someday start to be used by somebody as a store of wealth. If not, suicide is always an option. 

Grandma: I put all my wealth in bank CD's yielding 0.0001% so I know it's safe. Also, I have 2 years left to live.

The rest of us: Have you seen a 100-year chart of the stock market printed on a linear rather than log scale? It's better than porn. [Retires at 40]

Psychstache

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Goldbugs: I put all my wealth in gold because it has been used as a store of value for 2,500 years. I'll work until I'm 72, but at least I can hold my life savings in my hand.

Cryptobugs: I put all my wealth in crypto because it could potentially someday start to be used by somebody as a store of wealth. If not, suicide is always an option. 

Grandma: I put all my wealth in bank CD's yielding 0.0001% so I know it's safe. Also, I have 2 years left to live.

The rest of us: Have you seen a 100-year chart of the stock market printed on a linear rather than log scale? It's better than porn. [Retires at 40]

Aaaaaaaaaaand new signature acquired.

Sjalabais

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@MilesTeg, that's a good take and what I read about quantum computing suggests that once a breakthrough is done here, all existing encryption becomes obsolete. Stories of people losing access to their cryptowallets are plenty; NYTimes had one about a guy having 2 password attempts left on a stock of 20$ million or so.

Simultaneously, with some diversification and an enlightened approach to risk, you can still make a lot of money from crypto. So far, I have locked in a 100% return, and I could lose the remaining gamblevestment without pain.

@ChpBstrd, that's just hilarious - perfect!

theolympians

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Goldbugs: I put all my wealth in gold because it has been used as a store of value for 2,500 years. I'll work until I'm 72, but at least I can hold my life savings in my hand.

Cryptobugs: I put all my wealth in crypto because it could potentially someday start to be used by somebody as a store of wealth. If not, suicide is always an option. 

Grandma: I put all my wealth in bank CD's yielding 0.0001% so I know it's safe. Also, I have 2 years left to live.

The rest of us: Have you seen a 100-year chart of the stock market printed on a linear rather than log scale? It's better than porn. [Retires at 40]

LOL!

theolympians

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Reference your last paragraph, you write about third party verification. Don't we have that with the banking system? If there is an issue there are enforcement orgs that investigate it openly. You may or may not be happy with the finding but there is one. Everything is tracked. BTC promoters act like this isn't the case, and they have solved a problem

If two shylocks are selling/buying something that would be seen as less than legal, I can see why you would want bitcoin. Otherwise, why not use the financial system in place?

As to a long term store of value, I can say the same for cabbage patch kids, or beanie babies. "Give it time".

I do agree, the crypto can be a destabilizing effect on the banking system and undermines a countries currency. That is never a good thing and will only create the turmoil that the promoters say it hedges against.

Bitcoin can also be tracked. That's how the Feds recovered millions in Bitcoin ransom paid to the Colonial Pipeline hackers. They tracked the payment to the wallet where it was stored, then seized the entire wallet.

The Feds have also been tracking the Bitcoin stored in wallets related to the Silk Road website that was shut down years ago. I suspect they're using it as bait, waiting for the owners to claim it one day. When they do, law enforcement will be there waiting.

You called that didn't you! +1

Mr. Green

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Someday in the not to distant future computing will advance to the point where the cryptographic and other features of Bitcoin/blockchain will become obsolete at which point your Bitcoin will become instantaneously worthless. This is not a theoretical concern, this is an inevitability. As soon as computers are fast enough that the hashing algorithms uses to secure the Bitcoin blockchain are no longer a barrier the whole thing will collapse like the house of cards that it is.
This is the endgame right here and it will happen faster than anyone expects, just like every other computing breakthrough of the last couple decades.

"Yeah man I figured YOLO and now I'm worth millions of...I mean zero dollars." -Some crypto holder in the not too distant future

Telecaster

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Bitcoin can also be tracked. That's how the Feds recovered millions in Bitcoin ransom paid to the Colonial Pipeline hackers. They tracked the payment to the wallet where it was stored, then seized the entire wallet.

The Feds have also been tracking the Bitcoin stored in wallets related to the Silk Road website that was shut down years ago. I suspect they're using it as bait, waiting for the owners to claim it one day. When they do, law enforcement will be there waiting.

Tim Ferris had an interesting interview with Katie Haun, who was the federal prosecutor who lead the investigation into the Silk Road.  As it turns out, two federal agents investigating Silk Road had become corrupt.  She was adamant that they were only caught because they were using Bitcoin.  It is a wild story.  Worth a listen if you are interested in that sort of thing. 

She also commented on the NYT article about the Colonial Pipeline ransom (she was not involved with the case and is no longer a prosecutor).  She credited the speed of the recovery with the use of Bitcoin.   Getting bank records by contrast can take weeks or months.

ChpBstrd

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Someday in the not to distant future computing will advance to the point where the cryptographic and other features of Bitcoin/blockchain will become obsolete at which point your Bitcoin will become instantaneously worthless. This is not a theoretical concern, this is an inevitability. As soon as computers are fast enough that the hashing algorithms uses to secure the Bitcoin blockchain are no longer a barrier the whole thing will collapse like the house of cards that it is.
This is the endgame right here and it will happen faster than anyone expects, just like every other computing breakthrough of the last couple decades.

Are you saying the endgame for crypto will be when (a) computers get smart enough to crack the algos, or (b) investors get smart enough to foresee this possibility? If so, what you're describing would be a head-on collision between Moore's Law and the Flynn Effect.

Mr. Green

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Someday in the not to distant future computing will advance to the point where the cryptographic and other features of Bitcoin/blockchain will become obsolete at which point your Bitcoin will become instantaneously worthless. This is not a theoretical concern, this is an inevitability. As soon as computers are fast enough that the hashing algorithms uses to secure the Bitcoin blockchain are no longer a barrier the whole thing will collapse like the house of cards that it is.
This is the endgame right here and it will happen faster than anyone expects, just like every other computing breakthrough of the last couple decades.

Are you saying the endgame for crypto will be when (a) computers get smart enough to crack the algos, or (b) investors get smart enough to foresee this possibility inevitability? If so, what you're describing would be a head-on collision between Moore's Law and the Flynn Effect.
Fixed that for you. It won't matter which one of those come first, the net result is the same.

One of the more recent stand outs to me was AI beating a human at Go for the first time. everyone thought it was years away and BAM! It happened. Now AI is so good it's impossible for a human to win.
« Last Edit: June 14, 2021, 06:36:55 PM by Mr. Green »

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Tim Ferris had an interesting interview with Katie Haun, who was the federal prosecutor who lead the investigation into the Silk Road.  As it turns out, two federal agents investigating Silk Road had become corrupt.  She was adamant that they were only caught because they were using Bitcoin.  It is a wild story.  Worth a listen if you are interested in that sort of thing. 

She also commented on the NYT article about the Colonial Pipeline ransom (she was not involved with the case and is no longer a prosecutor).  She credited the speed of the recovery with the use of Bitcoin.   Getting bank records by contrast can take weeks or months.

Thanks for the recommendation. That was an interesting interview.

MilesTeg

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Someday in the not to distant future computing will advance to the point where the cryptographic and other features of Bitcoin/blockchain will become obsolete at which point your Bitcoin will become instantaneously worthless. This is not a theoretical concern, this is an inevitability. As soon as computers are fast enough that the hashing algorithms uses to secure the Bitcoin blockchain are no longer a barrier the whole thing will collapse like the house of cards that it is.
This is the endgame right here and it will happen faster than anyone expects, just like every other computing breakthrough of the last couple decades.

Are you saying the endgame for crypto will be when (a) computers get smart enough to crack the algos, or (b) investors get smart enough to foresee this possibility? If so, what you're describing would be a head-on collision between Moore's Law and the Flynn Effect.

The cryptographic features of all crypto will _inevitably_ be broken. Whether "investors" foresee it or not doesn't change the result -- everyone but maybe a select few will lose their ass.

Bitcoin and other similar blockchain based cryptos have a bigger weakness though: the 51% attack. The way the block chain is managed is that whatever 51% of participants say happened is what happened. Regardless of whether it's the truth of the matter. All it takes to take away all your Bitcoin is to get 51% of "people" to agree to that. All that really takes is someone willing to accumulate 51% of the Bitcoin clients either through firing up servers, taking over other servers with malware, or some combination.

DaKini

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Quote
All that really takes is someone willing to accumulate 51% of the Bitcoin
...which is not an easy task. You will need the electrical power of countries - which is out of scope for "normal joes" like you and me, but people like a certain dog coin proponent (or countries) may do that probably for a huge net gain. And if they succeed, you can probably do nothing about it, can't you?

SuperSecretName

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Someday in the not to distant future computing will advance to the point where the cryptographic and other features of Bitcoin/blockchain will become obsolete at which point your Bitcoin will become instantaneously worthless. This is not a theoretical concern, this is an inevitability. As soon as computers are fast enough that the hashing algorithms uses to secure the Bitcoin blockchain are no longer a barrier the whole thing will collapse like the house of cards that it is.
This is the endgame right here and it will happen faster than anyone expects, just like every other computing breakthrough of the last couple decades.

Are you saying the endgame for crypto will be when (a) computers get smart enough to crack the algos, or (b) investors get smart enough to foresee this possibility? If so, what you're describing would be a head-on collision between Moore's Law and the Flynn Effect.

The cryptographic features of all crypto will _inevitably_ be broken. Whether "investors" foresee it or not doesn't change the result -- everyone but maybe a select few will lose their ass.

Bitcoin and other similar blockchain based cryptos have a bigger weakness though: the 51% attack. The way the block chain is managed is that whatever 51% of participants say happened is what happened. Regardless of whether it's the truth of the matter. All it takes to take away all your Bitcoin is to get 51% of "people" to agree to that. All that really takes is someone willing to accumulate 51% of the Bitcoin clients either through firing up servers, taking over other servers with malware, or some combination.
This is not accurate.

If SHA-256, the cryptographic algorithm of bitcoin, gets broken, the world has bigger problems.  It is used by the military and government.  And then everyone just upgrades to SHA512.  Or an asteroid hits the earth.  Not high on my list of concerns.

Re: 51% attack, putting aside the practicality of pulling it off, there are two things that can happen.  1 - The 51% holder can censor transactions (e.g. not include what you want), 2 - they can double-spend their own coins.  They can't take yours, and they can't rewrite history.  And if you try to take 51% off the nodes, you will just hard fork bitcoin, and be on your own network with no one else.  Congrats.

Regardless, if someone were to try a 51% mining attack, they'd be better suited just to mine bitcoin for the profits instead of wasting tens of billions of dollars.