Author Topic: What do you think of adding a low% of crypto allocation  (Read 31428 times)

aceyou

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Re: What do you think of adding a low% of crypto allocation
« Reply #50 on: September 28, 2021, 06:13:45 AM »

Store of value? Maybe, as long as enough folks believe in it. As a general means of payment? No way for Bitcoin.

There is also no way the US or any other semi-functioning country is gonna accept some new "currency" as legal tender,

If the US is ever gonna accept digital money it will be digital USD in some form, not some crypto.


The governments of the US and other so-called semi-functioning countries may or may not choose to not accept bitcoin, but how often do you make a payment to a nation-state's governing body anyway? 

99.9% of the time, we make payments to corporations in the world, not the government institutions themselves.  And yes, those corporations will be accepting non government issued crypto. 

Twitter just announced that they will accept peer-to-peer bitcoin transfers as a general means of payment through a layer 2 solution called the lightning network.  Currently they have over 200 million daily users, most of whom are younger than 35 years old. 

https://www.theverge.com/2021/9/23/22689806/twitter-bitcoin-lightning-tipping-nft-authentication


So now there exists whole countries (El Salvador currently, with Panama, Cuba, and Ukraine making strides) who accept bitcoin, and we have one of the biggest social networks in the world accepting it.  Keep in mind that bitcoin was created only 12 years ago.  To me, the take-away isn't "the US government doesn't even accept it yet".  The real take-away is "wow, in only 12 years, small countries and the some of the world's biggest corporations are already accepting it as legal tender.  This is pretty mind blowing!" 



boarder42

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Re: What do you think of adding a low% of crypto allocation
« Reply #51 on: September 28, 2021, 06:24:03 AM »

Store of value? Maybe, as long as enough folks believe in it. As a general means of payment? No way for Bitcoin.

There is also no way the US or any other semi-functioning country is gonna accept some new "currency" as legal tender,

If the US is ever gonna accept digital money it will be digital USD in some form, not some crypto.


The governments of the US and other so-called semi-functioning countries may or may not choose to not accept bitcoin, but how often do you make a payment to a nation-state's governing body anyway? 

99.9% of the time, we make payments to corporations in the world, not the government institutions themselves.  And yes, those corporations will be accepting non government issued crypto. 

Twitter just announced that they will accept peer-to-peer bitcoin transfers as a general means of payment through a layer 2 solution called the lightning network.  Currently they have over 200 million daily users, most of whom are younger than 35 years old. 

https://www.theverge.com/2021/9/23/22689806/twitter-bitcoin-lightning-tipping-nft-authentication


So now there exists whole countries (El Salvador currently, with Panama, Cuba, and Ukraine making strides) who accept bitcoin, and we have one of the biggest social networks in the world accepting it.  Keep in mind that bitcoin was created only 12 years ago.  To me, the take-away isn't "the US government doesn't even accept it yet".  The real take-away is "wow, in only 12 years, small countries and the some of the world's biggest corporations are already accepting it as legal tender.  This is pretty mind blowing!"

so china has banned it if other global powers ban this the market for it basically goes away. Or it is now held and supported by these countries who had currency issues to begin with.  Currency in any form is only as good as the backing it receives from the trust of the general public.  I didn't put much trust in el Salvador's currency before bitcoin so its adoption along with the possible adoption of other 3rd world/corrupt economies does not interest me.  Maybe a combined 3rd world market currency with out fear of manipulation by the govt officials(they'll figure out a way) will help these economies do better in the long run it still doesnt solve the deflationary issues posed above.

aceyou

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Re: What do you think of adding a low% of crypto allocation
« Reply #52 on: September 28, 2021, 06:40:09 AM »

I don't mind Bitcoin itself. However, the strong advocates for this type of "investment" has a tendency to bug the shit out of me. The very strong vocal advocates tend to have very little money to invest and want to get rich quick.

It is my belief that the MMM crowd probably has a small amount in their portfolio. However, the MMM crowd is smart enough not to be spewing Bitcoin FOMO all over the place. It looks and smells like barf.

I hope my assumptions are not barf, but I will soon be an example of a person with a medium portfolio (700k) who will be making a significant Crypto investment.  I'm at 20% now and will be moving to about 40% within the month.  I'll have about 320k in crypto (Ether and Bitcoin) and 400k in VTSAX at that point. 

I'm not doing it because I think the market is about to rise short term...I am not a short term investor and don't claim to know what any market will do short term.  I am doing this on the assumption that cyrpto is going to be the main financial instrument for the world by the middle of this century.  The only way I plan to exit this strategy is if it becomes crystal clear that this assumption has failed.    I have put spent about 200 hours studying crypto over the past few months trying to poke holes and look for reasons it will fail, but it just leaves me convinced that it will succeed.

I am not posting this to try to change your mind or disagree with you, but rather to add myself as a public data point so we can all see together whether I succeed or fail.   If correct, I plan to celebrate and hopefully even retire sooner than expected.  If false, then I plan to laugh at myself along with the rest of the forum! 

Cheers!

It's possible to make money in anything. Some play and win the lottery. This discussion is more about what makes a good strategic investment. Not fear of missing out of potential future returns.

Good luck to you. You seem more reasonable than most. However, in order for this to work, your co-investors need to have the same level of confidence and determination. If trust weakens and people start to flee, it doesn't matter how well the technology performs.

If the technology performs well, it becomes a threat to the currency of the United States. It would be in the best interest of the United States to make it illegal or put restrictions on it. As others have said, due to special interest, we would have to engage in war for Bitcoin to become the dominant currency. It could happen. Anything is possible.

In a similar thread, (not too long ago), someone was advocating that rental real estate was just as risky as Bitcoin and cited the 2008-2012 housing recession. It's true that from Q1 2007 to Q1 2009, real estate decreased nationally about 19%.

https://fred.stlouisfed.org/series/MSPUS

Within the last 6 months, it looks like the biggest drop for Bitcoin was May 9 to 19. The drop was 36% over 11 days.

You said that if Bitcoin goes 10X, you will quit your job. You also said that you are in it for the long haul.

What is your withdrawal strategy for the next 30-40 years with Bitcoin?

Thanks for being willing to have an open discussion, despite having a different viewpoint. 

First, to be clear, I plan to be more invested in Ethereum than Bitcoin, but to hold both.  Bitcoin has like the most pure currency that coders could dream of, which entices me.  Ethereum has a MUCH more robust network of coders and corporations building on it's platform, which entices me. 

Here's my current withdrawal strategy:

If Ether and Bitcoin do establish themselves, then a withdrawal strategy for them is probably much more graceful and simple than in today's environment.  Ether and Bitcoin currently have a combined market cap of about 1.1 trillion dollars.  Enough money to already be legit entities, but very small compared to the ~95 trillion market cap of the corporations that make up VTSAX.  This is what creates the possibility for variance where the coin can drop 36% over 11 days as you mentioned.

However, if my assumptions are correct, then 20 years from now corporations and even several countries will be accepting these currencies as acceptable form of payment, and the market cap will be far higher than 1.1 trillion.  This is key.  If there is let's say 25 trillion held worldwide in Bitcoin/Ether (which I don't think is unreasonable, and possibly an underestimate), the variance of the currency will drop significantly.  This will have the downside of creating lower growth potential, but the huge upside of taking away much of the risk of waking up to 25% of your wealth evaporating. 

So, over time, I predict that Bitcoin/Ethereum will likely become worse from a standpoint of wealth creation, but will become much more stable as a way to store value.  My guess is that in 20 years, I won't be getting out of my Ether/Bitcoin positions to decrease volatility, rather I'll be doing it because volatility is low enough that VTSAX is once again a higher level of volatility, and therefore once again a better way to grow wealth. 

I'm not asking you to agree with my opinion, but did I explain my thoughts well enough that you are able to understand my opinion?  I've been working really hard to clarify all this in my own mind, and I know I'm not amazing at clarifying my thoughts to others yet:) 

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Re: What do you think of adding a low% of crypto allocation
« Reply #53 on: September 28, 2021, 07:23:06 AM »
For what it's worth I am something like 20% crypto.

I don't include it on my NW sheets and I really didn't spend THAT much on it(maybe 1% NW or less). It just grew to that. I dumped most of that into some newer projects (alts) earlier this year and reset the growth curve.

If it does a 5X, I can FIRE. It's worth the gamble to me. It's somewhat like holding a perpetual lottery ticket.

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Re: What do you think of adding a low% of crypto allocation
« Reply #54 on: September 28, 2021, 08:09:11 AM »
Today I discovered I can buy "GBTC" in my Vanguard account.  It's an OTC (over the counter) stock, not traded on Nasdaq or NYSE.  For me, that means I can buy and sell in my Roth account, and not deal with tax issues (I hope).
https://finance.yahoo.com/quote/GBTC/
And a week later, I realized there's a problem: GBTC and BTCUSD performance are far apart.  For a 2% expense ratio, they should do a better job of it.

YTD, BTC beat GBTC by 45% to 7%, which is a huge performance gap.
2 year, BTC beat GBTC by almost 2x, 409% vs 223%
5 year, BTC beats GBTC by 6774% to 3356%
(Admittedly, anyone who made 34x their money probably isn't so worried about missing another 2x)

aceyou

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Re: What do you think of adding a low% of crypto allocation
« Reply #55 on: September 28, 2021, 08:46:56 AM »

Store of value? Maybe, as long as enough folks believe in it. As a general means of payment? No way for Bitcoin.

There is also no way the US or any other semi-functioning country is gonna accept some new "currency" as legal tender,

If the US is ever gonna accept digital money it will be digital USD in some form, not some crypto.




The governments of the US and other so-called semi-functioning countries may or may not choose to not accept bitcoin, but how often do you make a payment to a nation-state's governing body anyway? 

99.9% of the time, we make payments to corporations in the world, not the government institutions themselves.  And yes, those corporations will be accepting non government issued crypto. 

Twitter just announced that they will accept peer-to-peer bitcoin transfers as a general means of payment through a layer 2 solution called the lightning network.  Currently they have over 200 million daily users, most of whom are younger than 35 years old. 

https://www.theverge.com/2021/9/23/22689806/twitter-bitcoin-lightning-tipping-nft-authentication


So now there exists whole countries (El Salvador currently, with Panama, Cuba, and Ukraine making strides) who accept bitcoin, and we have one of the biggest social networks in the world accepting it.  Keep in mind that bitcoin was created only 12 years ago.  To me, the take-away isn't "the US government doesn't even accept it yet".  The real take-away is "wow, in only 12 years, small countries and the some of the world's biggest corporations are already accepting it as legal tender.  This is pretty mind blowing!"

so china has banned it if other global powers ban this the market for it basically goes away. Or it is now held and supported by these countries who had currency issues to begin with.  Currency in any form is only as good as the backing it receives from the trust of the general public.  I didn't put much trust in el Salvador's currency before bitcoin so its adoption along with the possible adoption of other 3rd world/corrupt economies does not interest me.  Maybe a combined 3rd world market currency with out fear of manipulation by the govt officials(they'll figure out a way) will help these economies do better in the long run it still doesn't solve the deflationary issues posed above.

Hey Boarder, I'm pumped you are chiming in.  I was actually thinking about PM'ing you recently because I know from your work in DFS that you are open to ways of making money that are considered outside the norm by most.  Your opinion holds a bit more weight to me on this topic than the average joe on the street, since I know you are generally open to pretty out of the box ideas. 

I can't deny that I am disappointed by China's banning of crypto as they roll out their cyrpto Yuan.  At first I was worried this could be an existential threat(I had an extra beer that night:), so I basically did nothing but look into the ramifications of this over the past few days.  I'm less concerned now.  It looks like democracies most of the rest of the world will have far less incentive to ban it, and far more pressure to allow it. 

For example, in the US:
- Companies like Fidelity are super close...like maybe within weeks of offering a crypto ETF.  When one institution offers this, they will all have to do it, and quickly, or they will lose clients.  Once most financial institutions offer this, then there will be more and more lobbyists in finance advocating for crypto.  Right now, the big banks are basically only being hurt by crypto, but I think in the coming year it will be more nuanced than that.  I see it as something that they wish was never created, but now that it does exist, they are going to have to quickly adapt and make the best of the new situation.  There are lots of examples of this already happening.

- Major corporations are adopting quickly.  I think in the tech industry the CEO's understand the value of blockchains, and they want to get cryto onboarded quickly for two reasons.  Unlike the finance industry, this is a help to most major tech firms, particularly in social media.  I think they don't want the government to ban it, so if they make it ubiquitous quickly, it gets really hard to do.  Last Thursday Jack Dorsey announced bitcoin as payment via tipping...that's 200 million people who  will shortly have the option.  I think we will see more of this by industries that stand to benefit from crypto adoption...they will want to make it ubiquitous quickly so the public sentiment would make it super hard for democracies to get in crypto's way too much. 

- Also, let's point out that the US may not make it a national currency, but that doesn't mean they will forbid people and corporations from using it.  At the most basic level, bitcoin is protected by the first amendment.  computer code is considered free speech, and it can't be outlawed.  Some applications of it can be banned.  So, for example, I could see stable coins be highly regulated, and maybe even banned (but hopefully not).  However, bitcoin, by definition, is literally computer code, and the constitution supersedes laws.  If bitcoin is banned in the US, then it means we have way bigger problems on our hands, and my implosion of my crypto portfolio will be the least of my concern.

Again, I am particularly interested in your opinion, so please let me know if and how your position on this solidifies or shifts over time.  I'd rather  change my position over time and be correct, then to hang on to the wrong ideas simply for pride or something stupid like that.  If I'm seeing this wrong, I want to understand why and act accordingly. 

Take care. 

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Re: What do you think of adding a low% of crypto allocation
« Reply #56 on: September 28, 2021, 09:08:25 AM »
Okay, here are very clueless and honest questions based on the opposing opinions I'm reading here.

Say I don't care about missing out on potential gains of investing in crypto, I'm just not a speculation person for whatever reason.
Let's also assume that crypto does take over at least large chunks of the currency system.

Would we not assume that if that happens, that there will be a reasonable system for transition?
Assuming I don't care about losing out on gains, what are the benefits of buying particular coins *at this time*?

Between the champing at the bit pro-crypto folks, and the frothing at the mouth anti-crypto folks, it's hard to get a decent sense of anything. But I simply cannot wrap my mind around the utility of buying crypto *now* other than speculation, despite the fact that the pro-crypto folks cite endless reasons beyond speculation for their positions.

Am I missing something?

boarder42

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Re: What do you think of adding a low% of crypto allocation
« Reply #57 on: September 28, 2021, 09:16:47 AM »

Store of value? Maybe, as long as enough folks believe in it. As a general means of payment? No way for Bitcoin.

There is also no way the US or any other semi-functioning country is gonna accept some new "currency" as legal tender,

If the US is ever gonna accept digital money it will be digital USD in some form, not some crypto.




The governments of the US and other so-called semi-functioning countries may or may not choose to not accept bitcoin, but how often do you make a payment to a nation-state's governing body anyway? 

99.9% of the time, we make payments to corporations in the world, not the government institutions themselves.  And yes, those corporations will be accepting non government issued crypto. 

Twitter just announced that they will accept peer-to-peer bitcoin transfers as a general means of payment through a layer 2 solution called the lightning network.  Currently they have over 200 million daily users, most of whom are younger than 35 years old. 

https://www.theverge.com/2021/9/23/22689806/twitter-bitcoin-lightning-tipping-nft-authentication


So now there exists whole countries (El Salvador currently, with Panama, Cuba, and Ukraine making strides) who accept bitcoin, and we have one of the biggest social networks in the world accepting it.  Keep in mind that bitcoin was created only 12 years ago.  To me, the take-away isn't "the US government doesn't even accept it yet".  The real take-away is "wow, in only 12 years, small countries and the some of the world's biggest corporations are already accepting it as legal tender.  This is pretty mind blowing!"

so china has banned it if other global powers ban this the market for it basically goes away. Or it is now held and supported by these countries who had currency issues to begin with.  Currency in any form is only as good as the backing it receives from the trust of the general public.  I didn't put much trust in el Salvador's currency before bitcoin so its adoption along with the possible adoption of other 3rd world/corrupt economies does not interest me.  Maybe a combined 3rd world market currency with out fear of manipulation by the govt officials(they'll figure out a way) will help these economies do better in the long run it still doesn't solve the deflationary issues posed above.

Hey Boarder, I'm pumped you are chiming in.  I was actually thinking about PM'ing you recently because I know from your work in DFS that you are open to ways of making money that are considered outside the norm by most.  Your opinion holds a bit more weight to me on this topic than the average joe on the street, since I know you are generally open to pretty out of the box ideas. 

I can't deny that I am disappointed by China's banning of crypto as they roll out their cyrpto Yuan.  At first I was worried this could be an existential threat(I had an extra beer that night:), so I basically did nothing but look into the ramifications of this over the past few days.  I'm less concerned now.  It looks like democracies most of the rest of the world will have far less incentive to ban it, and far more pressure to allow it. 

For example, in the US:
- Companies like Fidelity are super close...like maybe within weeks of offering a crypto ETF.  When one institution offers this, they will all have to do it, and quickly, or they will lose clients.  Once most financial institutions offer this, then there will be more and more lobbyists in finance advocating for crypto.  Right now, the big banks are basically only being hurt by crypto, but I think in the coming year it will be more nuanced than that.  I see it as something that they wish was never created, but now that it does exist, they are going to have to quickly adapt and make the best of the new situation.  There are lots of examples of this already happening.

- Major corporations are adopting quickly.  I think in the tech industry the CEO's understand the value of blockchains, and they want to get cryto onboarded quickly for two reasons.  Unlike the finance industry, this is a help to most major tech firms, particularly in social media.  I think they don't want the government to ban it, so if they make it ubiquitous quickly, it gets really hard to do.  Last Thursday Jack Dorsey announced bitcoin as payment via tipping...that's 200 million people who  will shortly have the option.  I think we will see more of this by industries that stand to benefit from crypto adoption...they will want to make it ubiquitous quickly so the public sentiment would make it super hard for democracies to get in crypto's way too much. 

- Also, let's point out that the US may not make it a national currency, but that doesn't mean they will forbid people and corporations from using it.  At the most basic level, bitcoin is protected by the first amendment.  computer code is considered free speech, and it can't be outlawed.  Some applications of it can be banned.  So, for example, I could see stable coins be highly regulated, and maybe even banned (but hopefully not).  However, bitcoin, by definition, is literally computer code, and the constitution supersedes laws.  If bitcoin is banned in the US, then it means we have way bigger problems on our hands, and my implosion of my crypto portfolio will be the least of my concern.

Again, I am particularly interested in your opinion, so please let me know if and how your position on this solidifies or shifts over time.  I'd rather  change my position over time and be correct, then to hang on to the wrong ideas simply for pride or something stupid like that.  If I'm seeing this wrong, I want to understand why and act accordingly. 

Take care.

My opinion is there is far too much risk you're taking on to try to shave a few years off and FI timeline and possibly become mega rich.  having an allocation at no more than 5-10% maybe ok if this is something you believe in but its just a belief the history is far too short.  Investing in specific coins is even worse in my opinion as no one knows what will win or fail.  Just b/c something has a huge market cap doesnt mean its not a house of cards - see enron.  The govt may not be able to make this illegal per your statements but they can regulate it out of existance.  I just fundamentally see no value in this sector and mostly a bunch of talking heads trying to get rich quick.  I could not sleep at night or retire with an asset allocation that rich in a single short term trend that could completely fold on itself for no other reason than people lose interest in it being a thing. 

I'd also hope your research includes all of the counterpoints its very easy today to get confirmation bias on something when thats what you're seeking
« Last Edit: September 28, 2021, 09:21:43 AM by boarder42 »

aceyou

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Re: What do you think of adding a low% of crypto allocation
« Reply #58 on: September 28, 2021, 09:22:53 AM »
Okay, here are very clueless and honest questions based on the opposing opinions I'm reading here.

Say I don't care about missing out on potential gains of investing in crypto, I'm just not a speculation person for whatever reason.
Let's also assume that crypto does take over at least large chunks of the currency system.

Would we not assume that if that happens, that there will be a reasonable system for transition?
Assuming I don't care about losing out on gains, what are the benefits of buying particular coins *at this time*?

Between the champing at the bit pro-crypto folks, and the frothing at the mouth anti-crypto folks, it's hard to get a decent sense of anything. But I simply cannot wrap my mind around the utility of buying crypto *now* other than speculation, despite the fact that the pro-crypto folks cite endless reasons beyond speculation for their positions.

Am I missing something?

Yeah, that's a totally reasonable position/questions to be throwing out there.

I'll try to state a case for people not interested in using it as an investment. 

Suppose you have a person who is not comfortable with investing in stocks.  That's weird for us since we are all MMMer's, but many people in first world countries are not comfortable with stock investing.  These people are in a tough position right now, because the US, the EU, and most all first world countries are debasing their currency by printing money.  So, many people need a way to at least maintain the value they've accumulated.  US dollars and the EU are getting eaten by inflation, whereas Bitcoin has a forever hard cap of 21 million coins, and over 18 million of them have already been minted.  By the way the code was written, bitcoin can't debase their currency.  So, even if the world continues to trust the dollar, it will still be worth less and less each year.  But if the world continues to trust crypto, it has the feature of maintaining it's value. 

Now, an even stronger case for cyrpto is people who live in the developing world.  In those countries you usually CAN'T invest in stocks, buy gold on an exchange, etc.  The ONLY thing they can hold is their countries currency, which gets debases way faster than the US dollar...they lose so much to inflation.  And even if they have access to the dollar bill, that's getting debased super fast as well.  For the third world, cyrpto is the only solid way to maintain wealth.  They can get paid, and with an internet connection they can convert their nation's currency to bitcoin.

You may see bitcoin as unstable, but that's from the point of view of a first world rich person.  To a third world person with few to no options monetarily, this is the most stable and legit way to store wealth that they've ever had access too.

So, given your personal position towards crypto and the options to invest in stocks, gold, bonds, etc, I might advocate that you don't invest in crypto.  But there are many who right now SHOULD be buying it even if they don't care about the speculative gains. 

Hope that helps a bit.  Cheers! 

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Re: What do you think of adding a low% of crypto allocation
« Reply #59 on: September 28, 2021, 09:24:48 AM »
There is no real reason to own crypto if you don't have fear of missing out on potential future gains.  There don't appear to be many (any?) valid current use cases for a person living in a country without a failed currency or for people who aren't currently unbanked.  Just about anything that crypto can do for legal uses, your regular bank/credit card can do better at the moment.

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Re: What do you think of adding a low% of crypto allocation
« Reply #60 on: September 28, 2021, 09:44:45 AM »
There is no real reason to own crypto if you don't have fear of missing out on potential future gains.  There don't appear to be many (any?) valid current use cases for a person living in a country without a failed currency or for people who aren't currently unbanked.  Just about anything that crypto can do for legal uses, your regular bank/credit card can do better at the moment.

Yeah, but the sentiment seems to be that there are legitimate reasons to buy it *now* in the event that it becomes a standard form of currency.

I just don't see the mechanism for this argument.

I say this because I have seen countless debates online where pro-crypto folks insist that it's not just speculation.

But how? How is it not just speculation for a typical north american investor?

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Re: What do you think of adding a low% of crypto allocation
« Reply #61 on: September 28, 2021, 09:48:37 AM »
Okay, here are very clueless and honest questions based on the opposing opinions I'm reading here.

Say I don't care about missing out on potential gains of investing in crypto, I'm just not a speculation person for whatever reason.
Let's also assume that crypto does take over at least large chunks of the currency system.

Would we not assume that if that happens, that there will be a reasonable system for transition?
Assuming I don't care about losing out on gains, what are the benefits of buying particular coins *at this time*?

Between the champing at the bit pro-crypto folks, and the frothing at the mouth anti-crypto folks, it's hard to get a decent sense of anything. But I simply cannot wrap my mind around the utility of buying crypto *now* other than speculation, despite the fact that the pro-crypto folks cite endless reasons beyond speculation for their positions.

Am I missing something?
For someone not interested, I'd say just keep buying pieces of businesses (or instruments that represent buying pieces of businesses) assuming this is part of your portfolio.  If those businesses you purchase start to use crypto as a currency in the future, cool, you still own a piece of the business.  If they do not start to use crypto as a currency in the future, cool, you still own a piece of the business.  Owning pieces of a business is still a viable tool to help win the financial game of life but there are more and more options for doing so (and more pitfalls, perhaps).

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Re: What do you think of adding a low% of crypto allocation
« Reply #62 on: September 28, 2021, 10:22:39 AM »

Store of value? Maybe, as long as enough folks believe in it. As a general means of payment? No way for Bitcoin.

There is also no way the US or any other semi-functioning country is gonna accept some new "currency" as legal tender,

If the US is ever gonna accept digital money it will be digital USD in some form, not some crypto.




The governments of the US and other so-called semi-functioning countries may or may not choose to not accept bitcoin, but how often do you make a payment to a nation-state's governing body anyway? 

99.9% of the time, we make payments to corporations in the world, not the government institutions themselves.  And yes, those corporations will be accepting non government issued crypto. 

Twitter just announced that they will accept peer-to-peer bitcoin transfers as a general means of payment through a layer 2 solution called the lightning network.  Currently they have over 200 million daily users, most of whom are younger than 35 years old. 

https://www.theverge.com/2021/9/23/22689806/twitter-bitcoin-lightning-tipping-nft-authentication


So now there exists whole countries (El Salvador currently, with Panama, Cuba, and Ukraine making strides) who accept bitcoin, and we have one of the biggest social networks in the world accepting it.  Keep in mind that bitcoin was created only 12 years ago.  To me, the take-away isn't "the US government doesn't even accept it yet".  The real take-away is "wow, in only 12 years, small countries and the some of the world's biggest corporations are already accepting it as legal tender.  This is pretty mind blowing!"

so china has banned it if other global powers ban this the market for it basically goes away. Or it is now held and supported by these countries who had currency issues to begin with.  Currency in any form is only as good as the backing it receives from the trust of the general public.  I didn't put much trust in el Salvador's currency before bitcoin so its adoption along with the possible adoption of other 3rd world/corrupt economies does not interest me.  Maybe a combined 3rd world market currency with out fear of manipulation by the govt officials(they'll figure out a way) will help these economies do better in the long run it still doesn't solve the deflationary issues posed above.

Hey Boarder, I'm pumped you are chiming in.  I was actually thinking about PM'ing you recently because I know from your work in DFS that you are open to ways of making money that are considered outside the norm by most.  Your opinion holds a bit more weight to me on this topic than the average joe on the street, since I know you are generally open to pretty out of the box ideas. 

I can't deny that I am disappointed by China's banning of crypto as they roll out their cyrpto Yuan.  At first I was worried this could be an existential threat(I had an extra beer that night:), so I basically did nothing but look into the ramifications of this over the past few days.  I'm less concerned now.  It looks like democracies most of the rest of the world will have far less incentive to ban it, and far more pressure to allow it. 

For example, in the US:
- Companies like Fidelity are super close...like maybe within weeks of offering a crypto ETF.  When one institution offers this, they will all have to do it, and quickly, or they will lose clients.  Once most financial institutions offer this, then there will be more and more lobbyists in finance advocating for crypto.  Right now, the big banks are basically only being hurt by crypto, but I think in the coming year it will be more nuanced than that.  I see it as something that they wish was never created, but now that it does exist, they are going to have to quickly adapt and make the best of the new situation.  There are lots of examples of this already happening.

- Major corporations are adopting quickly.  I think in the tech industry the CEO's understand the value of blockchains, and they want to get cryto onboarded quickly for two reasons.  Unlike the finance industry, this is a help to most major tech firms, particularly in social media.  I think they don't want the government to ban it, so if they make it ubiquitous quickly, it gets really hard to do.  Last Thursday Jack Dorsey announced bitcoin as payment via tipping...that's 200 million people who  will shortly have the option.  I think we will see more of this by industries that stand to benefit from crypto adoption...they will want to make it ubiquitous quickly so the public sentiment would make it super hard for democracies to get in crypto's way too much. 

- Also, let's point out that the US may not make it a national currency, but that doesn't mean they will forbid people and corporations from using it.  At the most basic level, bitcoin is protected by the first amendment.  computer code is considered free speech, and it can't be outlawed.  Some applications of it can be banned.  So, for example, I could see stable coins be highly regulated, and maybe even banned (but hopefully not).  However, bitcoin, by definition, is literally computer code, and the constitution supersedes laws.  If bitcoin is banned in the US, then it means we have way bigger problems on our hands, and my implosion of my crypto portfolio will be the least of my concern.

Again, I am particularly interested in your opinion, so please let me know if and how your position on this solidifies or shifts over time.  I'd rather  change my position over time and be correct, then to hang on to the wrong ideas simply for pride or something stupid like that.  If I'm seeing this wrong, I want to understand why and act accordingly. 

Take care.

My opinion is there is far too much risk you're taking on to try to shave a few years off and FI timeline and possibly become mega rich.  having an allocation at no more than 5-10% maybe ok if this is something you believe in but its just a belief the history is far too short.  Investing in specific coins is even worse in my opinion as no one knows what will win or fail.  Just b/c something has a huge market cap doesnt mean its not a house of cards - see enron.  The govt may not be able to make this illegal per your statements but they can regulate it out of existance.  I just fundamentally see no value in this sector and mostly a bunch of talking heads trying to get rich quick.  I could not sleep at night or retire with an asset allocation that rich in a single short term trend that could completely fold on itself for no other reason than people lose interest in it being a thing. 

I'd also hope your research includes all of the counterpoints its very easy today to get confirmation bias on something when thats what you're seeking

Fair points.  I'll add that my wife and I each are ten years away from pensions.  Mine will probably be worth about 45k/year.  Hers will probably be worth 60k/year since she makes more than me.  We also own a house worth 400k currently that will be paid off in 9 years.  Additionally, we have 700k in the stach, 300k of which we are putting into crypto.  So even if that goes to zero, in 10 years we will have:

-100k+ pension per year (it would take a 2.5 million dollar stache to replicate this at a 4% withdrawal rate)
- paid off house
- whatever that 400k of VTSAX grows to in the next 10 years
- whatever additional VTSAX I buy in the next 10 years, plus the earnings on that additional money. 
- And we have a 500k life insurance policy on each other in the meantime for extra security. 

So in my particular position, I suppose it's not really 40% of my retirement.  It's 40% of my stache, but there's much outside of that.  If you include all that other stuff, I'm probably a bit over 10% allocated, but probably not much. 

Your last point is the one that is harder for me.  Searching for counterpoints to my assessment of crypto is harder than I'd like it to be.  I'm constantly looking, but many of the counterpoints are vague statements like "it's risky", "it's just used for crime", and things like that.  Things like "it's mainly used for crime" are just categorically false.  Statements like "it's risky" may be completely true, but there's seldom math to back it up. 

There is one REALLY VALID critique of crypto that I simply cannot deny, and you've pointed it out already.  Crypto has a super short lifespan, so the sample size is undeniably small.  This is a valid criticism and discounting it would be stupid.  Even though they seem like clear home runs to me, bitcoin has only been around for 12 years, and other coins are all younger than that.  This isn't a big deal, it's a really big deal:) 

My counter to that argument is this:  There was once a time when the US stock market was only 12 years old.  If we discount crypto because of it only being 12 years old, then we should similarly say that a person shouldn't have been buying stocks 12 years into the market's existence.  But a) that would have probably been a mistake for early adopters, and b) if they didn't invest in that, it wouldn't exist today, which would be sad. 

I believe that given all the layers of security I have listed above (pension/paid off house/400k in VTSAX, life insurance), I can easily absorb a 300k loss of wealth and still retire a happy and wealthy person in 10 years. 

Thanks again for your thoughtful response, hearing from an intelligent critic is far more valuable to me than someone who just drinks my cool-aide:)  It'll be fun to see how both of our views on this evolve in the coming months and years. 

FLBiker

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Re: What do you think of adding a low% of crypto allocation
« Reply #63 on: September 28, 2021, 10:31:18 AM »
There is no real reason to own crypto if you don't have fear of missing out on potential future gains.  There don't appear to be many (any?) valid current use cases for a person living in a country without a failed currency or for people who aren't currently unbanked.  Just about anything that crypto can do for legal uses, your regular bank/credit card can do better at the moment.

Yeah, but the sentiment seems to be that there are legitimate reasons to buy it *now* in the event that it becomes a standard form of currency.

I just don't see the mechanism for this argument.

I say this because I have seen countless debates online where pro-crypto folks insist that it's not just speculation.

But how? How is it not just speculation for a typical north american investor?

If I'm understanding your question correctly, I agree that this position (you have to buy it now because it will be a viable currency) doesn't make any sense.  If a crypto currency becomes a viable form of currency, it would of course have to be obtainable via some sort of exchange process.  If it weren't, it wouldn't be a viable currency.  So, buying coins at this point in time is speculating on the particular coin(s) that will end up being viable.

Malcat

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Re: What do you think of adding a low% of crypto allocation
« Reply #64 on: September 28, 2021, 10:45:59 AM »
There is no real reason to own crypto if you don't have fear of missing out on potential future gains.  There don't appear to be many (any?) valid current use cases for a person living in a country without a failed currency or for people who aren't currently unbanked.  Just about anything that crypto can do for legal uses, your regular bank/credit card can do better at the moment.

Yeah, but the sentiment seems to be that there are legitimate reasons to buy it *now* in the event that it becomes a standard form of currency.

I just don't see the mechanism for this argument.

I say this because I have seen countless debates online where pro-crypto folks insist that it's not just speculation.

But how? How is it not just speculation for a typical north american investor?

If I'm understanding your question correctly, I agree that this position (you have to buy it now because it will be a viable currency) doesn't make any sense.  If a crypto currency becomes a viable form of currency, it would of course have to be obtainable via some sort of exchange process.  If it weren't, it wouldn't be a viable currency.  So, buying coins at this point in time is speculating on the particular coin(s) that will end up being viable.

Okay, so I'm not missing anything.

I keep positing this and keep being told I'm wrong and "don't understand" crypto.

Granted, the majority of crypto-folk in my real life are fucking morons who don't know anything about investing, so aren't able to engage in a real conversation.

But I wanted to really understand that I wasn't missing anything, because as much as I've read, I do NOT feel confident holding much of an opinion or position on crypto at this time.

boarder42

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Re: What do you think of adding a low% of crypto allocation
« Reply #65 on: September 28, 2021, 11:35:21 AM »
There is no real reason to own crypto if you don't have fear of missing out on potential future gains.  There don't appear to be many (any?) valid current use cases for a person living in a country without a failed currency or for people who aren't currently unbanked.  Just about anything that crypto can do for legal uses, your regular bank/credit card can do better at the moment.

Yeah, but the sentiment seems to be that there are legitimate reasons to buy it *now* in the event that it becomes a standard form of currency.

I just don't see the mechanism for this argument.

I say this because I have seen countless debates online where pro-crypto folks insist that it's not just speculation.

But how? How is it not just speculation for a typical north american investor?

If I'm understanding your question correctly, I agree that this position (you have to buy it now because it will be a viable currency) doesn't make any sense.  If a crypto currency becomes a viable form of currency, it would of course have to be obtainable via some sort of exchange process.  If it weren't, it wouldn't be a viable currency.  So, buying coins at this point in time is speculating on the particular coin(s) that will end up being viable.

Okay, so I'm not missing anything.

I keep positing this and keep being told I'm wrong and "don't understand" crypto.

Granted, the majority of crypto-folk in my real life are fucking morons who don't know anything about investing, so aren't able to engage in a real conversation.

But I wanted to really understand that I wasn't missing anything, because as much as I've read, I do NOT feel confident holding much of an opinion or position on crypto at this time.

I would say this is the typical problem even with convincing people to stop trading individual stocks and switch to index funds.  Many still view the stock market as a gamble and don't want to read and research on why its not when you buy index funds. 

What is there to miss - you may hit the fountain of black gold to the moon.  But if this somehow becomes a currency it doesnt change the value of the companies we hold today.  I mean it could hurt some specific market sectors like banking while helping others like computer hardware.  but if it becomes the new dollar your company will just be measured in unicorn fartcoins instead of US dollars and maintain most of its same value relative to the goods and services you need to buy.

for the record if unicorn fartcoins ever come out i'm probably going to buy some just to say i own them
« Last Edit: September 28, 2021, 11:43:12 AM by boarder42 »

aceyou

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Re: What do you think of adding a low% of crypto allocation
« Reply #66 on: September 28, 2021, 11:55:00 AM »
There is no real reason to own crypto if you don't have fear of missing out on potential future gains.  There don't appear to be many (any?) valid current use cases for a person living in a country without a failed currency or for people who aren't currently unbanked.  Just about anything that crypto can do for legal uses, your regular bank/credit card can do better at the moment.

Yeah, but the sentiment seems to be that there are legitimate reasons to buy it *now* in the event that it becomes a standard form of currency.

I just don't see the mechanism for this argument.

I say this because I have seen countless debates online where pro-crypto folks insist that it's not just speculation.

But how? How is it not just speculation for a typical north american investor?

If I'm understanding your question correctly, I agree that this position (you have to buy it now because it will be a viable currency) doesn't make any sense.  If a crypto currency becomes a viable form of currency, it would of course have to be obtainable via some sort of exchange process.  If it weren't, it wouldn't be a viable currency.  So, buying coins at this point in time is speculating on the particular coin(s) that will end up being viable.

Okay, so I'm not missing anything.

I keep positing this and keep being told I'm wrong and "don't understand" crypto.

Granted, the majority of crypto-folk in my real life are fucking morons who don't know anything about investing, so aren't able to engage in a real conversation.

But I wanted to really understand that I wasn't missing anything, because as much as I've read, I do NOT feel confident holding much of an opinion or position on crypto at this time.

+1  You are not missing anything.  If crypto takes off and becomes widespread currency you'll easily be able to convert your cash or stocks to it at any time.  Currently I am investing for the sake of speculation, and am assuming all the risk that goes with this, and not because it's my only shot to own it.  I strongly think it will rise in value faster than stocks.  But even if I'm right, the people who waited to buy it will be able to convert their currency to crypto at the click of the button in the future. 

No one living in a first world country currently needs to own any crypto at the moment.

BicycleB

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Re: What do you think of adding a low% of crypto allocation
« Reply #67 on: September 28, 2021, 11:59:19 AM »

for the record if unicorn fartcoins ever come out i'm probably going to buy some just to say i own them

LOL. Unicorn fartcoins are the new Doge.

@aceyou, thanks for seeking and articulating reasonable arguments; ditto @Malcat.

Villanelle

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Re: What do you think of adding a low% of crypto allocation
« Reply #68 on: September 28, 2021, 12:13:44 PM »
Yes I have 20%. @Malcat  I plan to rebalance my portfolio annually to keep it at 20% crypto.

My question on this thread though is to understand what's the downside of adding a low% and rebalancing. Crypto has better risk vs reward than leveraged ETFs and a 2-5% seem to do wonders to the returns.

@waltworks Thank you for the recognition :)

"My question on this thread though is to understand what's the downside of adding 20% Theranos and rebalancing.  Look at the backtesting!!1!1!"  -c2015

Good luck, OP.  It may well work out.  Or not.  I don't think there is any harm in gambling with a few % of your network or portfolio.  20%?  Seems exceedingly foolish to me but to the guy who wins $500,000,000 in the lottery,  I suppose buying a ticket wasn't a waste of money. 

clarkfan1979

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Re: What do you think of adding a low% of crypto allocation
« Reply #69 on: September 28, 2021, 12:49:46 PM »
1. I think the utility of crypto as a currency in 3rd world countries with unstable currencies is real. However, I don't see this value to be enough to allocate my money towards this "investment".

2. Similar to what others have said, my personal bias is that my family/friends that own bitcoin and crypto know very little about investing and have very little invested. They struggle to understand the basics of economics. They seem to take the "fairy dust" approach, which is difficult to debate.

3. Re-balancing at 20% and putting the profits into VTSAX seems like a better strategy than not re-balancing.

4. You are predicting less variance in Bitcoin in the future. Statistically speaking, that type of prediction is very difficult to pull off. To fully understand this prediction, I would encourage you to read up on "homogeneity of variance" 

aceyou

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Re: What do you think of adding a low% of crypto allocation
« Reply #70 on: September 28, 2021, 02:46:27 PM »

4. You are predicting less variance in Bitcoin in the future. Statistically speaking, that type of prediction is very difficult to pull off. To fully understand this prediction, I would encourage you to read up on "homogeneity of variance"

Ok, so it looks like the Levene Test will be my learning/reading for tonight.  Thanks clarkfan for the direction.

clarkfan1979

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Re: What do you think of adding a low% of crypto allocation
« Reply #71 on: September 29, 2021, 12:24:56 PM »

4. You are predicting less variance in Bitcoin in the future. Statistically speaking, that type of prediction is very difficult to pull off. To fully understand this prediction, I would encourage you to read up on "homogeneity of variance"

Ok, so it looks like the Levene Test will be my learning/reading for tonight.  Thanks clarkfan for the direction.

Without going off of too much of a tangent, homogeneity of variance is a statistical assumption we make regarding normally distributed constructs/variables. Reasonable people making reasonable assumptions are going to assume normally distributed variables to have homogeneity of variance when making predictions about our world. 

Once you start violating this rule, you essentially go into an alternative universe (statistically speaking). In this alternative universe you are more likely to conclude that you found "something" (maybe a black hole?) when it doesn't actually exist. 




BicycleB

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Re: What do you think of adding a low% of crypto allocation
« Reply #72 on: September 29, 2021, 03:32:00 PM »

4. You are predicting less variance in Bitcoin in the future. Statistically speaking, that type of prediction is very difficult to pull off. To fully understand this prediction, I would encourage you to read up on "homogeneity of variance"

Ok, so it looks like the Levene Test will be my learning/reading for tonight.  Thanks clarkfan for the direction.

Without going off of too much of a tangent, homogeneity of variance is a statistical assumption we make regarding normally distributed constructs/variables. Reasonable people making reasonable assumptions are going to assume normally distributed variables to have homogeneity of variance when making predictions about our world. 

Once you start violating this rule, you essentially go into an alternative universe (statistically speaking). In this alternative universe you are more likely to conclude that you found "something" (maybe a black hole?) when it doesn't actually exist.

Why should we assume that future prices of Bitcoin are normally distributed?

habanero

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Re: What do you think of adding a low% of crypto allocation
« Reply #73 on: September 29, 2021, 04:30:57 PM »

Without going off of too much of a tangent, homogeneity of variance is a statistical assumption we make regarding normally distributed constructs/variables. Reasonable people making reasonable assumptions are going to assume normally distributed variables to have homogeneity of variance when making predictions about our world. 

Once you start violating this rule, you essentially go into an alternative universe (statistically speaking). In this alternative universe you are more likely to conclude that you found "something" (maybe a black hole?) when it doesn't actually exist.

On one day during the GFC Goldman Sachs published a note that the daily move in 2y US treasuries were 136 standard deviations (I might remeber the number incorrectly, but it was a botload of sigmas). They obv used it to make the point that stuff isn't really normally distributed in the real world.

boarder42

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Re: What do you think of adding a low% of crypto allocation
« Reply #74 on: September 29, 2021, 04:31:15 PM »

4. You are predicting less variance in Bitcoin in the future. Statistically speaking, that type of prediction is very difficult to pull off. To fully understand this prediction, I would encourage you to read up on "homogeneity of variance"

Ok, so it looks like the Levene Test will be my learning/reading for tonight.  Thanks clarkfan for the direction.

Without going off of too much of a tangent, homogeneity of variance is a statistical assumption we make regarding normally distributed constructs/variables. Reasonable people making reasonable assumptions are going to assume normally distributed variables to have homogeneity of variance when making predictions about our world. 

Once you start violating this rule, you essentially go into an alternative universe (statistically speaking). In this alternative universe you are more likely to conclude that you found "something" (maybe a black hole?) when it doesn't actually exist.

Why should we assume that future prices of Bitcoin are normally distributed?

Why should we assume anything about Bitcoin and it's future as anything of substance. I mean a coin made as a joke is insanely popular. What's stop edge investors from thinking doge is the best and my new unicorn farts are better.

Banks making vehicle to profit off transactions of something does not give value to something.

aceyou

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Re: What do you think of adding a low% of crypto allocation
« Reply #75 on: September 29, 2021, 05:01:57 PM »

4. You are predicting less variance in Bitcoin in the future. Statistically speaking, that type of prediction is very difficult to pull off. To fully understand this prediction, I would encourage you to read up on "homogeneity of variance"

Ok, so it looks like the Levene Test will be my learning/reading for tonight.  Thanks clarkfan for the direction.

Without going off of too much of a tangent, homogeneity of variance is a statistical assumption we make regarding normally distributed constructs/variables. Reasonable people making reasonable assumptions are going to assume normally distributed variables to have homogeneity of variance when making predictions about our world. 

Once you start violating this rule, you essentially go into an alternative universe (statistically speaking). In this alternative universe you are more likely to conclude that you found "something" (maybe a black hole?) when it doesn't actually exist.

Why should we assume that future prices of Bitcoin are normally distributed?

Why should we assume anything about Bitcoin and it's future as anything of substance. I mean a coin made as a joke is insanely popular. What's stop edge investors from thinking doge is the best and my new unicorn farts are better.

Banks making vehicle to profit off transactions of something does not give value to something.

I'm mentally prepared to be totally wrong about Bitcoin and Ethereum, but if it's because Doge ends up supplanting them, well that's just not something I can emotionally prepare for:) 

boarder42

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Re: What do you think of adding a low% of crypto allocation
« Reply #76 on: September 29, 2021, 05:44:05 PM »

4. You are predicting less variance in Bitcoin in the future. Statistically speaking, that type of prediction is very difficult to pull off. To fully understand this prediction, I would encourage you to read up on "homogeneity of variance"

Ok, so it looks like the Levene Test will be my learning/reading for tonight.  Thanks clarkfan for the direction.

Without going off of too much of a tangent, homogeneity of variance is a statistical assumption we make regarding normally distributed constructs/variables. Reasonable people making reasonable assumptions are going to assume normally distributed variables to have homogeneity of variance when making predictions about our world. 

Once you start violating this rule, you essentially go into an alternative universe (statistically speaking). In this alternative universe you are more likely to conclude that you found "something" (maybe a black hole?) when it doesn't actually exist.

Why should we assume that future prices of Bitcoin are normally distributed?

Why should we assume anything about Bitcoin and it's future as anything of substance. I mean a coin made as a joke is insanely popular. What's stop edge investors from thinking doge is the best and my new unicorn farts are better.

Banks making vehicle to profit off transactions of something does not give value to something.

I'm mentally prepared to be totally wrong about Bitcoin and Ethereum, but if it's because Doge ends up supplanting them, well that's just not something I can emotionally prepare for:)

Supplement Bitcoin and Ethereum with 2 failed tech stocks from the 90s and doge with one that succeeded.

That's why this is dumb.

jojoguy

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Re: What do you think of adding a low% of crypto allocation
« Reply #77 on: September 29, 2021, 07:10:45 PM »
I have went from dabbling crypto to building a huge amount of excitement for it. I really like more of the Defi side of it. There are a bunch of ways to make money on it and hedge against a bearish market. Anchor Protocol basically has a 20% APY savings account and they also have a borrow/lending system that makes you interest in both directions, albeit there is a little risk involved. Staking is great too.

I bought a Helium(HNT) miner last week to make passive income on. So far it has been active for a couple of days. The wait was a headache. I had to wait two-three days for it to sync with the blockchain. The amount mined hasn`t been much so far because of there not being too many hotspots in a couple of miles radius of me. So, I ordered an outdoor antenna, that will soon arrive, to be able to pick up more hotspots a further away. Once I start building up more coins I will be able to stake those as well to get 8% APR.

I just really enjoy the vast ideas and projects within the crypto market. It is not just about buying and selling coins based on the price of the coin itself. You can put the coins to work to make you even more. I am taking a look at Pancake Swap and their daily auto-compounding as well as a newer one called Kogecoin. I don`t want to put too much into either, but both of those have such huge potential. Koge is newer than Pancake, but could possibly blow up in value.

I am not surprised that many from the FIRE movement are drawn to it. It seems good to mess around with if you want to risk a small amount for big rewards, and the amount of diversity it has.

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Re: What do you think of adding a low% of crypto allocation
« Reply #78 on: September 29, 2021, 07:58:39 PM »
Koge is newer than Pancake, but could possibly blow up in value.

To each their own, but I don't know how I could write a sentence like this and not feel ridiculous.

boarder42

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Re: What do you think of adding a low% of crypto allocation
« Reply #79 on: September 30, 2021, 04:54:52 AM »


I am not surprised that many from the FIRE movement are drawn to it. It seems good to mess around with if you want to risk a small amount for big rewards, and the amount of diversity it has.

i think this statement is categorically false - a few in the fire movement are drawn to it.  These threads are primarily composed of the same 3-5 people supporting it and a vast majority of people saying really wtf are you doing.

as to your comments on "interest" at 20% this is not even remotely the same as 20% interest on a dollar - the dollar is stable.  your coins fall as much as 80% in days.

Malcat

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Re: What do you think of adding a low% of crypto allocation
« Reply #80 on: September 30, 2021, 05:36:12 AM »


I am not surprised that many from the FIRE movement are drawn to it. It seems good to mess around with if you want to risk a small amount for big rewards, and the amount of diversity it has.

i think this statement is categorically false - a few in the fire movement are drawn to it.  These threads are primarily composed of the same 3-5 people supporting it and a vast majority of people saying really wtf are you doing.

as to your comments on "interest" at 20% this is not even remotely the same as 20% interest on a dollar - the dollar is stable.  your coins fall as much as 80% in days.

I agree, the FIRE community is exceptionally risk averse on average compared to the rest of the population.

Perhaps there are other FIRE communities on the internet where crypto is big, but here the pro-crypto contingency is really just a small handful who post a lot about it.

That's not a criticism from me, I don't hold much of an opinion about crypto, it just doesn't really fit at this time with the demographic here, despite us having a huge proportion of techy folks.

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Re: What do you think of adding a low% of crypto allocation
« Reply #81 on: September 30, 2021, 07:02:26 AM »
There are a bunch of ways to make money on it and hedge against a bearish market.

The last bear market that I can remember was in 2008.  Didn't bitcoin become a thing in 2009?  What 'bearish market' are you hedging against?

boarder42

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Re: What do you think of adding a low% of crypto allocation
« Reply #82 on: September 30, 2021, 07:09:44 AM »
There are a bunch of ways to make money on it and hedge against a bearish market.

The last bear market that I can remember was in 2008.  Didn't bitcoin become a thing in 2009?  What 'bearish market' are you hedging against?

Last market crash was in March 2020.  Btc went from 9763 to a bottom of 5336 a loss of 4427 a loss of 45%

Not a very good hedge against the sp500 that lost 32% of value over the same window. 

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Re: What do you think of adding a low% of crypto allocation
« Reply #83 on: September 30, 2021, 08:41:38 AM »
I am not surprised that many from the FIRE movement are drawn to it. It seems good to mess around with if you want to risk a small amount for big rewards, and the amount of diversity it has.
Many are drawn to it?  I'm guessing your claim is based on a guess?
Most people I've seen base early retirement around equity investment, not crypto.


Why should we assume anything about Bitcoin and it's future as anything of substance. I mean a coin made as a joke is insanely popular. What's stop edge investors from thinking doge is the best and my new unicorn farts are better.
Market cap counts the price of something times how much is available.  Bitcoin's market cap is 30x that of Dogecoin, so it's like comparing Visa to AMC.  The existence of irrational meme stocks (like AMC) does not by itself mean that stock investing is a bad idea.


Last market crash was in March 2020.  Btc went from 9763 to a bottom of 5336 a loss of 4427 a loss of 45%
Another way to measure is from Feb peak to the low point in March.  By that measure, the S&P 500 dropped 35.6%... and Bitcoin dropped 60.7%.

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Re: What do you think of adding a low% of crypto allocation
« Reply #84 on: September 30, 2021, 10:10:18 AM »


I am not surprised that many from the FIRE movement are drawn to it. It seems good to mess around with if you want to risk a small amount for big rewards, and the amount of diversity it has.

i think this statement is categorically false - a few in the fire movement are drawn to it.  These threads are primarily composed of the same 3-5 people supporting it and a vast majority of people saying really wtf are you doing.

as to your comments on "interest" at 20% this is not even remotely the same as 20% interest on a dollar - the dollar is stable.  your coins fall as much as 80% in days.

I agree, the FIRE community is exceptionally risk averse on average compared to the rest of the population.

Perhaps there are other FIRE communities on the internet where crypto is big, but here the pro-crypto contingency is really just a small handful who post a lot about it.

That's not a criticism from me, I don't hold much of an opinion about crypto, it just doesn't really fit at this time with the demographic here, despite us having a huge proportion of techy folks.

Yep, just looking at this forum as my data points, the pro-crypto cohort around here is real small...like myself and a few other posters is all I've seen.

Also, confirming what Boarder said, I'd advice against looking at crypto as a hedge for stocks.  I've put a lot of time into this and there's a lot of things I love about crypto, but that isn't one of them. 

If crypto was going to be a hedge for something, it would be against inflation of a fiat currency.  Nation states can and do print money, which debases and inflates that currency.  However...

Cryptocurrencies are considered superior by people who are pro-crypto because they have a cap on how many can be put into circulation, so those currencies are protected from inflation via debasement.  Bitcoin is perfectly protected, and it is often compared to gold.  The code for Bitcoin caps the number of coins that can be minted at 21 million.  There are a little over 18 of them minted already.  Gold is similar, there's a finite amount, and the only way to get more is to mine it.  But unlike gold, where we don't actually know how much is left to be mined, we know exactly how much more bitcoin can be mined...and it isn't that much. 

Ethereum has a slightly different code to limit debasement.  They allow the minting of 18 million new coins per year.  So, for the first few years, it will inflate rather quickly.  However, each year, 18 million coins will become a smaller and smaller percent of the total coins in circulation.  So, not as finite as bitcoin, but unlike the dollar, there's a prescribed rule to ensure that over time inflation rate goes down and down and down.  The dollar, on the other hand, is getting debased by a greater and greater amount each year.

This is the main reason that I am pro-crypto...it solves several problems that the world needs solved...
1.  It's a global currency in a world that is now global. 
2.  Even if picked a nation-state backed currency like the dollar, the Euro, or the yuan to be a universal currency, it would still  require us to trust that nation state to
      a) not debase it...which we know won't happen...all nation states are debasing their currency by printing money.
      b) not cease to exist.  History shows us that the rise and fall of empires is a given.  The people who live in the US may continue to thrive if the U.S. empire changed ownership, but it's currency would likely be replaced.  Crypto is not tied to a nation state, so as long as there's internet, bitcoin will still be there. 

The downside of crypto is clear as well...even if it IS on paper a better currency than fiat notes like the dollar, it will only win if people want it to win.  Inferior products sometimes defeat superior products in the marketplace of ideas, and it's possible that it doesn't get mass adopted.  My bet is that it has enough legs to eventually overtake fiat currency, and that it will come to fruition.  This is the only reason a person should buy bitcoin or ethereum IMO. You are speculating markets gradually replacing some of their gold, fiat, and equity reserves with crypto until we reach a new market equilibrium, and that you'll ride the gains of the cryptocurrency as it moves towards this new equilibrium.  

I invest in Bitcoin because it is the most secure cyrpto on the market from a code standpoint and because it has the most trust by the general public.  I view bitcoin as a digital replacement of gold.  It would be SUPER HARD for another crypto to knock off Bitcoin, because Bitcoin doesn't try to be everything to everyone.  From pure security standpoint, good luck writing a code that beats bitcoin. 

I invest in Ethereum, because it's security is nearly as secure as bitcoin from a code standpoint, but it has far more coders developing the platform than does bitcoin.  I view Ethereum as the place where people will actually be doing business, because applications can be build on it easier.  Ethereum has more competition than Bitcoin, because several other cryptos are trying to beat Ethereum as platforms where applications can be build on even better.  Ethereums two biggest competitors are Solana and Cardano.  Solana, for example, has coded itself to make transactions happen faster than Ethereum, but it by definition had to trade a bit on security to do it.  So many feel that this part of the crypto market won't be winner take all.  Instead, there will likely be a few different protocals that stand out depending on what you are looking to do.  I you are creating a business that need to make super fast and cheap transactions and security isn't that important, you might choose solana.  But for an application that requires more security that approaches bitcoin, but is far easier to use than bitcoin, you might choose Ethereum.  It's possible that a single corporation would put different parts of their businesses on different protocals, depending on what each part of their business requires.  This is why I'm not super concerned with Ethereum's competitors.  The things Ethereum does well, it does REALLY well, and I see them exploding in those domains. 


Villanelle

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Re: What do you think of adding a low% of crypto allocation
« Reply #85 on: September 30, 2021, 11:46:24 AM »


I am not surprised that many from the FIRE movement are drawn to it. It seems good to mess around with if you want to risk a small amount for big rewards, and the amount of diversity it has.

i think this statement is categorically false - a few in the fire movement are drawn to it.  These threads are primarily composed of the same 3-5 people supporting it and a vast majority of people saying really wtf are you doing.

as to your comments on "interest" at 20% this is not even remotely the same as 20% interest on a dollar - the dollar is stable.  your coins fall as much as 80% in days.

I agree, the FIRE community is exceptionally risk averse on average compared to the rest of the population.

Perhaps there are other FIRE communities on the internet where crypto is big, but here the pro-crypto contingency is really just a small handful who post a lot about it.

That's not a criticism from me, I don't hold much of an opinion about crypto, it just doesn't really fit at this time with the demographic here, despite us having a huge proportion of techy folks.

Yep, just looking at this forum as my data points, the pro-crypto cohort around here is real small...like myself and a few other posters is all I've seen.

Also, confirming what Boarder said, I'd advice against looking at crypto as a hedge for stocks.  I've put a lot of time into this and there's a lot of things I love about crypto, but that isn't one of them. 

If crypto was going to be a hedge for something, it would be against inflation of a fiat currency.  Nation states can and do print money, which debases and inflates that currency.  However...

Cryptocurrencies are considered superior by people who are pro-crypto because they have a cap on how many can be put into circulation, so those currencies are protected from inflation via debasement.  Bitcoin is perfectly protected, and it is often compared to gold.  The code for Bitcoin caps the number of coins that can be minted at 21 million.  There are a little over 18 of them minted already.  Gold is similar, there's a finite amount, and the only way to get more is to mine it.  But unlike gold, where we don't actually know how much is left to be mined, we know exactly how much more bitcoin can be mined...and it isn't that much. 

Ethereum has a slightly different code to limit debasement.  They allow the minting of 18 million new coins per year.  So, for the first few years, it will inflate rather quickly.  However, each year, 18 million coins will become a smaller and smaller percent of the total coins in circulation.  So, not as finite as bitcoin, but unlike the dollar, there's a prescribed rule to ensure that over time inflation rate goes down and down and down.  The dollar, on the other hand, is getting debased by a greater and greater amount each year.

This is the main reason that I am pro-crypto...it solves several problems that the world needs solved...
1.  It's a global currency in a world that is now global. 
2.  Even if picked a nation-state backed currency like the dollar, the Euro, or the yuan to be a universal currency, it would still  require us to trust that nation state to
      a) not debase it...which we know won't happen...all nation states are debasing their currency by printing money.
      b) not cease to exist.  History shows us that the rise and fall of empires is a given.  The people who live in the US may continue to thrive if the U.S. empire changed ownership, but it's currency would likely be replaced.  Crypto is not tied to a nation state, so as long as there's internet, bitcoin will still be there. 

The downside of crypto is clear as well...even if it IS on paper a better currency than fiat notes like the dollar, it will only win if people want it to win.  Inferior products sometimes defeat superior products in the marketplace of ideas, and it's possible that it doesn't get mass adopted.  My bet is that it has enough legs to eventually overtake fiat currency, and that it will come to fruition.  This is the only reason a person should buy bitcoin or ethereum IMO. You are speculating markets gradually replacing some of their gold, fiat, and equity reserves with crypto until we reach a new market equilibrium, and that you'll ride the gains of the cryptocurrency as it moves towards this new equilibrium.  

I invest in Bitcoin because it is the most secure cyrpto on the market from a code standpoint and because it has the most trust by the general public.  I view bitcoin as a digital replacement of gold.  It would be SUPER HARD for another crypto to knock off Bitcoin, because Bitcoin doesn't try to be everything to everyone.  From pure security standpoint, good luck writing a code that beats bitcoin. 

I invest in Ethereum, because it's security is nearly as secure as bitcoin from a code standpoint, but it has far more coders developing the platform than does bitcoin.  I view Ethereum as the place where people will actually be doing business, because applications can be build on it easier.  Ethereum has more competition than Bitcoin, because several other cryptos are trying to beat Ethereum as platforms where applications can be build on even better.  Ethereums two biggest competitors are Solana and Cardano.  Solana, for example, has coded itself to make transactions happen faster than Ethereum, but it by definition had to trade a bit on security to do it.  So many feel that this part of the crypto market won't be winner take all.  Instead, there will likely be a few different protocals that stand out depending on what you are looking to do.  I you are creating a business that need to make super fast and cheap transactions and security isn't that important, you might choose solana.  But for an application that requires more security that approaches bitcoin, but is far easier to use than bitcoin, you might choose Ethereum.  It's possible that a single corporation would put different parts of their businesses on different protocals, depending on what each part of their business requires.  This is why I'm not super concerned with Ethereum's competitors.  The things Ethereum does well, it does REALLY well, and I see them exploding in those domains.

I'm highly unlikely to ever be a Bitcoin investor or holder, but I have a question about the bolded.  Isn't this actually a downside to Bitcoin?  Sure, it protects against inflation, as you explained.  But doesn't it also mean that Bitcoin will eventually become almost unusable?  It's not unlike if the US decided to stop making any more currency. Over time, coins fall down drains and paper bills get destroyed.  Bitcoins wallets are locked and the coins in them lost, no?  Someone dies and doesn't share their credentials with family, and those Bitcoins are forever lost from circulation.  So in either case, with no new 'money' being made, over time the available currency shrinks.  Eventually, isn't that currency going to die?  Who could accept USD if there are only a few million dollars worth left in existence?  Businesses and people would start seeking out and using Canadian dollars or Euro, or some other currency that would be more stable and more widely accepted, once the supply of USD started dwindling, no?  (That's assuming the US government didn't prevent that; they seem unlikely to interfere and try to force or even encourage the use of Bitcoin, so I doubt there would be any protection on that front.)   Just as finding places to take Bitcoin was tough in the very early days because there weren't enough to make them popular so people didn't want to take them and then not be able to easily spend them, isn't that going to happen on the way down, too, once they are all mined and every year we lose some to the various forms of attrition, until they are once again so uncommon that no one bothers to accepts them or want to take them because they don't want to get stuck holding a dying currency?

I absolutely could be thinking about this all wrong, and am truly asking from a place of ignorant curiousity--no snark or judgement.  Please explain to me why the hard limit on the number of Bitcoins isn't a bad thing in the longer term. 

Telecaster

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Re: What do you think of adding a low% of crypto allocation
« Reply #86 on: September 30, 2021, 12:18:06 PM »
I'm highly unlikely to ever be a Bitcoin investor or holder, but I have a question about the bolded.  Isn't this actually a downside to Bitcoin?  Sure, it protects against inflation, as you explained.  But doesn't it also mean that Bitcoin will eventually become almost unusable?  It's not unlike if the US decided to stop making any more currency. Over time, coins fall down drains and paper bills get destroyed.  Bitcoins wallets are locked and the coins in them lost, no?  Someone dies and doesn't share their credentials with family, and those Bitcoins are forever lost from circulation.  So in either case, with no new 'money' being made, over time the available currency shrinks.  Eventually, isn't that currency going to die?  Who could accept USD if there are only a few million dollars worth left in existence?  Businesses and people would start seeking out and using Canadian dollars or Euro, or some other currency that would be more stable and more widely accepted, once the supply of USD started dwindling, no?  (That's assuming the US government didn't prevent that; they seem unlikely to interfere and try to force or even encourage the use of Bitcoin, so I doubt there would be any protection on that front.)   Just as finding places to take Bitcoin was tough in the very early days because there weren't enough to make them popular so people didn't want to take them and then not be able to easily spend them, isn't that going to happen on the way down, too, once they are all mined and every year we lose some to the various forms of attrition, until they are once again so uncommon that no one bothers to accepts them or want to take them because they don't want to get stuck holding a dying currency?

I absolutely could be thinking about this all wrong, and am truly asking from a place of ignorant curiousity--no snark or judgement.  Please explain to me why the hard limit on the number of Bitcoins isn't a bad thing in the longer term.

Your comments are spot on.  Bitcoin is designed to be deflationary.  You don't want a deflating currency for the reasons you mention.  People will tend to horde money instead of spending it, which hurts the economy.   

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Re: What do you think of adding a low% of crypto allocation
« Reply #87 on: September 30, 2021, 12:45:47 PM »
I'm highly unlikely to ever be a Bitcoin investor or holder, but I have a question about the bolded.  Isn't this actually a downside to Bitcoin?  Sure, it protects against inflation, as you explained.  But doesn't it also mean that Bitcoin will eventually become almost unusable?  It's not unlike if the US decided to stop making any more currency. Over time, coins fall down drains and paper bills get destroyed.  Bitcoins wallets are locked and the coins in them lost, no?  Someone dies and doesn't share their credentials with family, and those Bitcoins are forever lost from circulation.  So in either case, with no new 'money' being made, over time the available currency shrinks.  Eventually, isn't that currency going to die?  Who could accept USD if there are only a few million dollars worth left in existence?  Businesses and people would start seeking out and using Canadian dollars or Euro, or some other currency that would be more stable and more widely accepted, once the supply of USD started dwindling, no?  (That's assuming the US government didn't prevent that; they seem unlikely to interfere and try to force or even encourage the use of Bitcoin, so I doubt there would be any protection on that front.)   Just as finding places to take Bitcoin was tough in the very early days because there weren't enough to make them popular so people didn't want to take them and then not be able to easily spend them, isn't that going to happen on the way down, too, once they are all mined and every year we lose some to the various forms of attrition, until they are once again so uncommon that no one bothers to accepts them or want to take them because they don't want to get stuck holding a dying currency?

I absolutely could be thinking about this all wrong, and am truly asking from a place of ignorant curiousity--no snark or judgement.  Please explain to me why the hard limit on the number of Bitcoins isn't a bad thing in the longer term.

Your comments are spot on.  Bitcoin is designed to be deflationary.  You don't want a deflating currency for the reasons you mention.  People will tend to horde money instead of spending it, which hurts the economy.

i think we've seen a practical application of block chain thru the tracking of digital art and media that people are selling.  Does this benefit bitcoin - NO b/c bitcoin holds no patents on blockchain so its pretty worthless.  I think there are other practical applications yet to be discovered but again these dont benefit the first coin made.

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Re: What do you think of adding a low% of crypto allocation
« Reply #88 on: September 30, 2021, 12:56:17 PM »
I'm highly unlikely to ever be a Bitcoin investor or holder, but I have a question about the bolded.  Isn't this actually a downside to Bitcoin?  Sure, it protects against inflation, as you explained.  But doesn't it also mean that Bitcoin will eventually become almost unusable?  It's not unlike if the US decided to stop making any more currency. Over time, coins fall down drains and paper bills get destroyed.  Bitcoins wallets are locked and the coins in them lost, no?  Someone dies and doesn't share their credentials with family, and those Bitcoins are forever lost from circulation.  So in either case, with no new 'money' being made, over time the available currency shrinks.  Eventually, isn't that currency going to die?  Who could accept USD if there are only a few million dollars worth left in existence?  Businesses and people would start seeking out and using Canadian dollars or Euro, or some other currency that would be more stable and more widely accepted, once the supply of USD started dwindling, no?  (That's assuming the US government didn't prevent that; they seem unlikely to interfere and try to force or even encourage the use of Bitcoin, so I doubt there would be any protection on that front.)   Just as finding places to take Bitcoin was tough in the very early days because there weren't enough to make them popular so people didn't want to take them and then not be able to easily spend them, isn't that going to happen on the way down, too, once they are all mined and every year we lose some to the various forms of attrition, until they are once again so uncommon that no one bothers to accepts them or want to take them because they don't want to get stuck holding a dying currency?

I absolutely could be thinking about this all wrong, and am truly asking from a place of ignorant curiousity--no snark or judgement.  Please explain to me why the hard limit on the number of Bitcoins isn't a bad thing in the longer term.

Your comments are spot on.  Bitcoin is designed to be deflationary.  You don't want a deflating currency for the reasons you mention.  People will tend to horde money instead of spending it, which hurts the economy.

i think we've seen a practical application of block chain thru the tracking of digital art and media that people are selling.  Does this benefit bitcoin - NO b/c bitcoin holds no patents on blockchain so its pretty worthless.  I think there are other practical applications yet to be discovered but again these dont benefit the first coin made.

Bitcoin isn't a functional currency.

The main reason to hold it is that maybe someone else will pay you more money for it at some point in the future.  At the very best it should be considered like a non-dividend paying stock.

LateStarter

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Re: What do you think of adding a low% of crypto allocation
« Reply #89 on: September 30, 2021, 01:00:42 PM »
. . . Just as finding places to take Bitcoin was tough in the very early days because there weren't enough to make them popular so people didn't want to take them and then not be able to easily spend them, isn't that going to happen on the way down, too, once they are all mined and every year we lose some to the various forms of attrition, until they are once again so uncommon that no one bothers to accepts them or want to take them because they don't want to get stuck holding a dying currency?
. . .
Your comments are spot on.  Bitcoin is designed to be deflationary.  You don't want a deflating currency for the reasons you mention.  People will tend to horde money instead of spending it, which hurts the economy.

Villanelle: Won't Bitcoin become worthless due to scarcity ? (which is a bad thing)
Telecaster: Yes, Bitcoin will become very valuable due to scarcity. (which is also a bad thing)

Eh ??



edited for typo + expanded




« Last Edit: September 30, 2021, 01:54:34 PM by LateStarter »

maisymouser

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Re: What do you think of adding a low% of crypto allocation
« Reply #90 on: September 30, 2021, 01:39:44 PM »
but if it becomes the new dollar your company will just be measured in unicorn fartcoins

OK, I was not a crypto person but I'm sold. Selling all my VTSAX to invest in fartcoins, thank you boarder42.

habanero

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Re: What do you think of adding a low% of crypto allocation
« Reply #91 on: September 30, 2021, 02:30:57 PM »
If you look at crypto as an asset class you should or shouldn't own you can repeat the excercise for others. Why not own commodities (has outperformed crypto lately even), why not real estate in addition to your own home if you own one? Why not a certain % in precious metals? Or unlisted equity? Bonds get very little love these days despite being one of the key asset classes.

There are a lot of asset classes most folks don't invest in directly, myself included. I have yet have someone explain to me why I should own crypto other than "I think it's gonna go higher 'cuase it has been going higher" It's a purely speculative play. If you bought something as dull as natural gas futures at the start of the year you would be up like 250%. Why is noone talking about natural gas futures? It's been a spectacular run.

You don't need crypto or any other specific asset class to get rich or stay rich. My sister bought some ETH some time ago. She "invested" like 2k USD. I told her that if you get lucky and make 2x or 5x or 10x the return it won't - after tax - really make any meaningful difference to you as you make 120k per year. Its a miniscule play that's not gonna move the needle on anything, but she just refused to listen. She heard it was hot and bought some. I tried explaining to here that it would most likely never make her rich even if returns turned out great %-wise. but that was like talking to a wall.
« Last Edit: September 30, 2021, 02:34:35 PM by habanero »

joe189man

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Re: What do you think of adding a low% of crypto allocation
« Reply #92 on: September 30, 2021, 03:36:05 PM »
If you look at crypto as an asset class you should or shouldn't own you can repeat the excercise for others. Why not own commodities (has outperformed crypto lately even), why not real estate in addition to your own home if you own one? Why not a certain % in precious metals? Or unlisted equity? Bonds get very little love these days despite being one of the key asset classes.

There are a lot of asset classes most folks don't invest in directly, myself included. I have yet have someone explain to me why I should own crypto other than "I think it's gonna go higher 'cuase it has been going higher" It's a purely speculative play. If you bought something as dull as natural gas futures at the start of the year you would be up like 250%. Why is noone talking about natural gas futures? It's been a spectacular run.

You don't need crypto or any other specific asset class to get rich or stay rich. My sister bought some ETH some time ago. She "invested" like 2k USD. I told her that if you get lucky and make 2x or 5x or 10x the return it won't - after tax - really make any meaningful difference to you as you make 120k per year. Its a miniscule play that's not gonna move the needle on anything, but she just refused to listen. She heard it was hot and bought some. I tried explaining to here that it would most likely never make her rich even if returns turned out great %-wise. but that was like talking to a wall.

The bolded is what i keep coming back to, if i had bought (or even known about) cardono last fall it could have made ~20x right now, but i would have never put more than $1k into it, so hypothetically thats ~$20k profit,  many folks here get bonuses that large or larger all the time. Like @habanero says its not likely to move the needle much. Especially now that the cheap gains have been made and everyone is talking about crypto. I couldn't imagine bitcoin or ethereum going 20 x again, but i thought the internet was a fad in the late 90s so what do i know.

LateStarter

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Re: What do you think of adding a low% of crypto allocation
« Reply #93 on: September 30, 2021, 03:37:55 PM »
If you look at crypto as an asset class you should or shouldn't own you can repeat the excercise for others. Why not own commodities (has outperformed crypto lately even), why not real estate in addition to your own home if you own one? Why not a certain % in precious metals? Or unlisted equity? Bonds get very little love these days despite being one of the key asset classes.
Why do you assume that anyone positive about crypto only looks at crypto ?

There are a lot of asset classes most folks don't invest in directly, myself included. I have yet have someone explain to me why I should own crypto other than "I think it's gonna go higher 'cuase it has been going higher" It's a purely speculative play. If you bought something as dull as natural gas futures at the start of the year you would be up like 250%. Why is noone talking about natural gas futures? It's been a spectacular run.
Who are you talking to ? Have you tried to find out for yourself ? For a more sophisticated case, try: https://www.lynalden.com/invest-in-bitcoin/ and the follow-up articles listed there. You might still disagree with it all but at least you'll have a better understanding of what some see as sound reasoning.

People probably would be talking about Natural Gas Futures if they subscribed to the theory of: "I think it's gonna go higher 'cuase it has been going higher". Maybe they don't. I don't.

You don't need crypto or any other specific asset class to get rich or stay rich. My sister bought some ETH some time ago. She "invested" like 2k USD. I told her that if you get lucky and make 2x or 5x or 10x the return it won't - after tax - really make any meaningful difference to you as you make 120k per year. Its a miniscule play that's not gonna move the needle on anything, but she just refused to listen. She heard it was hot and bought some. I tried explaining to here that it would most likely never make her rich even if returns turned out great %-wise. but that was like talking to a wall.
Yeah, I don't always understand my sister's actions . . . not sure what that tells me about crypto though.

habanero

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Re: What do you think of adding a low% of crypto allocation
« Reply #94 on: September 30, 2021, 04:06:13 PM »
Quote

Who are you talking to ? Have you tried to find out for yourself ? For a more sophisticated case, try: https://www.lynalden.com/invest-in-bitcoin/ and the follow-up articles listed there. You might still disagree with it all but at least you'll have a better understanding of what some see as sound reasoning.


I (think) I have an at least fairly decent understanding of the main reasons why some / a lot think it will go to the moon and beyond. It might, or it might not. But given it's an asset class (like commodities) that pays no dividends or has no underlying income it boils down to the "will increase in value" argument otherwise there would be no point in owning it especially as it - at least seems like a - come hell or high water, I'm gonna stick to it thing. I have no idea what the price of bitcoin or any other crypto will be in 10 years, it might be very high and it might be very low. If it's the former there is no force of nature that dictatates it will stay that way, if it's the latter there is nothing that says it will rebound. You could kind of make the same argument for equities, but at least it's an asset class that pays semi-regular income and will scale with the general economy. I doubt many buy crypto hoping for 7% annual real returns. That would be like a slow Wednesday in crypto space.

Fwiw I find gold utterly useless - it barely has any uses other than being valued and scarce and that show has been going for like 5000 years or whatever so it's not like I think anything has to be useful to find widespread assumed value. If I bought X% of my NW in crypto today I might be vastly richer than if I didn't - I don't know. What I know for sure is that I don't need crypto or commodities or bonds or whatever to likely get and stay fairly rich. I could put some % of my NW in crypto but given the volatility it has my position would be small and unless I got very lucky it wouldn't matter that much in the end. If fairly confident in having say 1 million USD in global equities, in crypto  - not so much. Just like if I had some intel Moderna was probably gonna strike gold in 2020 I still wouldn't put 1 million into the bet on it.

Basically I have no need for the off-chance to get very rich very fast. Im fine with slow and steady the tried and tested way.

Villanelle

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Re: What do you think of adding a low% of crypto allocation
« Reply #95 on: September 30, 2021, 04:23:02 PM »
. . . Just as finding places to take Bitcoin was tough in the very early days because there weren't enough to make them popular so people didn't want to take them and then not be able to easily spend them, isn't that going to happen on the way down, too, once they are all mined and every year we lose some to the various forms of attrition, until they are once again so uncommon that no one bothers to accepts them or want to take them because they don't want to get stuck holding a dying currency?
. . .
Your comments are spot on.  Bitcoin is designed to be deflationary.  You don't want a deflating currency for the reasons you mention.  People will tend to horde money instead of spending it, which hurts the economy.

Villanelle: Won't Bitcoin become worthless due to scarcity ? (which is a bad thing)
Telecaster: Yes, Bitcoin will become very valuable due to scarcity. (which is also a bad thing)

Eh ??



edited for typo + expanded

So what is your answer to my question? 

LateStarter

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Re: What do you think of adding a low% of crypto allocation
« Reply #96 on: September 30, 2021, 05:22:05 PM »
. . . Just as finding places to take Bitcoin was tough in the very early days because there weren't enough to make them popular so people didn't want to take them and then not be able to easily spend them, isn't that going to happen on the way down, too, once they are all mined and every year we lose some to the various forms of attrition, until they are once again so uncommon that no one bothers to accepts them or want to take them because they don't want to get stuck holding a dying currency?
. . .
Your comments are spot on.  Bitcoin is designed to be deflationary.  You don't want a deflating currency for the reasons you mention.  People will tend to horde money instead of spending it, which hurts the economy.

Villanelle: Won't Bitcoin become worthless due to scarcity ? (which is a bad thing)
Telecaster: Yes, Bitcoin will become very valuable due to scarcity. (which is also a bad thing)

Eh ??



edited for typo + expanded

So what is your answer to my question?
Not sure I have a particularly good answer. I was just querying the logic of the response.

If pushed, I'd say my gut-feeling is that such ongoing losses should be fairly insignificant in the scheme of things / compared to many other risks.
There's plenty of tales about people throwing away laptops 10 years ago with 100 'worthless' Bitcoins on them. However, I doubt many would be so careless today. My assumption is that people are generally careful with, and seek to protect, their valuables.
The total value of Bitcoin is currently around $800 billion. You'd need to misplace a lot of value to undermine any usefulness it has as a medium of exchange even now.
If it gets to the extreme point that everybody has some Bitcoin and we all use it every day and get a bit casual with it and regularly lose some, the total value will be waaaay higher and the losses proportionally smaller.

My main interest in Bitcoin is as a store of value, and in that context any such losses would, presumably, increase the value. The 'coins' would still exist but they would be out of circulation, thus limiting supply.

boarder42

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Re: What do you think of adding a low% of crypto allocation
« Reply #97 on: September 30, 2021, 05:37:34 PM »
Store of exactly what value. It consumes massive amounts of energy and has no utility as a currency or way to be utilized as a commodity. So it's a store of a perception that it has value to those who think it does?

Gold is a store of value but is used in jewelry and computing. What exactly is Bitcoin used for.

Gold was also used as an actual currency for centuries. We already have a globally accepted store of value that's no longer useable as currency.
« Last Edit: September 30, 2021, 06:57:58 PM by boarder42 »

Villanelle

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Re: What do you think of adding a low% of crypto allocation
« Reply #98 on: September 30, 2021, 06:49:07 PM »
. . . Just as finding places to take Bitcoin was tough in the very early days because there weren't enough to make them popular so people didn't want to take them and then not be able to easily spend them, isn't that going to happen on the way down, too, once they are all mined and every year we lose some to the various forms of attrition, until they are once again so uncommon that no one bothers to accepts them or want to take them because they don't want to get stuck holding a dying currency?
. . .
Your comments are spot on.  Bitcoin is designed to be deflationary.  You don't want a deflating currency for the reasons you mention.  People will tend to horde money instead of spending it, which hurts the economy.

Villanelle: Won't Bitcoin become worthless due to scarcity ? (which is a bad thing)
Telecaster: Yes, Bitcoin will become very valuable due to scarcity. (which is also a bad thing)

Eh ??



edited for typo + expanded

So what is your answer to my question?
Not sure I have a particularly good answer. I was just querying the logic of the response.

If pushed, I'd say my gut-feeling is that such ongoing losses should be fairly insignificant in the scheme of things / compared to many other risks.
There's plenty of tales about people throwing away laptops 10 years ago with 100 'worthless' Bitcoins on them. However, I doubt many would be so careless today. My assumption is that people are generally careful with, and seek to protect, their valuables.
The total value of Bitcoin is currently around $800 billion. You'd need to misplace a lot of value to undermine any usefulness it has as a medium of exchange even now.
If it gets to the extreme point that everybody has some Bitcoin and we all use it every day and get a bit casual with it and regularly lose some, the total value will be waaaay higher and the losses proportionally smaller.

My main interest in Bitcoin is as a store of value, and in that context any such losses would, presumably, increase the value. The 'coins' would still exist but they would be out of circulation, thus limiting supply.

But if there are only 50,000 and then 25,000 and then 1,000 Bitcoin left in circulation, how usable really are they?  How many places are going to accept this tiny little currency?  I now bitcoins can be spent fractionally, and maybe that's part of the answer--it won't matter if there are only 1000 of them left in circulation because that will actually 1,000,000,000 .0001th bit coins, then it spend the same as 1,000,000,000 bitcoins, as long as the value inflates? 

But regarding the second bolded, it seems to miss the entire point of my question.  It won't increase the value if everyone stops taking bitcoin because it becomes some fringe currency (a bit like it was initially, but on the way down instead of the way up) that almost no one has.  If almost no one has it, stores will stop taking it, and it stores stop taking it, it has almost no value at all, and if it has almost no value, more stores ill stop taking it, and...

And I'm not sure I buy the "it's valuable so people are going to take good care of it" rationale.  Gold and diamond jewelry is valuable, but people lose it.  Paper US currency is valuable but it gets lot and burned in a house fire and left in a coat pocket of a coat that gets thrown away. 

Imagine there is only one bitcoin left.  How would that increase its value, instead of making its value basically $0?  At that point, it's just some random bit of code (or a number generated by). It only has value if people are willing to exchange it for goods or a different currency.  And why would they do that if it's just an obscure solution to an equation that was all the rage in 2020?  I guess maybe it would have some value as a NFT to someone with a nostalgia for the 2020's? 

Juan Ponce de León

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Re: What do you think of adding a low% of crypto allocation
« Reply #99 on: September 30, 2021, 07:21:23 PM »
Hear that everyone?  If stores stop taking bitcoin, it's value will be worthless!  Except, stores never took it in the first place and it's value is $43500 per bitcoin.  Hrrmmmmm.