OT: Ray, how's your Bitcoin investment going?

[jimcav]

my son, who is 14, asked me why i don't put some $ into bitcoin. He overheard me talking to my wife about my stagnant investment in a marijuana stock (canopy growth)

Is this a robinhood account type of thing? My only market exposure is through an online brokerage, which will let me buy COIN, but not the individual crypto

This may have been previously covered--I haven't gone through all 40+ pages

thx

[MattTuck]

Originally Posted by jimcav

my son, who is 14, asked me why i don't put some $ into bitcoin. He overheard me talking to my wife about my stagnant investment in a marijuana stock (canopy growth)

Is this a robinhood account type of thing? My only market exposure is through an online brokerage, which will let me buy COIN, but not the individual crypto

This may have been previously covered--I haven't gone through all 40+ pages

thx

coinbase.com is probably the most straightforward way to do it.

I think this is a good chance to teach your son about investing, speculation and asset allocation. What percent of your portfolio are you thinking of putting in bitcoin?

The market cap of global equities is around $95 trillion (based on a quick google search), I think the value of the top crypto currencies is around 1.5 trillion. So, I wouldn't allocate much more than a few percent of your portfolio to crypto. Even if you're very bullish on the space, I'd say holding more than 10% of your portfolio in bitcoin would be highly speculative (read risky).

[zmalwo]

Originally Posted by jimmy-moots

He's basically saying that you only lose (or make) money when you go in/out of it.

You may have dodged a bullet short term but unless you buy back in now at a lower price, then you miss the opportunity for the real money which is going long, riding the volatility and reaping rewards when its 10x+.

BTC is a wild ride and while you can't predict the future, it is a 'bet' that has huuuuuuge upside and not a lot of downside.

Best advice you can get for trading stock or crypto is do your research, build your case for why you believe the stock/crypto is undervalued versus the price it will be in 5-10 years, buy it and then only ever sell when the case you built is invalidated.

The markets are a short term voting machine, long term weighing machine (Benjamin Graham). Value comes out in the long run, don't be guided by the short term swings.

If i sold all of my positions, then I certainly wouldn't want to get back in at any price point. Crypto IMO will never replace US dollar, unless it is regulated and controlled by a reserve like the federal reserve in the US. After all, no business (unless illegal) wants a currency that fluctuates 20% +- hour by hour. It is good while the currency still goes up, but once it stops business and people will cry for stabilization thus leads to inevitable regulation and all turns out to be the same as US dollar in the end. Ride the hype while you can but don't shoot for long.

[dbnm]

I am using robin hood and the Voyager app for my crypto. both are rather good on an iphone.

[MattTuck]

Originally Posted by zmalwo

If i sold all of my positions, then I certainly wouldn't want to get back in at any price point. Crypto IMO will never replace US dollar, unless it is regulated and controlled by a reserve like the federal reserve in the US. After all, no business (unless illegal) wants a currency that fluctuates 20% +- hour by hour. It is good while the currency still goes up, but once it stops business and people will cry for stabilization thus leads to inevitable regulation and all turns out to be the same as US dollar in the end. Ride the hype while you can but don't shoot for long.

There are a lot of points in there. Do you think crypto only has value as an asset if it replaces the US dollar as store of wealth, unit of account, and medium of exchange? Or do you think it has value as a stand-alone asset class alongside other fiat systems?

Agree that volatility is a headwind for wide spread adoption, but I think most sophisticated companies (if they wanted to) could translate their bitcoin revenues into dollars within hours of receiving, and so mitigate most exchange rate risk. There are futures also now available, so they could use that to manage risk if it was a concern. (Obviously your average mom and pop convenient store doesn't have the capability to do that yet).

My counter argument to the volatility argument is that we are in the middle of (at least) 2 different forces that are driving price volatility. First, natural price discovery of a new asset class under extreme uncertainty and second, a speculative mania. There is no doubt that both are at play, but it is not easy to estimate the relative contributions of either.

[thegunner]

Originally Posted by dbnm

I am using robin hood and the Voyager app for my crypto. both are rather good on an iphone.

RH doesn't implement wallets -- you literally cannot transfer your balance elsewhere without liquidating it within the constraints of the RH ecosystem. I don't know why people still use RH.

[jimoots]

Originally Posted by zmalwo

If i sold all of my positions, then I certainly wouldn't want to get back in at any price point. Crypto IMO will never replace US dollar, unless it is regulated and controlled by a reserve like the federal reserve in the US. After all, no business (unless illegal) wants a currency that fluctuates 20% +- hour by hour. It is good while the currency still goes up, but once it stops business and people will cry for stabilization thus leads to inevitable regulation and all turns out to be the same as US dollar in the end. Ride the hype while you can but don't shoot for long.

If your hypothesis on Bitcoin being successful relies on it replacing currencies then that's fair enough. I can't see it being used as a general purpose currency for the reasons you throw out, add to that the fact it's limited by transaction p/second, transaction cost and all the work it takes to maintain such a secure ledger the proof it requires.

I would throw out the argument that Bitcoin (and crypto) is like nothing we've ever seen, BTC and ETH have huge potential upside for different reasons - general argument is BTC as digital gold, ETH as a an trading and blockchain application base. What we're beginning to see is mainstream investors and businesses use BTC as a hedge against inflation and currency fluctuations as part of a balanced portfolio. I posit that we are only at the beginning of that.

If I'm right (I could well be wrong) money you make attempting to trade highs and dips will pale in comparison to what you'd make going long.

And if I'm wrong, which I accept I could be, then I don't really lose a lot - just because the bet has such huge upside.

I see 10x on current prices still very possible, lets come back in 5 years and see how my comment ages! Ha!

[jimcav]

Originally Posted by MattTuck

coinbase.com is probably the most straightforward way to do it.

I think this is a good chance to teach your son about investing, speculation and asset allocation. What percent of your portfolio are you thinking of putting in bitcoin?

The market cap of global equities is around $95 trillion (based on a quick google search), I think the value of the top crypto currencies is around 1.5 trillion. So, I wouldn't allocate much more than a few percent of your portfolio to crypto. Even if you're very bullish on the space, I'd say holding more than 10% of your portfolio in bitcoin would be highly speculative (read risky).

sound advice, but even 10%--not in my comfort zone. IF I had a million $, I'd not buy 2-3 bitcoin. I'm not sure I could even do it at the 1.5% level of the top crypto value vs total global equity value you listed. I was thinking more like the price of a very decent used frame, ie just a few $k MAX. I'll look into coinbase--not sure what is possible as what I'm considering is just a fraction of a bitcoin. Obviously I know zilch, but I think of this as better than betting at the Del Mar races, but not really something I understand as investing (but back in '98 I bought Enron on advice of my morgan stanley guy--I liked him as he was a former USMC LT, but he really didn't give me much good advice on stocks, Enron just being the worst of it).

[jimoots]

Originally Posted by MattTuck

So... Elon musk is skeptical and china doesn't like crypto
.... Doesn't change my thesis that there is a non-zero probability that cryptocurrency is a once in a generation (maybe even less frequent) birth of a new asset class.

Yep, this.

Ride that volatility!

[MattTuck]

Originally Posted by jimcav

sound advice, but even 10%--not in my comfort zone. IF I had a million $, I'd not buy 2-3 bitcoin. I'm not sure I could even do it at the 1.5% level of the top crypto value vs total global equity value you listed. I was thinking more like the price of a very decent used frame, ie just a few $k MAX. I'll look into coinbase--not sure what is possible as what I'm considering is just a fraction of a bitcoin. Obviously I know zilch, but I think of this as better than betting at the Del Mar races, but not really something I understand as investing (but back in '98 I bought Enron on advice of my morgan stanley guy--I liked him as he was a former USMC LT, but he really didn't give me much good advice on stocks, Enron just being the worst of it).

PM me if you like, and I can give you my phone number if you want to chat a bit more to learn about it. There is no problem buying a fraction of a bitcoin. You could actually buy 0.000000001 worth of a bitcoin (which is the smallest unit possible at this time, and is referred to as a "satoshi", which has a value of $0.00041 at this time.

Yes, I was saying that 10% of your portfolio in crypto, even for a highly speculative trader, would be crazy. Don't do that I wasn't advocating for it.

[SPOKE]

About 20min ago I heard a radio news report that the Fed is looking into moving to a digital currency. Anyone have thoughts on this move?

[commandcomm]

Originally Posted by SPOKE

About 20min ago I heard a radio news report that the Fed is looking into moving to a digital currency. Anyone have thoughts on this move?

I don’t like it from a freedom perspective if digital is the only currency. There still needs to be paper dollars. Every transaction is tracked and any transaction can be turned off or not allowed for government controlled digital currency. At this time it is your choice to use a card and be tracked or use paper currency.

You have to look at it from any perspective no matter what your feeling is about government and politics. This is because at any time a different political party can be in power and use to to their advantage. You may think it is a good idea because you can cancel people from buying certain things. However, when the shoe is on the other foot, the stuff you want to buy may be cancelled.

There needs to be a serious and well thought out discussion in the area of ideas going forward on digital currency.

[tuscanyswe]

Whats the thinking on new "coins" ?

Lets say there is new coin that emerges as a much better currency for the average guy (for reason i dont know), what would happen to bitcoin and others current offers?

I mean its not like the us or any other country is going to launch a new currency that sort of make the usd useless cause there is that i can see no good reason for any country to ever do that. But isent there a chance that there is a new "coin" coming that sorta of makes the current ones useless or at least very much less interesting. I mean its tech right and that keeps evolving while regular currencies seem to resemble the state of nations which does not typically go nuts over night.

I obviously know next to nothing about cryptocurrencies so fill me in on why this wont happen?

[MattTuck]

Originally Posted by SPOKE

About 20min ago I heard a radio news report that the Fed is looking into moving to a digital currency. Anyone have thoughts on this move?

They are supposed to release a study sometime this summer on this topic. I'll wait until that is published before passing judgement.

China's digital currency is not a joke... and there are some serious implications if it starts to be used as a influence tool outside of China (ie. requiring foreign companies to transact using it in deals they do with or in China). So, there may be a reason the Fed wants/needs to explore a digital currency.

The devil, as they say, is in the details. So I'll wait a bit to understand what they are proposing.

More generally, if you are going to pursue a Keynsian form of monetary policy, it is actually nice to be able to create money out of thin air and send it to the general public directly. Then you don't have to rely on the clunky mechanism of buying treasuries and trying to manipulate interest rates to tweak aggregate demand. Maybe a digital currency could help in that regard. [I am against this type of monetary policy, but the Fed and both parties have embraced it, so a digital currency could certainly help it.]

The counterpoint to that is bitcoin's built in inflation rate. It is possible that the Fed sees bitcoin as a credible threat to US Dollar hegemony because it's supply today and supply in the future is very certain. If the price of bitcoin starts falling, you can't start removing bitcoins from circulation to prop up the price. In theory, if the Fed was concerned about the US dollar weakening, it could sell some of the assets on its balance sheet (thereby removing dollars from circulation) or raise interest rates (to lure people to park their money in a bank to earn more interest). This kind of tweaking the economy, combined with our reserve currency status has allowed us to borrow ridiculous amounts of money. Currently, something like 28 trillion dollars of national debt, with each tax payer responsible for $225,000. And there is no sign of this fiscal and monetary profligacy slowing.

Perhaps a digital currency with built in guardrails on supply could help us prolong our status as a reserve currency. I think the writing is clearly on the wall that the US is going to lose its status of leadership if things don't change, and a digital currency could credibly signal our intention to right the fiscal ship.

At any rate, I think this is a signal that the idea of digital currency and cryptographically secured assets is serious enough that major global powers feel it necessary to publish a study about it. I'd say, if anything, that speaks to the potential of the technology.

Now, whether the US starts one and outlaws all other crypto currencies, that is another question.

I am a fan of the principles of free market capitalism. If the custodians of the US dollar (or any other currency) are afraid of bitcoin, that should be a red flag warning on the sustainability of the dollar's value. I'm a fan of competition and one of the big reasons I think bitcoin is interesting is because it offers a credible alternative to sticking your money in a bank account that is going to lose a few % per year in purchasing power.

Even if bitcoin never becomes widely adopted, it is possible that its presence is enough of a threat that fiat monetary authorities will need to maintain some semblance of concern over inflation and borrowing.

To wrap up, I'll just throw out this quotation which is usually attributed to Mayer Amschel Rothschild, "Permit me to issue and control the money of a nation, and I care not who makes its laws!"

Bitcoin is not controlled by a government or individuals that can be corrupted, or try to influence its supply for political purposes. In that regard it is a new version of a very old idea -- precious metals. If you used gold or silver in ancient times, there was no easy way to create more of it... you had to mine it, or go to war to pillage it.

[MattTuck]

Originally Posted by tuscanyswe

Whats the thinking on new "coins" ?

Lets say there is new coin that emerges as a much better currency for the average guy (for reason i dont know), what would happen to bitcoin and others current offers?

I mean its not like the us or any other country is going to launch a new currency that sort of make the usd useless cause there is that i can see no good reason for any country to ever do that. But isent there a chance that there is a new "coin" coming that sorta of makes the current ones useless or at least very much less interesting. I mean its tech right and that keeps evolving while regular currencies seem to resemble the state of nations which does not typically go nuts over night.

I obviously know next to nothing about cryptocurrencies so fill me in on why this wont happen?

Yes, there are all sorts of innovations and use cases for new coins. Ethereum is probably the furthest ahead in terms of adding features to the system. There are ways (and new ways are being developed all the time) to incorporate new features into an existing blockchain. Tezos got a lot of press for its approach to on chain governance (adding new features automatically to the blockchain) as opposed to miners having to make a human decision on which fork of the network to support (which happened with bitcoin a few years ago).

When these projects are released, they are not left alone to run for decades on the same code. They are being added to, debugged, and improved, and some of the improvements address concerns (such as a move from proof of work to proof of stake to reduce energy usage).

Sure a new coin could come along and blow everything else out of the water, but that seems unlikely for 2 reasons. First, to reach many of the "points of parity" to compete with existing coins, you'd need to replicate the work that thousands of developers and contributors put into these other coins. Believe it or not, that is not the hard part, because many of these systems are open source, you could "stand on the shoulders of giants" to get started. The hard part would be attracting capital and attention away from the leaders, and then attracting developer talent to develop your "points of differentiation", what makes your coin better? And, if it is so much better, why hasn't one of the bigger coins adopted that feature?

Surely, it is possible -- but not easy.