I promise you, the US Government is knees deep in the blockchain and is monitoring everything. What a bad article. Nothing wrong with speculation, as long as you are doing so responsibly and understand the risks. Investors who valued Apple and Microsoft and rich now and that is not because they spotted a Ponzi scheme. But instead of seeing how ridiculous this is, even morepeople start piling in and bidding up every new variety of pills (cryptocurrency), over and over and on and on, until they are some of the most valuable things on the planet. Totally agree about cryptos- but not sure gold should be lumped in with them. A wisened Mustachian looks for long term, steady gains, and their invested dollars add value to a society the moment they are employed. The internet became an amazing avenue for wealth. Bitcoin has very little potential for the long term. Not going to do this with you.. So when I invest in bitcoin, Im not betting that itll replace dollars anytime soon. (see: Long Island Iced Tea Corp. becoming Long Blockchain Corp.). But again, this is not investment but speculation! The stock market over the long run will ALWAYS grow as long as the population and technology and our output as humans continues to grow. Because of this, Bitcoin Cash and Monero and Dogecoin and many others are far more more rational, but still exhibit many of the other problems stemming from competition that you mention. It is, in other words, a valid store of value with properties that support it as a choice. Not a repeatable strategy though, Im sure. The population has lost trust in the institutions of governance with good reason. However i travelled last year and found bitcoin is fast becoming the reserve currency for many African countries that have no banking or any infrastructure and is replacing the dollar. Tulips. https://t.co/wfi8XTq77s" Nothing is promised. January 2, 2018, 9:45 pm. No. That capability simply did not exist before blockchain-based currencies. Unlike gold or tulip bulbs or cigarettes or salt, no one desires dollars as goods in and of themselves. All Rights Reserved |, 95% of even the trading volume is fraudulent, Bitcoin: the Worlds First Decentralized Ponzi Scheme, the Problem with calling Bitcoin a Ponzi Scheme, How to Give Money (and Get Happiness) More Easily. Andrew Kravitz You would be one of those skeptics who in 1992 would have said Internet has no future because its present bandwidth cannot even handle an attachment over email! Plus, it costs something like $20 per transaction. The market can remain irrational longer than you can remain solvent.. I just hope my tax dollars arent used to bail these folks out. January 2, 2018, 6:04 pm. Also appreciate fungibility. They were literally carting around wheelbarrows full of the note because the hyperinflation the government produced killed the currency. by jlcollinsnh 18 Comments. Incredible comment. Im fine with crypto but not as an investment. It will never be a currency, but I do believe it will hang around for a long time as an weirdo alternative investment like gold. Only 8% of fiat currency is paper currently, the rest is digital, similar to Bitcoin and unlike Bitcoin, it cannot be copied and sold under another brand. Any efficiency brought to commerce through blockchain technology are very likely to show up as increased dividends from index funds. January 3, 2018, 4:34 am, Dont plan on investing in cryptocurrency. January 3, 2018, 12:06 am, Sounds like a classic case of sour grapes to me :-), Cameron For me, its just like watching a show that I dont know the ending of yet. Another intelligent case by highly experienced crypto business lawyer Preston Byrne. I suspect it will have uses beyond public currency. Long story short bitcoin provides value. I agree with you, Chris. (Aside from the threats of force that stem from legal tender laws.). Its value statement is the ability to send any amount of money, anywhere in the world, for very cheap, without asking anyones permission, and have the transaction be irreversibly settled within a few minutes. Yes, you can buy index funds with fiat money and not with Bitcoin. Trust yes. Bitcoin and altcoins consume a ridiculous amount of energy. That is the right way to think about these things. Many are trying to perfect it but until there is a clear winner, different ones will emerge. The very definition of an unsophisticated investor is Being more willing to buy something, the more its price goes up.. ie beauty counter for nerds. Say I trade you a car for 1 bitcoin on Jan 8. January 5, 2018, 7:01 am. The First Attack In 2012, I invited Pete and his wife to share a guest post on Financial Samurai when he was starting out called: Early Retirement: It's Not As Risky As You Might Think. You are correct about your overall analysis: Bitcoin is indeed silly as a store of value from current prices because the number of insanely secure blockchains can always be increased by 1. So, all of the normal, previous ways of saving have been destroyed & the banks/corrupt bankers get bailed out, over & over & the regular people are sick of it. It is already in Beta testing and will be released this year. It often seems like there is a Bitcoin mafia who get upset if someone says something bad about Bitcoin. Why the hell would you have an intermediary like that when buying bitcoins? Dit is je geld nu waard als je een jaar geleden Bitcoin, goud of andere assets kocht. (Again, you also cant go to space without it, or use your computer, but we can set that aside for the moment. Definitely not. Do you really think you own your Fiat paper? This is exactly what happened in the 1970s: The nominal price of stocks remained roughly the same while their effective purchasing power was cut more than in half, eventually prices will come back up. I was kinda hoping he'd mention if his frugality was a factor or not. In a sense one could swap bitcoin to USD and the article still stands. That means over the next 2 years, the Shiller P/E will be rolling out some of the terrible earnings numbers from the global financial crisis. 2) lots of other things are used as a store of value (paintings, etc) Mr. Money Mustache and his then-wife retired at the age of 30 with a net worth of $600,000. If I understand correctly, the rate of return is VERY low because of the high hash difficulty that Bitcoin has now reached. You mixed that up. I'm sure this had nothing to do with their personal stake in the outcome." Monetizing debt and inflating the monetary supply is eroding our purchasing power and wealth. , Umm, you do know that only about half of the worlds population even has access to the internet, right? if you over leverage yourself in any of these you can find yourself in trouble. Stocks and bonds and real estate can all enter into bubbles. On the other hand valuation of bitcoin has nothing to do with merits like this.What I dont understand is how spinning off a crypto currency XRP plays a role is this (please shed some light if you can). Im not saying Bitcoin is the saviour of USD imperialism. Spend $40,000 a year x 25 = $1,000,000 to be FI/spend 4% of $1,000,000 = $40,000 to spend each year. This is not characteristic of a healthy financial system (particularly so many years into a global recovery), but rather a zombie one thats been artificially propped up since the financial crisis. So, Bitcoin is a protocol invented to solve a money problem that simply does not exist in the rich countries, which is where most of the money is. Common arguments against cryptocurrencies are 1) energy consumption, 2) volatility, 3) blockchain is good, Bitcon is bad. The sooner we debunk the myth and come to our senses, the richer our world will be. TO_Ont Well, SOMEONE has to keep the bankers & wealthy rich, right??? It is a good. This means that the long-term value of Bitcoin comes down to its value as a commodity. Mr. Money Mustache shares his opinion about Bitcoin. There is a mad rush in places like Korea to move all money to Bitcoins, and their government does not even know what to do about it. Holding gold is not an investment in this case, it is a hedge. So right there you can scratch off any use of blockchain as pointless if it doesnt benefit from immutability. Good points? Blockchain may be the future, but that doesnt mean any of the current currencies will be worth anything. And its value as a commodity is likely to be a lot more like corn than like gold. Because hydro acts as a massive built-in storage in both the short term (ms, seconds) and long term ( hours, days, I think that the future is virtual currencies and of course the internet in general, just not right now, and absolutely not with any of the 1400+ fakecurrencies out there. The issue with the .com bubble was internet companies were given a high valuation with no demonstration that they were profitable or even provided a service/product. The national debt comes from fiscal irresponsibility from people, not a fiat currency. Speculation is great. Mattheus Well I guess its all right then. Justin, you are falling for the WhatAboutIsm tactic that makes false equivalence. And that, in a nutshell, is why booms and busts will continue to plague us: human emotion and the desire for more. I noticed that you didnt deny that you are invested in Bitcoin. On top of that, wages are not keeping up with the rising costs of living. I reply, if its gotten that bad, I dont want to live in that world anyway. And if immutability isnt necessary for your use case, just use a database and save yourself the headache. Since we are still in the opening stages of the Bitcoin phenomenon it is BTCs perceived functionality properties that should drive the current price action, not so much the mania and the speculation aspect. > what is the fundamental reason that existing currencies have been driven up so high? A Ponzi scheme is a fraudulent operation designed to steal peoples money. This has resulted in the Bitcoin blockchain ledger being nearly immutable. The bitcoin price isnt rising because people are buying the coins to conduct real business. It doesnt mean they are in bubbles at any price. Heres a great description of the whole scene by Chain CEO Adam Ludwin. An emerging application that will be huge is true ownership and verifiable authenticity of digital goods. That's right -- it really does not matter (to me) why they split up. January 2, 2018, 6:01 pm. There is no wealth and no trade without these two things, so you might as well go all-in and trust people. You keep talking about transactions needed for it to be a currency but fail to mention in your article that Lightning Network is in the works to address this very problem. Gold value in Ancient Rome also correlated well via military officer salary (Centurion correlating with a new Captain in the US Army). ), Im in the same boat. I doubt you really believe this is going to overthrow all of our current financial system. You could recreate your AAPL stocks again if you want and still keep the rest in GBTC? I keep thinking of that movie where the actor says Explain it to me like Im a 2 year old.. SMH. I hope it wasn't, but as he said in the article, it's none of our damn business. These are preposterous numbers. On the other hand, paying a ridiculously high speculative price based only on what others *might* be willing to pay in the futurebased on little historical or reasonable evidencecertainly is insane. Our Banker friend goes on to explain that the first Cancer-Pill might initially see some great sales. Bitcoin is a nascent technology and will evolve with time. Cryptocurrencies are the key to humanitys survival. The fees are incredible. Reward for Risk is worse for Powerball. You have unwittingly tripped up your own argument here. What if you want it for yourself, or have customers or distributors that do? I advise you look at the 10-year PE ratio. Take that money and RUN! It's as simple as getting any brokerage account and buying the Vanguard Exchange traded fund called VTI, or getting a Betterment account and setting your allocation to at least 90% stocks. The real backing of the dollar is the force the U.S. government will use if its debts are called in. Pete Adeney, aka Mr Money Mustache "As fluctuations continue over the time and you continue to invest, you get the average price as time goes on," he adds. I'm more of a general Life Engineer - someone who tries to optimize continue reading. Seems to Petes point, theres an awful lot of marketing push behind something that has dubious use cases and limited long term value. So I did learn a bit about locking and unlocking information, hacking, and ensuring that independent brains (whether they are two adjacent CPUs on a circuit board or two companies negotiating across the Pacific) can trust each other and coordinate their actions in lockstep. 2) Prices rise so much that earnings increase while stock prices remain the same. I dont know, why gold and not platinum or palladium? Like a piece of a profitable business or a rentable piece of real estate. But if that is the case, then it is far less irrational than are dollar bills, especially over long periods of time. There is no reliable way to track or trace paper. January 3, 2018, 9:23 am. In 5 years, I probably expect people to be cracking jokes on this shortsighted article. WHY??? I refer you to: https://shitcoin.me/. In Ancient Rome and today one ounce of gold bought a very nice dress suit. I remain open to more information on the uses of Blockchain, but Ive never seen a valid fundamental reason for betting on future increases in the prices of these things. . No bubble lasts that long and keeps growing exponentially. The market can remain irrational longer than you can remain solvent. No one knows what the stable value of bitcoin will end up, and betting in either direction just seems like a fools errand. Because I advocate something, I am not raving Mad! Or? However, cryptocurrency is what incentivizes the network to secure a blockchain, so theyre two sides of the same coin. Is it possible youre confusing the message of this article? If cryptocurrencydoestake off, it will be in a government-backed form, like a new Fedcoin or G20coin. Full anonymity and government evasion will not be one of its features. Update, my fingernails are up to $160,000 now. LennStar And the digital assets which are currently little more than digital currencies no one uses will be required to process and write data to the public blockchains. Why? That was called new economy. Bitcoins can be traced, your fingernails cant. Im patiently watching on the sideline to see how this is going to pan out. Im in the same boat where I dont understand it and it doesnt make sense to me in the real world. The unbanked people can hold actual coins in their hands, but they cannot trade in cryptocurrency at all. Big ERN just recommended me to your blog and now I see that you beat me to the joke I just made. Its a little like taking out the garbage. The $16,728 Social Security bonus most retirees completely overlook. Thats a lot of electricity that can be used to power 3.3 million homes wasted. :) If youd like a link, just holler! January 2, 2018, 6:06 pm, Agreed! Finally, someone in here who understands economics and not just personal finance! Also, for the first time in history, it will soon be possible to make millions of sub-cent transactions efficiently without any significant fees. Read your history, it happens occasionally even in the great USA (a few times actually). No matter how attractive a populous finds them to be, cryptocurrencies will remain the territory of criminals, speculators and consumers of novel technologies until they are auditable. In the US, Pesos are worthless in transactions and cost money to convert to US dollars. WantNotToWantNot Hell if I believed that I would work my ass of taking EVERYTHING I could and putting it into cryptos! Im sorry MMM, but the consensus is that your fingernails are worth nothing (you couldnt even pay me to hold them), and that 1 BTC is worth more than your bike. Bitcoin CANNOT shelter you, pay dividends nor feed you. I think in five years bitcoin will pretty much disappear. The idea of have a decentralized monetary system outside of government and banking control is great in my mind. The cryptocurrency is the glue that holds the system together. In order to have decentralization, there needs to be an incentive for people to commit resources to running the network. that would be a PE ratio of 1. Im selling because I agree that cryptocurrencies have entered the bubble phase, but when it comes to theirlong-term viability, you have completely missed the bigger picture. But I hope the good times continue for a long while! Inexpensive computers thousands of times more powerful than the best you could buy for $10K in 1990. Great post. This will be a fun article to read in 10 years. We cannot have better living conditions for half of humanity on this planet under a corrupt and manipulative central banking system of various countries, that are not even true democracies. I think that the short history of bitcoin teaches us just how challenging prediction can be in these technologies. Think about how tomorrows generation will use far a more advanced blockchain tech to interact with far more advanced internet and general tech to create things that we cant even conceive of yet, let alone why they would have value. So I also read a lot about investment bubbles and fundamentals and how to tell those apart. Speculation of these underlying earnings is what often pushes stock prices higher. So just like you say theres nothing stopping you from creating your own Bitcoin, its the same code.unless you could attract hundreds of millions of dollars of computing power to ensure data integrity on your blockchain, its as worthless as your nail clippings. Research Ethereum further. If history is any indication of the future, we can presume the government will print more USD to make up for lost revenue. I agree totally. The people that buy into bitcoin will be hurting enough financially. Remember there was social media before Facebook. Looking back, I couldve traded a couple bucks of electricity as a college student for tens of thousands of dollars today. Who wants to sacrifice to earn financial freedom when you can just invest in Bitcoin and achieve the same in less than a year. Your fiat paper would be worthless in 10 years and you will be washing your ass with it! Not likely, bitcoin mining farms are in China because of the cheaper energy costs. https://www.cryptocompare.com/mining/calculator/btc?HashingPower=190&HashingUnit=MH%2Fs&PowerConsumption=1293&CostPerkWh=0.12, Matt Stephenson True. Given that China has a lot of bitcoin mines and electricity is produced by coal in China mostly thats a lot of unnecessary CO2 that just got bumped in the atmosphere. And verify. Nobody needs to worry about whether terms will be met. MentalArson Bitcoins are scarce, your fingernails are not. The kids pulverize the bricks to make brick dust, which is the most valuable currency/commodity in their forest kingdom. Gold is relatively inert (wont rust except for very tiny amounts of oxydation), it is relatively easy to verify its authenticity (its malleable, the good ol biting the coin to see if it dents, you can melt it to look for impurities as well as hard to fake the colour with lead based forgeries). Probably, but I dont care. Bitcoin didnt fly off the charts until a couple of months ago, after (maybe) finding itself in the perfect storm to take a bubble to biblical proportions. MentalArson Couldnt have said it any better myself. January 3, 2018, 8:55 am. Prediction can be used to bail these folks out bail these folks out to keep the rest GBTC! Bought a very nice dress suit what often pushes stock prices remain same. 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