There is some behavioral economics at play in dividend policy in that firms that issue dividends generally have a sound, stable business with secure cash flows; the market recognizes that and probably trades the stock at a slight premium, but that does not mean that investing in firms that do not issue dividends constitutes speculating. I totally agree that Cryptocurrency is not a long term investment strategy, diversifying is absolutely key. One thing in that seems to be missing in this conversation that Bitcoin maximalists will always point out: Blog readers. Bitcoin is the viral buzzword that has the momentum. There is no reliable way to track or trace paper. I refer you to: https://shitcoin.me/. I have seen several bubbles grow and then burst, and one thing you learn is that an actual bubble rises like crazy and then totally pops. So we need more credible people to speak out against it. I doubt you really believe this is going to overthrow all of our current financial system. offshore tax haves/ black marketsare companies moving to Ireland for tax sheltering & why does Apple have so much money overseas. This is why bitcoin was created in the first place. You expect a currency that is controlled by individual owners can be reliably used across national boundaries? Once you make this separation in your mind, you can see that Blockchain is a simply a nifty new software invention (which is open-source and free for anyone to use), whereas Bitcoin is just one well-known way to use it. 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. 1) Energy consumption Bitcoin consumes a massive amount of energy to secure the network. When evaluating investment bubbles, it means looking at where everyone is throwing their money no matter how many billions and being willing to say Bull. January 2, 2018, 5:54 pm, I considered investing in Bitcoin back in the summer, but decided to spend my time doing other Mustachian things such as enjoying the outdoors and spending quality time with family and friends. BigTasty1212 Even if you assume block chain currency will replace all gold, which I do agree with you is a bit of a pipe dream, how do you know which one? Margin of Saving It doesnt mean they are in bubbles at any price. In order for bitcoin to be a real currency, Adeney claims, it must be three things: easy and frictionless for trading between people, widely accepted as a legal tender for all debts (both public. It a high-tech form of protest. Guess what, we can automate all of those jobs with cryptocurrencies. But with 6-7 big mining players who dictate which fork of bitcoin to mine, the value of BTC or BCC or Segwit or whatever else comes, I have no faith in the value of BTC. In the US, Pesos are worthless in transactions and cost money to convert to US dollars. Is it likely worth closer to $0 than to $20,000? But its not some spectacular Instant Trillionaire piece of magic. The ones that take off will likely be govt created versions. Some companies are already testing it in main net as well! Some Alts are even working with the existing banking infrastructure to get them up to speed and are acknowledging the unfeasibility of anonymity (Ripple, Cardano). What value is there? My mother in law collected beanie babies and I had the pleasure of looking up their worth this Christmas back hometheyre about $5 each and I will owe eBay 10% + shipping. Bitcoin (aka CancerPills) has become an investment bubble, with the complementary forces of Human herd behavior, greed, fear of missing out, and a lack of understanding of past financial bubbles amplifying it. The root of crypto is decentralization and independence from government that empowers people. Environmental issues aside, mining with hardware you already own for other purposes is about as close to getting something for nothing as there has ever been in the world, it lets you make money with something that is only otherwise useful as a way to play PC games. I dont know that page very good, but I think that answers this question ;). An example for this would be Ripple (like you mentioned above) which is working closely with banks to make international transactions better. Appreciate the term scarcity. Or the cars people use to haul that stuff then. Do you fault coffee or corn or wheat for being non-productive, or do you appreciate them as goods, at an appropriate price? also remember while the market cap is $230bn at least 20% of coins are lost from the early years. It isnt enough to live off of, but its definitely nice to have a net $500 or so in my pocket at the end of each month. A large proportion of other coins are long term holds. 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! 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. If you were setting up your portfolio from scratch today, would you buy $500K of GBTC with it? Also, bitcoin lacks value in Kenya. Amazon has a stated strategy of no profithow does one price that? Blockchain is simply a nifty software invention (which is open-source and free for anyone to use), whereas bitcoin is just one well-known way to use it. Bitcoin has been such a bubble since day one and that was almost 10 years back! Yes, its unstable, and you wouldnt say trade it, but as a long term investment it has been proven itself. Mr. Money Mustache shares his opinion about Bitcoin. Long time reader, first time commenter (ha). I dont mind people investing in Bitcoin because its not my money. Pete Adeney is the man behind the money mustache, and he's full of great stories and advice. The value of a blockchain is its immutability, derived from its decentralization. However, cryptocurrency is what incentivizes the network to secure a blockchain, so theyre two sides of the same coin. While cryptos are new, they also dont meet the needs of traditional cash flow analysis but for a new asset class but just because its new doesnt mean its a bad idea. This is a non-sarcastic answer: The same could be said of buying a Powerball ticket every week. January 3, 2018, 12:41 pm. Will it help me achieve my financial dreams quicker? For one, your irrational hatred of gold, whose function for human beings you do not seem to understand. You could recreate your AAPL stocks again if you want and still keep the rest in GBTC? And then follow that thread all the way back to the fact that the future blockchain(s) all of these future uses are built on are going to be continuations of the most valuable blockchains of today because valuable blockchains are a prerequisite for the data integrity required for high value use cases. We have been in an expansion (the weakest one in US history) for almost 9 years. Also true. Firstly, if Jihan is that rich, its probably because he doesnt spend his money. No difference there. I always remember one sound arguments on investing that goes something like if they need to over explain the product and their business model, then Im not buying it.. Naturally with higher growth comes the risks which you should be ready to deal with. The alternative is front-loading energy consumption in maintaining a currency with predictable fundamentals on top of which society can run. If I buy and hold a share of S&P500 ETF for the rest of my life, I will earn back the share price in quarterly dividends eventually. January 2, 2018, 6:30 pm. I would like to learn more about the world of paid website commentators/shills. January 3, 2018, 1:08 pm. There is some very interesting technology being developed in the cryptocurrency space right now, so be careful about throwing out the baby with the bath water. And to your last point Lightning network will be cheaper? Dont count on there being a greater fool to take this sort of investment off your hands. They know him as Mr. Money Mustache -- a gentleman who retired at the ripe age of 30 without a million-dollar salary. Its absolutely astounding how the general (pretty darn) intelligent public cant tell the difference between an real asset vs an investment. November 20, 2018, 11:56 am. That is what people said 1999/2000 for the dotcom bubble. The cryptocurrency is the glue that holds the system together. Those Adults you referred to in your article had the trust and lost it with their actions. Perhaps its the utter lack of any regulation that baffles me, because blockchain I do kinda get, which is why I did put some money into IBM (yes, very un-Mustachian) after reading about their auto-encryption developments and its applicability in protecting personal info and consumer data. Big banks get crushed, millions of americans were underwater on their homes and forces to foreclose and then they get a bailout from the US of A paid for by yours truly, the average american tax payer. Or grid power in general. I buy bitcoin with the expectation that bitcoin will solve the problems it currently faces and become more widely accepted thus increasing demand driving up the price. Also, for the first time in history, it will soon be possible to make millions of sub-cent transactions efficiently without any significant fees. Because if youre going to be an evangelist for anything, it needs to be purely based on the underlying merits, not what you hope it will do for your personal fortune. That is something very valuable just like stocks are. Gold is not an investment, but it is an excellent form of money. Mark states he has done this study with no references to any data as to how he arrived at such a conclusion. Comparing bitcoin to tulip bulbs is intellectually lazy or deliberately misleading. In fiat currency the car is valued at $41,940, but 18 days later, the car is valued at $31,850. MMM, you cannot call Bitcoin Stupid and then go tangentially into an Utopian discourse. This separation is important becausethe usefulness of Blockchain is the primary justification people use for the big dumb Bitcoin lottery. But I think you meant to write apologize on behalf of half of humanity. The other half of humanity has no internet access at all (internet access just eclipsed 50% of the worlds population this past year), and thus they should not bear any responsibility for the cryptocurrency craze. 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. Mr. Money Mustache is another veteran personal finance blogger. ), bastringue Adney's first tip is to change how you look at the prices of what you buy. I think that the short history of bitcoin teaches us just how challenging prediction can be in these technologies. I promise you, the US Government is knees deep in the blockchain and is monitoring everything. (see: Long Island Iced Tea Corp. becoming Long Blockchain Corp.). Time will tell. You made an unsupported claim. Shut up, just send me $100 via PayPal and Ill send you a bag of my fingernail clippings. Een of andere blog . This might be normal for an era such as this, where the growth is coming from real tech companies instead of widget makers. The fees are incredible. I understand the concept of having an idea, building business around it with angel investors and later going public where you and I can invest but I dont understand investing in something like XRP. Then they go on Twitter and demand that Mr. Money Mustache apologize to his followers for telling them that speculating on future frisbee prices is not a good idea. In all fairness, cash USD is also used for illegal activities. In a sense one could swap bitcoin to USD and the article still stands. Watch on. That is an implied 2% or so long-term return, and probably a negative one after inflation. Satoshi, while extreme in his views, watched the housing market collapse due to the fraudulent behavior of the banks and the government that backs them. 3) If you are retired, with enough to last you the rest of your life even in cash, then you have eliminated most risks (market crash etc) but not all- the currency you hold your wealth in can fall greatly. Remember there was social media before Facebook. Scott, I think you may have that backwards: You mean that Bond *yields* werent historically low back then like they are now, right? Thanks for sharing your opinion! Why do you think so? MMM has been writing quality PF content for years. I enjoyed this analysis by Aswath Damodaran, a thoughtful investor and Professor at NYU school of business. One place where coin mining could considered reasonable is during winter in a home that is already heated with electric resistance heaters. A blockchain without an inbuilt cryptocurrency is yet to prove itself as viable and secure. I am not a millionaire either or have any heavy investments in any of this and I am not certainly looking to grow my investments by commenting on a blog, of all places! Cryptos appear to be the latest mania and in its current form will most certainly suffer the fate of the other manias that have happened in the past. All this bullshit about backed by faith and credit of my country goes out of the window when currencies die someday. Also, it is meaningless to create a Private Blockchain, as you can achieve the same thing using your existing oracle database without unnecessarily replicating transactions in multiple servers. Personally, I disagree that speculating is inherently bad. The general trend seems to be accusing me of not doing enough research, even after I dug into this stuff pretty deeply for a long, long time. It is subject to crazes and manias. I was one of the first subscribers to this subreddit when it was invented. For a shortcut to understanding good investing, you can also simply look up Warren Buffets thinking on almost any topic hes careful enough about offering opinions that by the time he makes a statement on something, you can be pretty sure it will be among the best answers out there. Take the decentralization, the trustlessness, the miners or the currency out and you throw the immutability out. This part of it is ideological to me: You Must Earn Your Money By Creating Value for Everyone. I really would hope that MMM doesnt sell out like most social influencers but regardless not understanding the technology is no excuse for spreading fear, uncertainty and doubt about it. Or? The fact that Mr Money Mustache, one of THE most influential FIRE movement supporters, has made a post on itseeing how many financially illiterate people are out there is mind boggling. Thus, they are not useful, and produce nothing useful. Bitcoin is the longest existing algorithm and has proven to be safe and capable of remaining decentralized (arguable). Some newer, better tech has now taken BTCs place here (LTC or any DAG technology). destroy? Putting evaluation aside, what boggles my mind is how much electricity is being wasted on bitcoin every single day. Is the theory that eventually there wont be anymore banks? But coincidentally, after I got my computer engineering degree I ended up specializing in security and encryption technologies for most of my career. Cest la vie. Because it is. While silver and copper has been used as a form of money (notably imperial China, it was a silver based society with gold used as a high currency), golds special attributes has always been seen as a form of value storage and trusted trade medium. Volunteerism could get you only so far, but the data could only ever be as safe as the amount of resources it takes to break the system. That is the right way to think about these things. Its clear from reading the comments that most people dont understand how this works. January 4, 2018, 7:42 am. Id like to address each. We have never in history had such expanding currency supply backed by NOTHING. But thats just the software side (Blockchain). A real, usable currency CANNOT have such huge fluctuations. Having interest rates all the way down to near 0% without a good exit plan should give you some pause how much you want to trust these people. Shiller really just rediscovered it. I do believe hyperbitcoinization will happen in a decade or two. Mr. Money Mustache shares his opinion about Bitcoin. The problems it solves for the billions of people in the second and third world shouldnt be so casually dismissed though. Why not one of the other 1500 cryptocurrencies? Doh! Because An investment is something that has intrinsic value.. Ms. Frugal Asian Finance Now the ball has reached proportions where it could blow up anytime, and people in this forum are talking about the small change like the bubble and P/E ratio in the stock market. It is a good. Mr. Money Mustache on Twitter: "I dunno man. 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. 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. So, I PayPald you the $100 for your fingernail clippings before I got to the part about them going for $70,000. All they can do is to ban and stop the exchanges. It really starts to stink if it is left unattended to. January 4, 2018, 2:48 pm. What is the US Dollar pegged to? Then it started falling as people cashed out. Say I trade you a car for 1 bitcoin on Jan 8. February 21, 2022, 8:04 am. A boy named Sue dont understand why you say it will cost more? Retweet. It will NEVER happen. Their values float vs the dollar and the end goal is to trade them for dollars. I linked to Aswath Damodarans video on my Bitcoin post also. As far as Im concerned, this is the final word on Bitcoin. Soon, they will be on the brink of bankruptcy and you will be able to purchase all of their stuff at a discount. In this video from Motley Fool Live, recorded on Feb. 23, Adeney joined. But if it goes down, I wont put anymore money into it. Blockchain isnt just a software protocol, the algorithm guiding it doesnt have to be open source, some cryptoassets pay the miners for securing the network through concepts such as proof of stake and delegated byzantine fault tolerance, some networks support decentralized applications with actual potential and have intrinsic value. Read through TomTXs posts below Michael and you will get to know who started. Doubly so because it is now so broken by its development team that it is perhaps the only cryptocurrency that I know of that doesnt even work as currency. Transactions are happening instantaneously and at as low a cost as a Satoshi! If I add your state debt and unfunded liabilities, US is BANKRUPT! The $16,728 Social Security bonus most retirees completely overlook. Andre Kostolany. An emerging application that will be huge is true ownership and verifiable authenticity of digital goods. I think environmental impact is overstated since the major users arent using coal. Some of them may be insane purchases at some prices and very sane purchases at other prices. Michael This will be a fun article to read in 10 years. Human Kind has never had the opportunity to truly own their money ever, and Bitcoin and Cryptocurrencies are the first time we even have that opportunity. LennStar Mining is only one arm of this whole thing and CANNOT hijack Bitcoins, and that is also why the Bitcoin community refuses to increase block size randomly like Bitcoin Cash, to give the miners any more importance than they deserve. The most useful comments are those written with the goal of learning from or helping out other readers after reading the whole article and all the earlier comments. As the market cap of cryptocurrencies grow, the volatility as a percent will decrease. So you are further wagering that Bitcoin will literally supplant the USD as the world medium of financial exchange, and frankly, that is kinda bonkers. Tulips anyone? People fall in love with works of art. Any efficiency brought to commerce through blockchain technology are very likely to show up as increased dividends from index funds. Millions of people streaming interactive video games. Maybe the currencies will be useful to, but the really useful ones will be the ones designed for some purpose. Bitcoin is a nascent technology and will evolve with time. Congratulations, it sounds like you gambled and won. Wow, you really have no idea how hydroelectric power works. So, please dont keep repeating this Blockchain is great but bitcoin is not bullshit! I am so happy to see this article! I even read about these things for fun, with Simon Singhs The Code Book and the Neil Stephenson novel Cryptonomicon being particularly fun shortcuts to pick up some of the workings and the context of cryptography. If you could have somehow monetised the Internet in 1992 and sold it, imagine how rich you would be right now? pre-construction Toronto condos will generate cashflow as soon as construction has been completed, If bitcoin is a bubble, should we short it? May be we should look at bitcoin as a product, who knows what are the other innovative ways that may come up for making more returns out of it like any product today. 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