I agree with MMM that cryptocurrency in general is kind of dubious, and that Bitcoin is a particularly stupid implementation of it. This means whoever is buying this paper is doing so despite the fact they are guaranteed to lose money on the investment. Much of this buying has been propelled by central banks which can print their own currency and buy debt indiscriminately. Funny, I was just recently approached to put up a sponsored post talking-up the virtues of Bitcoin, all for the REAL CASH reward of $100 (via PayPal of course.) 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. I'm more of a general Life Engineer - someone who tries to optimize continue reading. Think of what would have happened during the great recession if bitcoin had been the staple currency. November 20, 2018, 12:00 pm, so other storage is NOT needed sorry, my phone likes to randomly delete words, Tor Kristen Haugen Cancer-Away, CancerBgone, CancEthereum, and any other number of competitors would spring up. I was tempted by the neat aspect of being involved in this thing I knew would have some kind of future value blockchain. January 2, 2018, 6:23 pm. Today, Jan 26, at 11:30 AM, its trading around $31,850. :) If youd like a link, just holler! I dont know, why gold and not platinum or palladium? The real backing of the dollar is the force the U.S. government will use if its debts are called in. Or when I have to go to the grocery store to buy milk and theres the sign that says NO POWER, CASH ONLY and my toddler is crying for milk, Im going to pay them in cash. Gold has the 2 most important properties to make it function as money, scarcity and intrinsic value. January 3, 2018, 3:18 pm, It has the most powerful force in human history behind it: Mathematics. Federal reserve banks and elected governments. I have been hearing Bitcoin is a scam and a bubble since the time it was 200 bucks! Its like saying they are investing in lottery tickets. LennStar Anyway, if your argument were correctwhich it partially isthen you of all people should be against fiat money systems like the US dollar in its current form. The rise in bitcoin represents people waking up to one delusion (false paper valuations) and unfortunately accepting another delusionthat digits are more valuable and trustworthy than paper. Thats a really bad equivocation. rollie fingers That is about a 24% drop in 18 days. And EVERYONE is posting, podcasting, and reporting on it. If cryptocurrency takes off, its much more likely that the winning one hasnt even been created yet, if history holds. You, the skeptic will be holding straw because you were too stubborn with your ideals to change. China is also a leader in renewables space. However, in 2004 when Facebook was being launched it was looked at as a funny little friend site. but remember short positions have a possible infinite downside while buying the asset has a possible infinite up side, If you do this youre still speculating on a market that cant be understood right now. If you want just one reason it is that governments will not allow it. Evidently you werent invested in Pets.com and other rising stars with no hope of ever getting profitable. Is having 1-2% of my overall portfolio in cryptocurrency stupid? No, not to me. What you are describing is called a silent crash. No one can say for sure whether or not the problems can be resolved and a highly transactable and stable currency may emerge. Same with internet search: remember AltaVista, Lycos, Dogpile? Many African countries have central banks. So I also read a lot about investment bubbles and fundamentals and how to tell those apart. I read somewhere on Twitter (cant remember where) that you can use anyone who uses Blockchain as a proper noun as a heuristic for how little they know of the space. Why not one of the other 1500 cryptocurrencies? Also, bitcoin lacks value in Kenya. Sorry*blockchain* may be worthy of accoladesNOT bitcoin. Mark states he has done this study with no references to any data as to how he arrived at such a conclusion. =. Id like to apologize on behalf of all humanity that you were compelled to spend some of your life energy on that. It is an honor to be doing this session! Mr. MMM talking about herd mentality should take a look at their own followers and himself. Christopher R Young Tulips anyone? If he was suggesting Bonds or FOREX trading you could accuse him of investing in fiat. > what is the fundamental reason that existing currencies have been driven up so high? If you are disgusted with the mining costs of Bitcoin you should be but the fact remains new inventions like RaiBlocks has made cryptocurrency frictionless and without mining or fees with transactions at over 7,000 per second. Overall, it is just as likely to go up as it is down, especially in the near term, and is best to avoid all together unless you just love gambling and dont care about losing money. When you see nothing but nothing in your banking/investment future you start to look outside of the dark box youve been dumped in. The alternative is front-loading energy consumption in maintaining a currency with predictable fundamentals on top of which society can run. However, there are a couple things you are wrong about here, and are worth commenting on. And of course, the purpose of this whole aside is that I want to establish credibility with you, so you will give this article some consideration. Get listed and sell some shares. Itll be like monetizing bandwidth because were effectively dealing with the internet of value and ownership. They probably also didnt like my stated aversion to cyptocurrency and desire to stick with boring real estate. All I had to do was sell the integrity of my blog for $100 non-bitcoin bucks (via PayPal of course.) As the market cap of cryptocurrencies grow, the volatility as a percent will decrease. But not possible with Bitcoin transaction costs for BTC are up in the integer $ range and can take hours. 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. Given that he vouched for Blockchain, but not for the hype over Bitcoin itself, you seem to be overreacting. Many are trying to perfect it but until there is a clear winner, different ones will emerge. Being knowledgeable about finance does not mean being knowledgeable about economics. Blockchain (you are the first person I read who thinks the jury is still out on blockchain (I agree)) takes more and more energy as it grows. January 3, 2018, 7:23 am. A bitcoin is not an investment, just as. Cryptos may be the money of the future, but there is nothing sane about its rise this past year. Read your history, it happens occasionally even in the great USA (a few times actually). Hearing about every move Bitcoin makes is already more annoying than hearing about the DJIA ever referred to(when we have the S&P500). Some companies are already testing it in main net as well! Danny Livewire While I agree with your sentiment about Bitcoin I have been echoing similar warnings to friends and family since its mid-2017 breakout to $2k I think several other cryptos are definitely deserving of a portion, albeit small, of an investment portfolio. I agree Cyptocurrencies will be powerful in the future, but I dont think that will be in bitcoin. LOL. Something only has value if ppl place a value on it. January 3, 2018, 5:48 am. Inexpensive computers thousands of times more powerful than the best you could buy for $10K in 1990. Thanks for your perspective on an interesting topic. Shorting bitcoin would just be speculation in the opposite direction. Hell isnt that why we are here in the first place? as well as all legal forms of private sales (ie. We can effectively automate trust. Undoubtedly the bubble will burst or mining difficulty will increase, but Ill be able to sell this supercomputer to some nerd play World of War Craft on. Is Bitcoin eventually going to replace the physical green back dollars and coins in our pockets? . But at least 98% of MMM readers do not live in countries where this is an issue. It also helps to have wise, centralized humans (the Federal Reserve system and other central banks) guiding the system. Gold and tulips and coffee and salt and any other good at a fair price, however, are an entirely different story. A boy named Sue Aside from what it can do, cryptocurrency guarantees an economy with very different fundamentals than government-issued currency because 1) its supply is finite and 2) no central authority controls distribution of new supply. You are a noble man ! meep er Looks like I made a big mistake then. Why? The Money Mustache Community . :), https://twitter.com/elonmusk/status/941500121564332032, farmecologist In 5 years, I probably expect people to be cracking jokes on this shortsighted article. There are sure going to be a lot of people gnashing their teeth and rending their garments when the bottom falls out of this market. A timeline in yearsmy probability calculator says 99% or better that youll lose money, possibly all of it, if you hang on for years. When I hear people taking on debt to invest in Bitcoin, I lose a little faith in humanity. Value is subjective; not all speculation is irresponsible; gold and other odd stores of value have novelty effects. When the common person does it, it can cause very big problems. > There is a high chance that Bitcoin doesnt remain #1 forever because there are so many cryptocurrencies, many of which with very different applications, including some that arent even based on blockchain technology. Thank you Jane, I have been waiting for someone to point this out! Cryptocurrencies are extremely risky. But thats just the software side (Blockchain). Besides, how do you get BTC in the first place? Hi Financialindependence.. I for one am lucky enough to participate in the birthing of an alternative financial paradigm so that people have choices. Only if you close your ears and go Na-na-na-na-na. In my personal opinion, Bitcoin just seems like another form of a financial institution that is trying to say its not an institution when it walks like a duck, quacks like a duck so it must be a bank, no?! January 2, 2018, 6:06 pm, Agreed! Definitely not a speculative bubble. But the fantasy that the world will switch to Bitcoin so you'll need it to conduct commerce so you better get yours now is just totally implausible to me. The sooner we debunk the myth and come to our senses, the richer our world will be. Its diversification. January 3, 2018, 12:58 pm. 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. I agree with you. Bitcoin is not a bubble, its the pin :), Not looking so good right now I think your point about time wasted is very accurate. Bitcoin is actually a saviour that provides the world an opportunity to get out of total mess without fighting a WW3! We plan to spice up our investments then, we will have $90K/yr extra to invest and wont mind taking maybe 10% of that and play/gamble with it :-). Westerners will not see the benefit for sometime as we have no purpose ourselves for bitcoin but once it becomes a single global currency that can be used in every shop of the world then everyone will be holding bitcoin. The bad news is that this means Bitcoin is going to keep wasting more and more electricity as the bubble goes on, and it doesnt matter that no one uses it anymore. The Money Mustache Community . Your comment is timestamped January 7, 2018. The timestamp on these comments is pretty helpful to see who was right! ), but not because they did anything useful or produced any money and value to society,. Im just curious what your motivations are for all your comments. Not only stocks, but real estate and bonds are expensive as well. All points noted. So long as you have the self control / personality to only invest what you can easily afford to lose and to not let it consume your time and energy (not true of most people but more so mustachians) then there seems to be a potentially large upside. It doesnt mean they are in bubbles at any price. Michael 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. This is exactly the same I have a dream. Bitcoin is not stupid per se. im not some conspiracy theorist but I do see the value in a global decentralized currency (none of which is tax evasion btw, Every major exchange currently advises and provides you with a modified 1099-INT for you to file taxes, the IRS as well recognizes bitcoin as owning property and implicated short/long term taxes for owners). 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. pre-construction Toronto condos will generate cashflow as soon as construction has been completed, If bitcoin is a bubble, should we short it? Right now a nascent currency like Bitcoin is not able to handle the transactions in a similar fashion due to limited bandwidth, and people like you point that out and say, look it cannot even handle the current level of transactions how is this thing going to replace Visa or MasterCard? Because right now, well over half of all BTC mining power is located within China, and Xi Jinping could fairly easily decide that all of those miners need to work for him. Government-issued currencies have value because they represent human trust and cooperation. If you have the courage. 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. Money only has value if it is stable and trusted. Ryan Thomas 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. People are looking for something that is undervalued to put their money towards. On the other hand, if youre cool with allowing remote-controlled robots to kill 3rd world women and children in your name, then keep using only US Dollars. Its not as simple as you make it personally. Why? Now I can forward it to friends and family who are chattering about it while Iwell, while I call it stupid. Tulips? January 2, 2018, 6:01 pm. Tim Beck Most pass of judgements without leaving their cushy little towns in the middle of nowhere in the US! According to the index, the amount of energy consumed by mining bitcoin surged about 26 percent in November alone and now totals nearly 36 terawatt hours, enough energy to power about 3.3 million homes. It is subject to crazes and manias. Dr-In-Debt I am beginning to get it Mattheus. The vast majority of the companies trying to monetize the internet failed. We dont need to prey on their consumerism also. Absolutely, so Ill proceed with it. When I hear someone claim an investment in Bitcoin I end up smiling politely and correcting them on one point. January 3, 2018, 1:43 pm, Apparently, Amazon pays people in other countries with Amazon gift cards. December 10, 2018, 5:45 pm, Dang! They will have to learn the hard way. Its speculation, pure and simple. It then proceeded to burst in spectacular fashion just ahead of the financial crisis, plunging all the way back to $30 before rebounding. Educate yourself on Lightning Network or layer 2 protocols of Bitcoin. The blockchain is only 1 part of Bitcoin. The thing that stopped me is that shorting it is a *pain in the ass*. February 19, 2018, 7:36 am. 26 Replies 18313 Views March 27, 2020, 01:47:17 PM by talltexan: How do you press your kids to learn money habits? Bitcoin is extremely risky, but it is not dumb and its value is also based on consensus. Networking. January 3, 2018, 7:13 am. Thats a lot of electricity that can be used to power 3.3 million homes wasted. Also, what is the source of that study? Even more troubling, an estimated $11 trillion of government debt now trades at negative yields. What if you want it for yourself, or have customers or distributors that do? In the US we call it the full faith and credit of the United States. I also remember that bubble..sure a lot of things moved to the internet but it had to crash..hard first. Bitcoin values are delusional. Might want to polish that up before going public again. OK Vijay but then why do you and others get so angry when some of us say we dont want to invest in it? I dont know that page very good, but I think that answers this question ;). Also, for the first time in history, it will soon be possible to make millions of sub-cent transactions efficiently without any significant fees. BigTasty1212 I just wish it had come out before the holidays so I could have just pointed family members to it instead of attempting (unsuccessfully!) Rick Gardner Amazing. Some guy on the internet That shit is gonna go way way up to 50k! Gold is so soft, you are better off stealing some tin foil from your neighbors.. and burying the potatoes under the fire! As such, its an awful means of trade. Your question was answered. Regular money has nothing behind it either. January 2, 2018, 5:52 pm. January 3, 2018, 12:48 pm. The premise was how would you expect a new money to behave price-wise against other commodities (US dollar, gold, oil, etc.)? But nobody seems to be able to put together a real reason why Bitcoin isnt the next Pets.com, Uberartist Stefan Brand Like every state currency, it derives its worth out of the fact that the state says you can *always* pay your taxes with it Hurry! Do you really see that happening? Consensus destroyed. https://www.cryptocompare.com/mining/calculator/btc?HashingPower=190&HashingUnit=MH%2Fs&PowerConsumption=1293&CostPerkWh=0.12, Matt Stephenson So with all that in mind, I wouldnt worry too much about the current Shiller P/E number. For those saying specific instances of cryptocurrency do not have long-term potential (Bitcoin, Ethereum, Litecoin, Monero, etc), the network effect is a force to be reckoned with. 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. 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. Alright, time for a thought experiment. Thus, they are not useful, and produce nothing useful. If THAT does happen (BTC=100K), it will prove once more that BTC is not a currency at all. But yes, you should think about getting out, since you have enough now. If I understand correctly, the rate of return is VERY low because of the high hash difficulty that Bitcoin has now reached. Poor people have never initiated a tax loophole. This is the greatest use of human energy and capital the world has ever seen. 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. 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. It seems like youre advocating for scenario #2. Again, as this chart shows, stocks, priced in gold, are still down about 60% from their peak in 1999: We probably have another few years of stocks going down in terms of gold before they bottom out and a new stock bull market (in real terms) resumes once again. They could also plateau until earnings catchup with prices.. Doingone transaction burns 215 kilowatt-hours of electricity, enough to run the entire MMM household for more than a full month, or to power an electric car formore than 800 miles of driving. This instability just further proves that it would make a terrible currency and a recent study reveals that about 95% of even the trading volume is fraudulent. Here is one interesting chart among many that shows exactly that: Even things that can be good investments can be in a bubble. Complaints and insults generally wont make the cut here, but by all means write them on your own blog! 3 years and 1 week later. I dislike all this vitriol given to speculators when they are fully valuable members of an economic system. That is bullshit written on toilet paper by a Private Bank called the Federal Reserve, owned by unscrupulous bunch of elites like your JP Morgan. 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. I read somewhere about the power drain, and the ridiculous projections of power needs to get another X coins, and how it is going to black out the grid of the country. Right now, I think that this space allows people to be their own VC. Allow it time to grow to say 10 trillion, and then let us debate on stability. Mr. Money Mustache's argument easily boils down to the soundbyte that "bitcoin's price is fundamentally unpredictable, which makes it a terrible investment decision.". Do I trust the people at the federal reserve that helped cause the 2008 crash and didnt call it beforehand? But there are interesting aspects to the technology and what it could develop into. So yes, blockchain = good bitcoin=maybe? I couldnt find anything indicating countries are using bitcoin as a reserve currency. Mr. Mustache. Comparing bitcoin to tulip bulbs is intellectually lazy or deliberately misleading. Let me know which one consumes more energy overall? As the legend goes, an anonymous developer published this whitepaper in 2008 under the fake name Satoshi Nakamoto. You respond with an implied personal insult. Some of my conversations with him inspired the research in this article. Im not saying Bitcoin is the saviour of USD imperialism. That is why I also invest in government bonds. Look at all the nations that proposed a EUR based oil exchange, all overthrown (no, not saying those were shining examples of humanity but the prioritization is simply correlated enough). (FWIW, CAPE had actually been studied in academic settings many, many decades before Shiller, and was a favorite metric of the legendary Benjamin Graham in the 1920s and 30s. I dont think so. El Penguin Not the only reason, but if earnings dont pan out, stock prices wont necessarily drop. But its not some spectacular Instant Trillionaire piece of magic. Youll note that without prejudice and emotion, he describes the actualuses of the technology, without getting intohow we should all place uninformed bets on its future value. Also, not all crypto currencies use PoW to mine / verify transactions. A bit frothy? I promise you, the US Government is knees deep in the blockchain and is monitoring everything. A real, usable currency CANNOT have such huge fluctuations. Vivek Prasannan There is no wealth and no trade without these two things, so you might as well go all-in and trust people. Heres a great description of the whole scene by Chain CEO Adam Ludwin. I think I found the mistake in your reasoning. I argue that fiat currency is inefficient because its supply is always increasing. All they can do is to ban and stop the exchanges. Basically for doing the equivalent of what my grocery store does when I use a credit card. Have you ever taken a look at how correlated the stocks of an index were? Its funny reading your article because while Im a true believer in bitcoin as the internet of money, I feel pretty much the same way as you do about 99% of the rest of crypto. The strategy isnt sustainable. January 5, 2018, 11:59 am. A stock is not a ticker symbol; it is a stake in an underlying business. Ive been watching this with fascination as its been a while since we have seen a hype and crash investment (because we only know which way this is going to go, right)??? You will also have to pay a fee to transfer from the exchange to your wallet. 3. Doesnt mean you cant speculate to help you get to FIRE sooner though. While were on the topic of bubbles, it seems the truly gigantic bubble in the world isnt bitcoin, but rather the global debt market. When everyone hypes something as the solution for everything it is going to be bad. Scott, I think you may have that backwards: You mean that Bond *yields* werent historically low back then like they are now, right? It needs to expand with the supply of goods and services in the world, otherwise we end up with deflation and hoarding. 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.. How many decades of using toilet paper as a useful medium of exchange are required before you reevaluate your position? Why? Thanks for saying this MMM! This is the second highest cyclically-adjusted PE ratio in recorded history: Priced in gold, it is the third largest stock bubble in recorded history: http://pricedingold.com/charts/SP500-1880.pdf. I do believe hyperbitcoinization will happen in a decade or two. 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. Congratulations, it sounds like you gambled and won. In one of my IRAs I bought some AAPl in 2009 for $28k. Yeah we could all gamble our way to FIRE, this week bitcoin, next week slot machines, poker, etc. Why would the author call this act stupid? It will NEVER happen. Again, this is really only true for FIAT CURRENCIES. Adeney retired from his job as a software engineer in 2005 at age 30 by spending only a small percentage of his annual salary and consistently investing the remainder, primarily in stock market index funds. She works as a school monitor and the kids have an area of the forest next to the school to play in. You made an unsupported claim. ie beauty counter for nerds. Now, with that moral sermon out of the way, we might as well talk about why Bitcoin has become such a big thing, so we can separate the usefulness of the underlying technology called Blockchain, from the mania about how people have turned Bitcoin it into a big dumb lottery. 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