Id argue strongly that its a good thing. And society is comprised of them, and nothing else. that would be a PE ratio of 1. Dont you find it strange, though, that my grandfather used what you call toilet paper to buy his first car, and his first house? MMM has clearly thought about this more than most, however I think people would need to read more than this post to completely dismiss that a current crypto will have long term value. Ms99to1percent 100% agree. > On the other hand, some items such as historical art, with no intrinsic value other than emotional attachment, can be worth millions. He said Bitcoin is stupid and speculative. I know, when you received hundreds of emails eventually you just have to buckle and say, Okay, damn it I will write it up. The value of bitcoin is very far removed from any sensible fundamental valuation, and the thing driving up the price seems to be a common sense that it will be worth more in the future. Fired & Free Lottery tickets doesnt go up in value consistently over a period of almost ten years. Ignore this utterly irrational FUD and embrace the digital world. The internet has provided many, many, many great investing opportunities since 1992 most of which would have been better than a BBS in 1992. Plus $20 to run the transaction. 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. !, What is money? youre supposed to pay taxes on gains in crypto too . Ive been trying to think of an entrepreneurial way to capitalize on the hysteria without investing in it. In one of my IRAs I bought some AAPl in 2009 for $28k. Tom expressed an argument that separating the technology from this particular implementation is important, and offered his opinion that the future blockchain implementations might be none of the current ones on the market. People are likely to disagree on whether this is a good thing depending on their worldview. Say I trade you a car for 1 bitcoin on Jan 8. This is not going to happen. Taxation does not give money purchasing power. Bitcoin has just 200 billion capitalization currently. People will release new ones all the time and people invest in them, not because they will ever be useful but because they expect the price to skyrocket. Is this likely to be worth $20,000 long term? Market prices are not set by consensus. Except of course, for all the others. We will see you on the other side of the crash. Thank you! But it is a valuation technique that goes back practically as long as there have been stock markets.). Ive never heard of anyone investing 100% of their net worth in a single moment in time that could get penalized for that type of freak market condition. A lot of stocks never pay dividends though. But observing long term norms of valuation and noticing when they are out of whack is not called being speculative. 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. 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. That is why I also invest in government bonds. Update, three years later: Since I wrote this, the imaginary price of Bitcoin has continued to be all over the map it initially dropped over 70%, then it went back up many hundreds of percent, over and over. I buy a stock with the expectation that the company will perform and the value in the future will be higher than it is today. Me personally, Im betting on the buck. Probably the same will happen again. I would say, Probably the same would not happen again. Let them hold on to their fiat currency if they like to. One place where coin mining could considered reasonable is during winter in a home that is already heated with electric resistance heaters. Ive been thinking of doing just that.. And then I put it off for a few weeks, and the price jumps up exponentially. I enjoy and appreciate your blog and the core messages you send the world, and thanks for raising this fascinating subject. I totally agree with you on bitcoin. ..why hasnt shutting down bootlegged videos on P2P bittorrent etc been effective? Thanks for sharing your opinion! I advise you look at the 10-year PE ratio. The problem with speculation is that the few that get in early certainly do make hordes of money at the expense of hordes of people that get in when speculative mania is at its peakinevitably to crash at some point. WHY??? Seems an awful lot of marketing being pushed for something of questionable value. One way or another, at some point, the cycle will end, and the cycle will start again. One of my coworkers at MMM-HQ works for nVidia, and part of his job is hunting down mining thieves who comandeer virtual servers (cloud computing) to mine coins on their behalf. Individuals getting rich off speculation doesnt mean its not speculation. Peter Mevoin For those of us who live in USA and use the USD for our currency, what does it mean to trust that government, which is currently breaching 19 TRILLION dollars in debt (https://en.wikipedia.org/wiki/National_debt_of_the_United_States) while simultaneously reducing its revenue stream (tax breaks for everyone). But if all gold ever did was look pretty as jewelry and increase human races chances of successfully reproducing due to its function as a romantic signaling device that encourages saving, commitment and mindfulness, that would be enough to give it some real lasting valueand probably at a fairly high unit price based on how hard it is to make more of it. They may settle to much less, or get close to zero, or they may grow more, no one can really predict this. Justin C Also, saying Blockchain Yes and Bitcoin No is tantamount to saying, Social Media is great but Facebook is not so great, or Internet Search is Great but Google is not Great!!! Even if you are the only one in the room willing to do it. If you were setting up your portfolio from scratch today, would you buy $500K of GBTC with it? Prices would rise, especially if the supply of these pills was limited (just as an artificial supply limit is built right into the Bitcoin algorithm.). I enjoyed this analysis by Aswath Damodaran, a thoughtful investor and Professor at NYU school of business. The problem with Bitcoin, (really all of the crypto currencies) is their value is not tied to anything of value. The NEW, BEST way to absorb all of this monetary wisdom is to subscribe to the newsletter and boot camp using the boxes to the right -> :) If youd like a link, just holler! Saving billions from poverty, war, and the enslavement of banks or the lack of any banking is Altruistic. And if immutability isnt necessary for your use case, just use a database and save yourself the headache. Bitcoins arent duplicable, your fingernails could be replaced by other fingernails and nobody would notice unless they do a mass spectrometry. Great text. A prescient article, but unfortunately, those of us that have investigated Bitcoin and come to the same conclusions(no interest in speculation, possibly completely value-less) must continue to put up with the Bitcoin bulls, and as seen in this comment section, they are extremely bullish. No guarantees that if bitcoin drops that it will ever come back. January 2, 2018, 7:25 pm. But how do you know youre investing in Amazon, and not Pets.com? THIS is a form of trust derived worth. January 2, 2018, 5:52 pm. Note that if you remove any of these essential elements, youve made the system effectively worthless. They cant use these gift cards. Personally, I am out of Bitcoin because it is no longer useful to me. Thus, they are not useful, and produce nothing useful. Barak PazTal Dont know if youve seen JP Searss satire of Bitcoin but I think you might appreciate it. 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. January 3, 2018, 4:51 pm. Anyway, what would he dump it for? No govt is just going to let the ability to control their economy be taken away from them. January 2, 2018, 5:53 pm, Dear Mr. Mustache, I am so sorry you had to write this at all. January 3, 2018, 8:02 am. In short, historically gold is the truest measure of value, the safest store of wealth, and best insurance against fiat money and other manias (see Weimar Republic circa 1934). Bro, we get ityou want to wipe your butt with germ-infested cash. Do you really see that happening? 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 was not as articulate as MMM in this post, but my underlying logic is the same. Worth at least an extra couple bitcoins there. All that the US has done since 2008, is hit the ball further and further down the road while at the same time blowing it more and more with air (read Quantitative Easing). Thats cool. by jlcollinsnh 18 Comments. I can have a stash of cash that is inflation proof just in case the government decides to wildly inflate the currency. They could also plateau until earnings catchup with prices.. I say its value is nil. Hmmm..why not pay in bitcoins if it is so superior? But I did put about $600 in Bitcoin over a year ago. In the mean time, Ill keep selling the bitcoins that I purchased for $30 each at $15k a pop. I for one am lucky enough to participate in the birthing of an alternative financial paradigm so that people have choices. PS: Brent, you write that if earnings dont pan out, stock prices wont necessarily drop. https://www.cnbc.com/2017/12/21/no-bitcoin-is-likely-not-going-to-consume-all-the-worlds-energy-in-2020.html, Biglaw Investor A lot less then the advertisements made for taking those things away from you. Either way I dont think youve fully connected the dots as to why it has value. It is called being informed about reality.. Episode 496: Why Bitcoin is Stupid - Part 1 by Mr. Money Mustache. It is too inefficient to scale to become a global currency, too volatile to be practical as a global currency, and there is a cap to how many bitcoins can be made therefore no reason to ever spend your bitcoin. If youre one of these credible people, please do so in the comments or in a blog post on Medium that we can all read. Please dont take the Proof of Work Blockchain like Bitcoins as the Blockchain. 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. Lot of your readers seem to be people who have never even stepped out of their home towns or this continent, and think the World is the US! Christopher R Young Miners are competing for the job by offering profit sharing and other services. OK, But What if Bitcoin Becomes the World Currency? Gold may be irrational, if you insist that it is. Because reasons, technology and internet! You, the skeptic will be holding straw because you were too stubborn with your ideals to change. If you feel comfortable developing your own metrics with which to gauge coins and want to invest in projects long term, you can. MentalArson Why would anyone do business with a medium of exchange that is accountable to nobody? There is no wealth and no trade without these two things, so you might as well go all-in and trust people. Im fine with crypto but not as an investment. Maybe a couple years from now when the mortgage is paid off and we have some play money/money we can afford to lose. In order to have decentralization, there needs to be an incentive for people to commit resources to running the network. In other words, if you truly need it to buy stuff, and thus you need to buy coins from some other person in order to conduct important bits of world commerce that you cant do any other way. Episode 497: Why Bitcoin is Stupid - 2 by Mr. Money Mustache. Pure Air and a bunch of IOUs that it will eventually default on. This is Part 1 of 2. 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. 2) Volatility the market cap of Bitcoin and other cryptocurrencies is small compared to that of fiat currencies. VTSAX returned over 22% last year. Then Ill stick with what works for me now. No major government will transact in a currency it cannot control. As we know from MMM teachings, safety and security are lies. remittances, credit lending for undocumented people. College, Medical, Cars, houses, Child Care, Stocks, Bitcoin, hell even dining out is all overinflated. Federal reserve banks and elected governments. However, governments and institutions are investigating the uses of some platforms, like Ethereum: https://globalnews.ca/news/3977745/ethereum-blockchain-canada-nrc/. Ive been wondering this too. EvoInvestor That is something very valuable just like stocks are. Only the most weak and fearful people will allow themselves to be stolen from for the sake of mythical national security that comes from trillions of dollars of military spending. He is skeptical of anything that has a tinge of a get rich quick scheme. 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. ): the Problem with calling Bitcoin a Ponzi Scheme. Or sell half of GBTC. Very good article! All I had to do was sell the integrity of my blog for $100 non-bitcoin bucks (via PayPal of course.) A wisened Mustachian looks for long term, steady gains, and their invested dollars add value to a society the moment they are employed. Id love to know what your background is. Great article! 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. January 15, 2018, 11:44 am. MMM calls Bitcoin Stupid and all these things as some kind of Ponzi Scheme! Get out while you can. And pray blurt out as to why it is bad equivocation? The real backing of the dollar is the force the U.S. government will use if its debts are called in. January 3, 2018, 7:20 am. January 19, 2018, 6:57 pm. Also appreciate the utility of sending value to anyone anywhere with an internet connection without asking a middleman for permission doing financial surveillance on you. A Ponzi scheme is a fraudulent operation designed to steal peoples money. Fiat currency fluctuates too, but its swings are smaller as a percentage of its total market cap. Crypto currency as an ecosphere financially has benefited the tech industry dramatically, and if you invest like Mr Money Mustache advises, that means you probably have a good amount invested into the S&P 500. Started by kayvent. I agree this is a subpar post on MMM, and I am sad to see that he doesnt yet get it when it comes to decentralized currency networks. Only if you close your ears and go Na-na-na-na-na. The thing that stopped me is that shorting it is a *pain in the ass*. So buying tulip bulbs is not insane at a reasonable price. So, I use bitcoin to buy stuff with the gift cards from these people. He appeared on the Kevin Rose podcast as well. Facebook is probably the 4th or 5th legitimate social media platform. People who have been trading 100s to buy illegal goods must be making out. I guess Petes point here is that block chain protocol has benefits but bitcoin is stupid. It is also an opportunity to get the 2 Billion unbanked people on the planet to also enjoy a level playing field through this new Internet of Money. Lets get this straight: in order for Bitcoin to be a real currency, it needs several things: Bitcoin has none of these things, and even safely storing it is difficult (see Mt. It takes an open, transparent society that trusts its elected officials to do RIGHT. What a bad article. 15 Replies 10705 Views March 26, 2020, 05:23:27 PM . Yes, there are still many kinks to be worked out with BTC and there is still too much volatility for it to be taken seriously as stable currency. Yeah, I had watched/listened to lots of Andreas stuff as part of the research for this. It is, above all else, pure wealth, other substances, and activities may be valued in gold bullion. Well said, Bill. Yes, this is a function. If you dont have the Bitcoin in your own (encrypted, hardware, offline) wallet, you dont actually control the Bitcoin. As should everyone. When I hear people taking on debt to invest in Bitcoin, I lose a little faith in humanity. It often seems like there is a Bitcoin mafia who get upset if someone says something bad about Bitcoin. Some of my conversations with him inspired the research in this article. People get excited about Bitcoin when the price goes up, but thats because they like making money not because the underlying object has any actual value or usefulness. 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. January 16, 2018, 4:53 pm. Hell if I believed that I would work my ass of taking EVERYTHING I could and putting it into cryptos! How much are these companies worth today? Ive been watching this situation for a few years, and assuming it would just blow over so we wouldnt have to talk about it here in this place where we are supposed to be busy improving our lives. Do we really want a place where youre either an Amazonian or Walmartian? Read through this article for the contrarian view of things: https://seekingalpha.com/article/4134745-bitcoins-path-1-million-bubble-bursting-anytime-soon, Mr. Money Mustache Or? January 2, 2018, 5:54 pm. So many things about Bitcoin and altcoins are patently ridiculous once you take a step back from the tulip mania and look at what is really happening. They know him as Mr. Money Mustache -- a gentleman who retired at the ripe age of 30 without a million-dollar salary. January 3, 2018, 7:32 am. Favorite quote: Bitcoins growth is not based on its technology alone (which, while powerful, is open-source and therefore easily replicable) but rather on the strength of virality, encouraged by the vested interests who held early and invested in marketing it; with no genuine business underlying it, it acquires its (very substantial) memetic potency only from the evangelism of those whohodland preach., David Webbs great explanation: Bitcoin: the Worlds First Decentralized Ponzi Scheme, Preston Byrne again (brilliant guy! Thats a tricky question. No, I am more inclined to trust economic models where the rules are clearly defined and cannot be changed, by anyone, ever. Een of andere blog . BigTasty1212 Yes, that is your ground reality today. Joey Graziano Guess what, we can automate all of those jobs with cryptocurrencies. Some companies are already testing it in main net as well! January 2, 2018, 6:30 pm. Or maybe you dont understand how exchanges work. Some newer, better tech has now taken BTCs place here (LTC or any DAG technology). It seems like youre advocating for scenario #2. Besides, how do you get BTC in the first place? Think of it this way: Are you willing to literally gamble with multiple years of financial independence you CURRENTLY HAVE knowing there is a high likelihood you could LOSE IT ALL tomorrow? To compare with fiat currency, we need to consider fiat currencys rippling effect on society. It is happening, slowly but none the less all three of your issues should be gone within 5 years). Even if you are the only one in the room willing to do it. I agree with Tawcan. Do you fault coffee or corn or wheat for being non-productive, or do you appreciate them as goods, at an appropriate price? You should have just invested in winning lottery tickets instead of bitcoin, they have had a much much higher rate of return. 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