Why I’m Putting All My Savings Into Bitcoin
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Why I’m Putting All My Savings Into Bitcoin
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Re: Why I’m Putting All My Savings Into Bitcoin
#2Take away the interesting technical aspects, and BitCoin, to me, looks like a pyramid scheme.
The BitCoin economy is like a small country with a novel monetary system. Now, a big country, say the USA, wants to join because it sees benefits in that system. Normally, such a transition would have the USA print new money. In this case, the answer to "OK, sounds useful, how do we introduce this kind of money into our economy?" is not "together, we pick an exchange rate, then you can 'print' a BitCoin for every X dollars you destroy", but "you buy it from us, who got there earlier".
There also are huge problems integrating this "nobody can check where money flows" scheme into current economies. Income tax? Forget it. Indirect government control over inflation and interet rates?. Forget it.
In the end, I think some of the ideas of BitCoin may live on, but I do not see it live for more than a couple of years. Meanwhile, it will make quite a few people rich.
Re: Why I’m Putting All My Savings Into Bitcoin
#3This violates two simple, and obvious, tenets of investing:
1. Don't put all your eggs in one basket.
2. If it sounds too good to be true, it probably is.
Re: Why I’m Putting All My Savings Into Bitcoin
#4I recommend reading up on the MMM company.
http://en.wikipedia.org/wiki/MMM_%28Ponzi_scheme_company%29
there is also a Russian movie called PiraMMMida that came out a few months ago, which is the fictionized version of history. Now that movie, is pretty much exactly how bitcoin tends to be covered by the fanboys.
And as the movie points out, it comes down to pure greed, people give up real money in order to buy worthless paper, which they are hoping to unload before it depreciates...but they never do, because they keep seeing big returns...until the point when the whole "economy" crashes and you are left with nothing. An important point, is that these people knew that the currency was worthless, but because of their greed they continued buying it up and promoting it to others.
Re: Why I’m Putting All My Savings Into Bitcoin
#5A few points:
1. There is a difference between "This is useful, I will use it," "This is useful, many people will use it, I think it is going to succeed," and "This is useful, I will invest in it." I have recently started using a text editor called Byword. I quite like it. But I am not rushing out to invest in it.
2. There is also a difference between "I will invest some of my money in it," I will invest all of my money in it," and "I will invest all of my money and all of the money I can borrow in it."
If we take a thousand people and instruct each of them to invest their life savings and everything they can borrow into a single, randomly chosen investment, some will get very rich, richer than anybody who avoids borrowing money for speculative investments, and much richer than people who take a balanced portfolio approach to investing.
But that doesn't mean it's a good strategy.
Re: Why I’m Putting All My Savings Into Bitcoin
#6Take away the interesting technical aspects, and BitCoin, to me, looks like a pyramid scheme. The BitCoin economy is like a small country with a novel monetary system. Now, a big country, say the USA, wants to join because it sees benefits in that system. Normally, such a transition would have the USA print new money. In this case, the answer to "OK, sounds useful, how do we introduce this kind of money into our econ…
> Take away the interesting technical aspects
BitCoin consists only of technical aspects. The rest is just noise that people do around them.
Re: Why I’m Putting All My Savings Into Bitcoin
#7bitcoin is somewhat interesting, I've been experimenting with it recently. One thing to note is that transfers aren't instant until your client catches up with the network -- when you first connect you currently have about 127k blocks to download before you are current.
At first I had some trouble understanding why you couldn't just had a client and create easier coins. The thing is, you can, but the network won't recognize them. The key to the system's security is that as long as 50% of the bitcoin nodes agree on that the current difficulty level is you can't inject 'fake' money into the system.
Right now moving money into and out of the system is a bit difficult. Mining is not worth the electricity it costs you, unless you have a GPU and join a mining pool. The 'value' of a bitcoin is very volatile, as tracked on the http://bitcoincharts.com site.
Re: Why I’m Putting All My Savings Into Bitcoin
#8I recommend reading up on the MMM company. http://en.wikipedia.org/wiki/MMM_%28Ponzi_scheme_company%29 there is also a Russian movie called PiraMMMida that came out a few months ago, which is the fictionized version of history. Now that movie, is pretty much exactly how bitcoin tends to be covered by the fanboys. And as the movie points out, it comes down to pure greed, people give up real money in order to buy worth…
Bitcoin is not a company. It is a currency. It doesn't promise anything.
The fact that it is an ingenuous social engineering hack is merely an effect of the money supply.
Re: Why I’m Putting All My Savings Into Bitcoin
#9"There is currently about USD 50 million in the bitcoin system, and just over six million coins in circulation, valued at $8 each. Up until now, demand has largely been driven by enthusiasts.
The value of a bitcoin can’t be held constant — if 12 more million dollars is exchanged into bitcoin, the value of a coin will rise to $10. The more people who want to use the system, the more people will need to exchange a portion of national currency for bitcoin, and the more money will go into the system. The more money there is in the system, the more a particular bitcoin will be worth."
This statement lacks economic sense. The total market capitalization of bitcoin ecosystem is $50m doesn't mean that $50m has been transacted. If I accept your offer of $800 per bitcoin, the market cap based on this transaction will become $5 billion instead.
Therefore, the author has severely over-estimated how much money that people have put in to the market. He is probably thinking "So there are $50 million investment here, my savings are so insignificant that I don't have to count the risk."
Re: Why I’m Putting All My Savings Into Bitcoin
#10This violates two simple, and obvious, tenets of investing: 1. Don't put all your eggs in one basket. 2. If it sounds too good to be true, it probably is.
They are only heuristics, not iron law of investment. Even so, don't put all your eggs in one basket pretty much apply to all situations.