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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

#101

Post by adrianN »

javert wrote: post #96
nazgulnarsil wrote: post #88

Bitcoin has aggravated the "layman talks out his ass about economics" problem again. 1. Gold is a proof of work system just like bitcoin. When someone accepts gold as payment for some other commodity or service they are doing so under the assumption that the value will be stable because it takes at least X amount of time/labor/ingenuity/money to "create" more gold by mining it. This is what backs non-consumption comm…

I don't know much about economics, but... Gold isn't really a non-consumption commodity. It's used in things like jewelry and compter circuits. In other words, it doesn't just work because everybody agreed that it's a good mechanism for trade. It works because it actually has underlying value. Or, at least, I can't rule out that possibility, because it DOES have underlying value.

But it has much less underlying value than other consumption commodities. Copper is more more useful than gold, for example.

Re: Why I’m Putting All My Savings Into Bitcoin

#102

Post by gcb »

rdtsc wrote: post #85
richardw wrote: post #52

Earlier quoted context omitted.

The basket many people are holding all their eggs in, is the USD. That has depreciated significantly in the last few years, with a very good chance that it'll continue to do so. My home currency isn't the dollar but my app is priced in dollars and that sucks. I'd far prefer to have Euro earnings and earn a few bitcoins a month as a speculative investment.

Would you have preferred your app to be priced in bitcoin instead?

I think thats already answeres in his comment.

he would prefer most of his apps in Euro and a few in Bitcoin

Re: Why I’m Putting All My Savings Into Bitcoin

#103

Post by knowtheory »

adrianN wrote: post #101
javert wrote: post #96

Earlier quoted context omitted.

I don't know much about economics, but... Gold isn't really a non-consumption commodity. It's used in things like jewelry and compter circuits. In other words, it doesn't just work because everybody agreed that it's a good mechanism for trade. It works because it actually has underlying value. Or, at least, I can't rule out that possibility, because it DOES have underlying value.

But it has much less underlying value than other consumption commodities. Copper is more more useful than gold, for example.

That gold is overinflated doesn't diminish the fact that it has a utility outside of it's use as a financial instrument.

Re: Why I’m Putting All My Savings Into Bitcoin

#104

Post by hugh3 »

palish wrote: post #15
raganwald wrote: post #5

A 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 mo…

Does anyone know of any balls-out investments that paid off (or didn't)? (I'm referring to "if this investment doesn't pay off, I'm jumping out a window" risk.) I'm just looking for interesting stories, and that sounds promising.

Here's the thing: due to the nonlinear value of money, if you're betting that something is going up massively then you're pretty much just as well off betting some of your money as you are betting all of it.

If I have ten million dollars, and I really think that tulip bulbs are going to go up by a factor of a thousand, it's still dumb to invest all my money in it hoping to get ten billion dollars. Instead, I invest half my money in it, because the difference between having five billion dollars and ten billion dollars is (in practical terms) small, whereas on the losing side the difference between having five million dollars and being completely broke is very large.

There's one exception to this: entrepreneurs frequently put all their money into their own company. Why? Because nobody else will, and because if the company doesn't get that money then the company will collapse. Wise? Maybe, maybe not, but it's wiser than sticking all your money in some random asset which, if not bought by you, would be bought by somebody else.

Re: Why I’m Putting All My Savings Into Bitcoin

#105

Post by knowtheory »

hugh3 wrote: post #65
Tichy wrote: post #42

Earlier quoted context omitted.

BitCoin doesn't promise any returns, and doesn't distribute anything to new people who sign up. It is only a Ponzi scheme if the real world's economy is a Ponzi scheme. I don't know if it is.

You're right. While bitcoin has certain similarities to Ponzi schemes (i.e. the fact that the people who start the scheme get rich while the folks who come later lose their money) I think it's really more accurately described simply as an asset bubble. Except, y'know, without any actual underlying asset. I don't think I've ever seen an asset bubble in something that was literally worthless before. Even the tulip bulb…

pets.com stock doesn't count? ;)

Re: Why I’m Putting All My Savings Into Bitcoin

#106

Post by adrianN »

knowtheory wrote: post #103
adrianN wrote: post #101

Earlier quoted context omitted.

But it has much less underlying value than other consumption commodities. Copper is more more useful than gold, for example.

That gold is overinflated doesn't diminish the fact that it has a utility outside of it's use as a financial instrument.

The paper used to print dollars also has intrinsic value, but you wouldn't want to argue that it's a good choice as currency just because you can burn it.

Re: Why I’m Putting All My Savings Into Bitcoin

#107

Post by hugh3 »

knowtheory wrote: post #103
adrianN wrote: post #101

Earlier quoted context omitted.

But it has much less underlying value than other consumption commodities. Copper is more more useful than gold, for example.

That gold is overinflated doesn't diminish the fact that it has a utility outside of it's use as a financial instrument.

True, but if you break down the value of gold then it's maybe a dollar an ounce from practical uses and 1500 dollars an ounce from the fact that it's a seven-thouand-year-old asset bubble.

Or, to put it another way, suppose tomorrow I figure out a way to replace gold with some much cheaper tin-copper alloy in all its industrial applications. That's not gonna decrease the value of gold all that much. (Note that I don't really count jewellery as an industrial application -- gold is used in jewellery because it's valuable, not because it looks any prettier than other metals).

Re: Why I’m Putting All My Savings Into Bitcoin

#109

Post by knowtheory »

hugh3 wrote: post #86
knowtheory wrote: post #40

Earlier quoted context omitted.

Actually quite easily. If your nation bans the trading of bitcoins for the official state currency, then you have a problem. Regardless of the fact that bitcoins can be transferred w/o outside observation is irrelevant if you can't purchase or trade for goods and services. And at that point, you're either black market, or you're fucked.

Well, as long as not all nations ban trading bitcoins for official state currency it doesn't completely screw things over. I simply trade my bitcoins for Vietnamese dongs or whatever and then exchange my dongs for dollars. No, the collapse is more likely to happen on its own. At some point the massive increase in value must draw to a close. What happens then? Big bitcoin holders no longer have an incentive to hold on…

Right, but then you are operating on a black market basis, because you're laundering money. If the problem gets bad enough the US starts banning dongs, or applying pressure on their government or what not.

Worse yet, laundering money on this basis will almost certainly come with an increased cost to trade through another currency, especially if there is legal risk to the parties doing the laundering.

It's not like laws will stop financial trading or traders, but if you're declaring your taxes as you're legally obligated, presumably there's still a paper trail indicating irregularities if you're funneling your bitcoins through dongs.

Re: Why I’m Putting All My Savings Into Bitcoin

#110

Post by ecaradec »

hugh3 wrote: post #98
diego wrote: post #94

Earlier quoted context omitted.

For every Andrew Carnegie, there are lots of others who watched their basket and saw it destroyed. They just don't go around giving advice.

Yes they do. They're the ones who go around saying "Don't put all your eggs in one basket".

Don't put all your eggs in a basket you know nothing about.
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