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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

#61

Post by eropple »

scotty79 wrote: post #6
Someone wrote: post #2

Take 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.

All human-created phenomena are social phenomena. "It's just tech" is said only by those who fundamentally don't understand this or want you to ignore those social aspects for their own gains.

Contrary to what lots of the Bitcoin aficionados might like people to think, the social aspects of it are the only part that really matters outside of a crypto mailing list. And they're also the reasons it's insane to expect people to actually use it.

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

#62

Post by stevenj »

luigi wrote: post #3

This 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: 1

Perhaps. But if you know what you're doing, wide diversification may not be wise.

"How many insights do you need? Well, I'd argue: that you don't need many in a lifetime. If you look at Berkshire Hathaway and all of its accumulated billions, the top ten insights account for most of it. And that's with a very brilliant man—Warren's a lot more able than I am and very disciplined—devoting his lifetime to it. I don't mean to say that he's only had ten insights. I'm just saying, that most of the money came from ten insights.

So you can get very remarkable investment results if you think more like a winning pari-mutuel player. Just think of it as a heavy odds against game full of craziness with an occasional mispriced something or other. And you're probably not going to be smart enough to find thousands in a lifetime. And when you get a few, you really load up. It's just that simple."

-Charlie Munger

http://ycombinator.com/munger.html

Re: 2

"Too much of a good thing can be wonderful."

-Mae West

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

#63

Post by jerf »

aaa1 wrote: post #41
woodall wrote: post #33

Earlier quoted context omitted.

>Gold is intrinsically similarly useless as bitcoin. That is incorrect on many levels. Gold has applications in MANY things. I bet the device you used to type out that comment has a bit of gold in it. The comparison to BitCoin and paper money makes more sense, but it doesn't. This is because BitCoin has no one backing it. If the dollar drops, well the US is backing it; and they will be forced to deal with the consequ…

>If the dollar drops, well the US is backing it; and they will be forced to deal with the consequences. http://en.wikipedia.org/wiki/Hyperinflation Currencies made by governments routinely lose >99% of value in few weeks. How this "backing" helps if you lose everything? In my country it happened 15-20 years ago. Also even US dollar drops every year.

There is no solution to the problem that currencies can become worthless. It is a fundamental aspect they have, because any commodity, artificial or otherwise, can become worthless. If change stopped, this might cease to be true, but in a world where in 100 years we may be seriously talking about the needs of our uploaded consciousnesses in the war against the bad AIs, or we may be a hunter-gatherer society again (and I'm using a 100-year-horizon just to highlight the problem but it's true on shorter timescales too), there simply isn't any safe, reliable value store.

woodall didn't say dollars won't hyperinflate. (S)He said the US "will be forced to deal with the consequences". Not the same.

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

#64

Post by sorbus »

stevenj wrote: post #62
luigi wrote: post #3

This 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: 1 Perhaps. But if you know what you're doing, wide diversification may not be wise. "How many insights do you need? Well, I'd argue: that you don't need many in a lifetime. If you look at Berkshire Hathaway and all of its accumulated billions, the top ten insights account for most of it. And that's with a very brilliant man—Warren's a lot more able than I am and very disciplined—devoting his lifetime to it. I don…

The purpose of diversification is in case your insight is wrong. In case bitcoin crashes faster than he's able to pull his money out, or in case demand slackens and prevents him from pulling his money out (being able to transform money from bitcoins to dollars is necessary until all the places he would spend money accept bitcoins too), being diversified would prevent him from losing everything.

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

#65

Post by hugh3 »

Tichy wrote: post #42
vaksel wrote: post #4

I 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 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 bulbs of the Dutch tulip mania (http://en.wikipedia.org/wiki/Tulip_mania) could be planted in your garden and would look quite pretty, even if not ten years' salary worth of pretty.

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

#66

Post by sorbus »

scotty79 wrote: post #12
vaksel wrote: post #4

I 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…

If such silly thing as gold became money and paper printed by governments became money then a tool possessing qualities that bitcoin possess is bound to become money eventually. Only two real risks. Crypto weakness or Bitcoin 2.0 Gold is intrinsically similarly useless as bitcoin. We used it as money only because it was durable and rare. We used paper as money because strong, trustworthy entity declared that its supp…

There's another risk, actually: government legislation/intervention.

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

#67

Post by tectonic »

richardw wrote: post #52
luigi wrote: post #3

This 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.

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.

Does investing in foreign stocks hedge against this?

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

#68

Post by stevenj »

sorbus wrote: post #64
stevenj wrote: post #62

Earlier quoted context omitted.

Re: 1 Perhaps. But if you know what you're doing, wide diversification may not be wise. "How many insights do you need? Well, I'd argue: that you don't need many in a lifetime. If you look at Berkshire Hathaway and all of its accumulated billions, the top ten insights account for most of it. And that's with a very brilliant man—Warren's a lot more able than I am and very disciplined—devoting his lifetime to it. I don…

The purpose of diversification is in case your insight is wrong. In case bitcoin crashes faster than he's able to pull his money out, or in case demand slackens and prevents him from pulling his money out (being able to transform money from bitcoins to dollars is necessary until all the places he would spend money accept bitcoins too), being diversified would prevent him from losing everything.

I know nothing about Bitcoin.

And I agree that you probably shouldn't put all your eggs in one basket.

But that doesn't mean that wide diversification is the right strategy.

I think some of the greatest successes have occurred because of an obsessive focus (e.g. Apple, Pixar, 37signals, Trader Joes, Chipotle, Berkshire Hathaway, top professional athletes).

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

#70

Post by hugh3 »

richardw wrote: post #52
luigi wrote: post #3

This 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.

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.

The basket many people are holding all their eggs in, is the USD

Not many people, or at least not many people with nontrivial amounts of money, have all their assets in US dollars. Most folks own shares and/or property. As you say, US-dollar cash assets are a poor investment right now since interest rates are lower than inflation.

Still, keeping all your money in US dollars (in a big brown bag inside a zoo, perhaps) is a lot less nutty than keeping all your money in bitcoins. Even if nothing else, the US dollar has a history of relatively low volatility over the past couple of hundred years, whereas bitcoins have a history of insanely high volatility and dates back to (uhh, goes and checks) 2009.

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