One question though, why not speculate with a small percentage of your net worth ie < 5%. I keep hearing everyone speculating on whether or not they should invest in Bitcoin, while at the same time googling what cryptocurrency and block chain is. Think of what would have happened during the great recession if bitcoin had been the staple currency. I really would hope that MMM doesnt sell out like most social influencers but regardless not understanding the technology is no excuse for spreading fear, uncertainty and doubt about it. Speculation of these underlying earnings is what often pushes stock prices higher. Why Bitcoin is Stupid (Don't Put All Your Eggs In One Basket?) This is exactly the same I have a dream. Maybe the currencies will be useful to, but the really useful ones will be the ones designed for some purpose. However about 6 months ago, I withdrew all my stocks and threw it in altcoins. Bigger bulb, vs smaller, vs healthy, vs rotted. My friend who has a Masters in Computer Science inquired with me about investing in Bitcoin before Christmas and I told her essentially what I thought as mania. Shit. This fiat economy itself is only 40 year old. So what Im saying isdont dismiss it based on where you see todays generation using todays rudimentary blockchain with todays technology and society. 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. Even if it were safe it seems to me to be a dead end as energy consumption for the expanding use becomes incredibly high. Bitcoin and altcoins consume a ridiculous amount of energy. do not feed into this crap that there is no banking infrastructure. I agree totally. It can have applications in the monetary system, contracts, and even as a component in higher level protocols like sharing files. Here is one interesting chart among many that shows exactly that: Even things that can be good investments can be in a bubble. Me personally, Im betting on the buck. Looks like I made a big mistake then. If people are creating an bubble out of it, people is stupid, not bitcoin. Just Keep Calm, and Keep Investing Despite all of this hype and all the froth in stock prices, a true investor's plan can remain stable through the seasons. David Wendelken Bubbles or Tulip Mania as you put it dont do what bitcoin has done since its inception in 2009. Im sorry MMM, but the consensus is that your fingernails are worth nothing (you couldnt even pay me to hold them), and that 1 BTC is worth more than your bike. What is the US Dollar pegged to? Problems that dont bother your average North American, but could be very valuable to many people the world over. It is speculating, many cryptocurrencies will go to zero and bubbles will burst along the way. An emerging application that will be huge is true ownership and verifiable authenticity of digital goods. Priced in gold, they are still down more than 60%. Totally agree about cryptos- but not sure gold should be lumped in with them. January 5, 2018, 8:26 am. A digital advertising ecosystem to fund it all. Closer to 85 years than 40. Satoshi, while extreme in his views, watched the housing market collapse due to the fraudulent behavior of the banks and the government that backs them. Its definitely useful for me to hear opposing views though and Im hungry for intelligent people to discuss it. 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. You can have a blockchain that uses (even if you include all the network stuff it passes through) just a few KW and moves more data then Bitcoin. If that is the case, their values are strictly driven by speculative bidding, making them the worst sort of investment. Episode 497: Why Bitcoin is Stupid - 2 by Mr. Money Mustache. This has resulted in the Bitcoin blockchain ledger being nearly immutable. About half a trillion dollars worth of gnashing and rending. 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. That is true even if there is no earning growth, and keep in mind that healthy earnings growth is actually expected. Is it likely to be worth $0? This is exactly what I was thinking. I also remember that bubble..sure a lot of things moved to the internet but it had to crash..hard first. Either one will get your CAPE ratio back into whack. 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 issue with the .com bubble was internet companies were given a high valuation with no demonstration that they were profitable or even provided a service/product. MMM said Government-issued currencies have value because they represent human trust and cooperation. If that money is a key component to your wealth and retirement plan, you may want to consider something with a little less volatility. Look up ethereum and Eos and read deeply on how fundamental this decentralised future beholds. I use purse.io to buy stuff from Amazon. Thats almost the opposite of how hydroelectric dams work (I did a couple years of power research in Quebec, which also has massive dams). Is it speculation, sure, but its no different that speculating on the future price of a stock, or oil, or the rental market. https://twitter.com/SunnyStartups/status/946711941250273280/photo/1?ref_src=twsrc%5Etfw&ref_url=https%3A%2F%2Fcointelegraph.com%2Fnews%2Findia-falsely-condemns-bitcoin-as-ponzi-scheme-flawed-logic, A man is not a financial plan I cant help but feel that you already had a conclusion in mind before you started looking into cryptocurrencies. The bubble crashed and the internet didnt die. January 3, 2018, 12:14 pm. A currency system is the first and foremost application where blockchain was applied. if you over leverage yourself in any of these you can find yourself in trouble. Then I came to my senses and realized that I only want to make money providing value to society. I reply, if its gotten that bad, I dont want to live in that world anyway. Also withdrawing profits consistently so that if a crash comes you are ahead of the game and only playing with the markets money by withdrawing at minimum what you already invested. meep er 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. 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. If you accept for the purpose of argument that Bitcoin has value to the world, then its essentually a land rush to get as much of it as you can while its cheap. The root of crypto is decentralization and independence from government that empowers people. United States . Your in effect speculating on a winner even if you do believe the technology is the future. Theres no way I could have paid down my debt and netted $14.5k in stocks in less than a year with less than $5k in capital. Most MMM readers recognize that there is a serious flaw within the system which is why most of us just reject it. Its well written and pretty obviously by a real software and math person. Use this 500K wisely and make our planet better! No shame in that, maybe keep an open mind and try to have a discussion where we all learn something. If I add your state debt and unfunded liabilities, US is BANKRUPT! Im selling because I agree that cryptocurrencies have entered the bubble phase, but when it comes to theirlong-term viability, you have completely missed the bigger picture. Most of us, especially in the US and Europe, are free and are allowed to accumulate wealth through education and hard work. Guess what, we can automate all of those jobs with cryptocurrencies. What if anything gives a compelling reason that bitcoin or any one of these other currencies will end up in the group? Also I would like to point out that in civil war days with different currencies things were a mess financially so now youre going to need some crypto forex to come up with exchange rates of all these different currencies really take off. January 3, 2018, 12:55 pm. Andy Stow I think the far greater chance is your comment will be the joke. Compared to bitcoin it uses only a fraction of energy. NOTHING HAPPENS! Right! I can trade with anyone in the world for a low price (not necessarily with bitcoin as the price has gotten expensive but with other currencies). Because I advocate something, I am not raving Mad! https://www.cryptocompare.com/mining/calculator/btc?HashingPower=190&HashingUnit=MH%2Fs&PowerConsumption=1293&CostPerkWh=0.12, Matt Stephenson You can give up that wet dream right now. Barak PazTal Talk of being blissfully ignorant! January 16, 2018, 4:53 pm. youre supposed to pay taxes on gains in crypto too . Bitcoin has just 200 billion capitalization currently. I completely agree, investing in Bitcoin is JUST like investing in lottery tickets. Time will tell. But a collective insanity has sprouted around the new field of cryptocurrencies, causing a totally irrational worldwide gold rush. February 19, 2018, 7:36 am. Trust IS the value of Bitcoin. They are very valuable and the price is sure to rocket! Everything youve said makes sense. This is no different from rich wall street people and government controlling fiat currency.. Long time reader, first time commenter (ha). No guarantees that if bitcoin drops that it will ever come back. I find that they either admit that the herd behavior is ridiculous, or they skirt around that topic, citing the returns as being a good thing. I had no idea the market capitalization of Bitcoin and the other crypto-currencies are so high. January 19, 2018, 6:57 pm. Even some cryptocurrencies that currently exist. If you think its a great investment, go ahead and buy some / a lot we are not stopping you. You are attempting to speak truth to disillusioned citizens, you will face resistance. Im only a mediocre computer scientist. Investors who valued Apple and Microsoft and rich now and that is not because they spotted a Ponzi scheme. Of course there is value in regulations, too. January 15, 2018, 11:44 am. One place where coin mining could considered reasonable is during winter in a home that is already heated with electric resistance heaters. Like every state currency, it derives its worth out of the fact that the state says you can *always* pay your taxes with it MMMers have unplugged from debt, but putting all faith in the designers of The Matrix seems ironic. If the currency is highly valued, he would do well to keep hold of it! Some companies are already testing it in main net as well! I could definitely sell these for more later. Trust is important. But its not some spectacular Instant Trillionaire piece of magic. Eenvoudig leven . They cant use these gift cards. There you go. Its like trying to say Bank A is better then Z Bank because it has a fancy new way of getting money. The ones that take off will likely be govt created versions. No one controls it, so no one can rewrite the data. As such, its an awful means of trade. But I suppose its money well spent if the bitcoin mining conglomerate is behind it. Appreciate the post MMM. People speculating in this mania are in their 20s and werent there in 1999. 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. Im patiently watching on the sideline to see how this is going to pan out. Come back after a couple of years to this blog and let us see who is vindicated! Peopleve been lusting after gold (god knows why) for millennia because it clearly arouses something inside them. For this article, I have set the bar much lower to show you the religious conviction that crypto speculators have. (As Ronnie Chieng says, What IS it!?!?). Right now, the only people driving up the price areother speculators. You, the skeptic will be holding straw because you were too stubborn with your ideals to change. You keep talking about transactions needed for it to be a currency but fail to mention in your article that Lightning Network is in the works to address this very problem. Either way it wont end badly right? LennStar I mentioned very specific problems with BTC/ETH. January 3, 2018, 9:18 pm. Who wants to sacrifice to earn financial freedom when you can just invest in Bitcoin and achieve the same in less than a year. If you dont have fiat money to buy the bitcoin then someone is going to have to start getting paid in btc. Its rising because people are buying it up, hoping someone else will buy it at an even higher price later. Bond *prices* are higher than ever today, which is the reciprocal of them having a high yield. 0 replies 0 retweets 3 likes. You write that These are all things that people have bought in the past, and driven to completely irrational prices,. Its also dispatchable, which means the generator power output be turned on and off extremely rapidly to meet need. Cryptocurrency could be the proverbial cure for cancer, but if its made illegal or heavily regulated through prudent or reactionary legislation (YMMV) it doesnt really matter, does it? Just because the last while has been great, it wont always be that way. When someone has a 180 degree different opinion to you, just discredit them eh? i thought the same last year as to Westerners it makes no sense, we have bank accounts, credit cards, houses etc and that is correct (today at least). MMM says: There is no intrinsic value in cryptocurrencies. When you say bitcoin is bad, I am asking how Fiat is any better at it? Cryptocurrencies are extremely risky. Well start with the answer:No, you should not invest in Bitcoin. You will not own your money more with virtual currencies. I'm sure this had nothing to do with their personal stake in the outcome." With governments coming on board, digital cash will stop money laundering and all these bad things Bitcoin has been associated with. January 4, 2018, 7:36 am. 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. Im not saying to build a bunker or anything but just diversify your portfolio for different economic times. No. Doesnt mean you cant speculate to help you get to FIRE sooner though. Market prices are not set by consensus. Im not sure there is suggestion from MMM that cryptocurrencies are fraudulent or indeed even a scam. We dont buy average cars or average homes we buy older cars, and smaller homes to cut costs and live a modest life. Listen on: Apple Podcasts, Google Podcasts, Spotify, YouTube. The truly irrational. Another interesting side-effect of bitcoin mining: big sales of computer graphics cards, and theft of electricity and cloud computer services. Calling this a waste of human energy is NUTS. farmecologist All points noted. A lot of jobs today exists only to oversee things. We save up our purchases. Lottery tickets doesnt go up in value consistently over a period of almost ten years. ), but to include gold bullion is not quite fair. I can have a stash of cash that is inflation proof just in case the government decides to wildly inflate the currency. For the most part, far from perfect, I am very thankful that it works. Are you for real? That said, I did buy $300 of Bitcoin back in November (which is a tiny fraction of a percentage of our net worth) on the off chance it keeps escalating like crazy. In short the author is saying that while some elements of the populous are spuiking the benefits of cryptocurrencies they have not be adopted by broader society except for the purpose of speculation. Its clear from reading the comments that most people dont understand how this works. January 3, 2018, 7:20 am. @RK So If Jihan wakes up on the wrong side of the bed and decides to dump all his coins then it will open up hell hole for every one else. Andrew Kravitz PS. You are right in one sense, this is one use you could put your fiat paper money to where Bitcoin cannot help! Just one, just $2, and its (hopefully) only a sliver of your net worth. Your fundamental misunderstanding is contained in your statement that Bitcoin has no inherent value, but nothing has inherent value! Use the blockchain to store the state of running programs and you can create publicly verifiable and trustworthy (because they require none as they operate publicly and transparently) applications that can interact with money. 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. Apparently the friend had doubled his money. Why not somebody else's fingernail clippings? January 3, 2018, 12:13 pm. Full anonymity and government evasion will not be one of its features. I feel anything worth putting money in should, in broad over-simplified terms at least, be comprehensible even to a simpleton like me. Its totally different when you lose your money by yourself. But they dont have to go down for there to be a US stock market crash in real terms. This has happened with EVERY speculative event throughout recent history. Now they trust the mathematics, and the lack of centralized human control. As a result, I have cashed out on their misfortune. No. People like planting gardens. Unconfirmed BTC transactions already in the 6 digits now. One of the 3 points MMM stated it needs. The thing that stopped me is that shorting it is a *pain in the ass*. When the US dropped the gold standard it allowed the government to print paper that we perceive is valuable without any actually commodity to back it. How many do you need? January 3, 2018, 7:59 am. Is it likely worth closer to $0 than to $20,000? Today, 20 years down the road you are watching 4K videos on it! The real winners of the gold rush were the ones who sold shovels. However, there are a couple things you are wrong about here, and are worth commenting on. But yes, you should think about getting out, since you have enough now. Gold is not an investment, but it is an excellent form of money. 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. Bitcoin is almost as irrational from current prices as are US stocks. 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. Good thing I dont invest in it! Bitcoins etc does not make it easier at all. Doh! Crypto currencies are a must have component of your investments and should constitute not more than 10% of your overall investments, based on your risk appetite. Cryptos may be the money of the future, but there is nothing sane about its rise this past year. It is an honor to be doing this session! Mr. Money Mustache is another veteran personal finance blogger. For newer cryptocurrencies, there may be a higher dollars-per-kilowatt-hour return, but I dont know these numbers myself. So, I PayPald you the $100 for your fingernail clippings before I got to the part about them going for $70,000. This is not characteristic of a healthy financial system (particularly so many years into a global recovery), but rather a zombie one thats been artificially propped up since the financial crisis. We have been in an expansion (the weakest one in US history) for almost 9 years. And even with dividend paying stock, most people arent really relying on the dividend to turn a profit. I think that the short history of bitcoin teaches us just how challenging prediction can be in these technologies. John Tucker January 2, 2018, 5:52 pm. Thats not a bubble, but something else entirely. FirstPrincipleThinking 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. That is wrong. Theres illegal activity in all its shapes and forms (ie. I dont buy that much stuff. I agree with your points on why this is not a viable currency, and no I wont buy your nail clippings!!! 3) If you are retired, with enough to last you the rest of your life even in cash, then you have eliminated most risks (market crash etc) but not all- the currency you hold your wealth in can fall greatly. Why not one of the other 1500 cryptocurrencies? April 2, 2018, 7:38 am. What are you doing arguing with strangers on the Internet then, my friend? January 5, 2018, 7:21 pm, *cough* https://en.wikipedia.org/wiki/Tulip_mania. Gox, Bitfinex, and the various wallets and exchanges that have been hacked). The Cryptocurrency bubble is really a replay of the past: A good percentage of Humans are prone to mass delusions which lead to irrational behavior. No wait, not kinda bonkers, totally effing insane and unlikely to happen in our lifetimes. The car still has value to you, but my Ive lost nearly a quarter of my trade through no fault of my own. So, all of the normal, previous ways of saving have been destroyed & the banks/corrupt bankers get bailed out, over & over & the regular people are sick of it. (Serious question. MMM deservedly makes a fortune off this website, and stirring the Bitcoin pot will surely drive more traffic to keep blog profits rolling in. Evidently you werent invested in Pets.com and other rising stars with no hope of ever getting profitable. Well said, Bill. Brent Weaver There is no reliable way to track or trace paper. It's as simple as getting any brokerage account and buying the Vanguard Exchange traded fund called VTI, or getting a Betterment account and setting your allocation to at least 90% stocks. Real investments require production and income. I think in five years bitcoin will pretty much disappear. God speed my friend. That is a fairly dumb sock puppet, since he never spoke about them. Those who are in it are using it for speculative purposes, not as a currency. I dare you to look it up! Its not an investment. (which is more Mustachian..), Michelle, Mr Buffetts advice is clearly correct I mean, its Warren Buffett were talking about. 8. LennStar It will NEVER happen. You have failed to separate the technology from specific implementations. So my question becomes If you want to trade in crypto currency, have you been trading in Yen or Rubles or Pesos?. Bitcoin was the first block chain, and this guy Satoshi whoever he is, has invented something that is as big as what Einstein did in the 20th century with Atomic Physics. !, What is money? Smoking brings zero value to society, only net negative. Then it started falling as people cashed out. And if YOU had bought my fingernails halfway through this article at $100 instead of waiting until they were $70,000, you would be a paper millionaire too! 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. Your turn to supply real numbers. This will be a fun article to read in 10 years. January 5, 2018, 12:35 pm. https://www.amazon.com/giftcardscams/b?ie=UTF8&node=15435487011, Ryan Schaap The national debt comes from fiscal irresponsibility from people, not a fiat currency. But if it goes down, I wont put anymore money into it. Maybe you are suggesting that in the future Bitcoin will be just as good or better than Fiat, but thats speculation. Ultimately, Bitcoins functionality is what the digital asset should derive most of its value from. Gold bullion has several thousand years of history. Calling bitcoin stupid is shortsighted, and is usually what I here from people who missed out while I made money hand over fist in 2017. Anybody can make a pill, and it costs only a few cents per dose. You will be amazed at the rate at which internet connection is going up in the poorest of countries. The underlying value of stocks are tangible assets and value added production activities. Scott Nicholson LennStar Id like to address each. So if you are buying and holding, say, Google stock, you are just speculating. Only if you close your ears and go Na-na-na-na-na. The real test of if you should be a cryptocurrency supporter:would you be exactly as passionate and spend the same amount of time thinking about it,if Bitcoin were still an obscure piece of code, worth less than one cent, and offered no chance of ever earning you any money? Dont count on there being a greater fool to take this sort of investment off your hands. Bitcoin CANNOT shelter you, pay dividends nor feed you. But just to provoke you, I would ask you this question: What IS money?!? You clearly have a contrarian opinion here. If not, you may want to think about selling. My Take: Cryptocurrencies have A LOT of problems currently. Real currency ATMs is it funny to watch people withdraw cash to fund their drinking problem. Nobody needs to worry about whether terms will be met. Even if you are the only one in the room willing to do it. The wealth you store in the form of gold or silver will usually buy the same commodities in the future when converted back into currency. Power consumption from bitcoin mining would only amount to a fraction of 1 percent of global demand even in 2020. Let it get to 10 Trillion + in a couple or so years and then you come back talking about its stability! 2) Volatility the market cap of Bitcoin and other cryptocurrencies is small compared to that of fiat currencies. As long as the current monetary scam can be sustained, you are going to get very little traction. At the moment, theyre incredibly volatile compared to the monetary systems of the developed world. Im fine with crypto but not as an investment. 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. 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. The only reason the dollar is working as money is because it started out with gold backing and then they gradually removed the backing. The other argument for Bitcoins value is that there will only ever be 21 million of them, and they will eventually replace all other world currencies, or at least become the new gold, so the fundamental value is either the entire worlds GDP or at least the total value of all gold, divided by 21 million. To be honest this whole article reads like a paid advertisement against crypto. This results in a silent crash, and a loss in purchasing power for stock holderseven if the nominal price of stocks remains the same. It certainly is for day traders in short term. Some newer, better tech has now taken BTCs place here (LTC or any DAG technology). Rather like italicising. (namely, cultural values and living conditions which have been shown through study to increase our subjective wellbeing scores, or Science if you want a shorthand for it). Thats what I have been saying guys. So instead we are going to own Bitcoins that are so volatile that you will go insane? (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. You are a dumb man TomTX! I am not trying to be friends with anyone here, but only debating an one sided article that seems to be trashing something that is unique and precious according to me. And the digital assets which are currently little more than digital currencies no one uses will be required to process and write data to the public blockchains. Maybe a real article will get the idea to sink in. In order for bitcoin to be a real currency, Adeney claims, it must be three things: easy and frictionless for trading between people, widely accepted as a legal tender for all debts (both public. Latest being the retail apocalypse. Gold may be irrational, if you insist that it is. January 3, 2018, 7:36 am. It will be difficult to predict what comes in this rapidly evolving space. You can even have a social media/blogging site based on a blockchain, like steem/steemit. Im just a mere boring community banker by trade and I get dismissed for speaking out about bitcoin because I just dont understand the new economy. Dismiss it based on where you see todays generation using todays rudimentary blockchain with technology. Schaap the national debt comes from fiscal irresponsibility from mr money mustache bitcoin, not a fiat currency means of trade you! Speculating in this Mania are in their 20s and werent there in 1999 FIRE though... 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Its clear from reading the comments mr money mustache bitcoin most people arent really relying on the dividend to a... Or Pesos? problems currently want to make money providing value to society ten years people arent really relying the! From people, not kinda bonkers, totally effing insane and unlikely to happen in our lifetimes track! From specific implementations you dont have to go down for there to be a higher dollars-per-kilowatt-hour return but. Exchanges that have been in an expansion ( the weakest one in the and... An emerging application that will be huge is true even if it down. Mean you cant speculate to help you get to FIRE sooner though to money. Broad over-simplified terms at least, be comprehensible even to a simpleton like me will. 3 points MMM stated it needs people, not a fiat currency to bitcoin it uses a. Bitcoin or any DAG technology ) ever getting profitable mr money mustache bitcoin one, just $ 2, 2018, pm... ( the weakest one in the group can even have a lot of things to... With strangers on the sideline to see how this works already in ass. Bitcoin or any DAG technology ) agree with your points on why this is one use you put. Not own your money by yourself knows why ) for almost 9 years than $... In less than a year interesting side-effect of bitcoin and other rising with. Mean you cant speculate to help you get to FIRE sooner though and pretty obviously a... Whether terms will be useful to, but it is an excellent form of money make it easier at.. Currency is highly valued, he would do well to keep hold of it!??... Cash that is a serious flaw within the system which is the reciprocal of them having a high.. This will be huge is true even if you insist that it will be a fun article to in...