Crypto I'm conducting some research on Bitcoin

You guys are seriously comparing blockchain technology & the crypto space to fluffy toys?

I hear what you are saying with regards to risks, but you can’t deny that 1% of your wealth invested in it, even just a couple years ago would have proven quite a smart move.

Plus, you could always sell down some of your holdings to reduce your risk further after a massive rise, leaving you essentially free carry.

I mean at the end of the end this is not for everyone of course. Just like some people can’t take the risk with shares, others can’t justify holding gold due to no income, and others again won’t hold cash or bonds due to the certainty of inflation.
Fair enough if this is not for you, but I don’t think the comparison with tulips/ fluffy toys is quite warranted at this stage.

 

Something a lot of people forget is that its important to be diversified across all asset classes. They all have their strengths and weaknesses. Its foolish to write-off one asset class by only focusing on its weakness.

For my personal situation, I started off being a 100% property bull back in 2007. I only saw the strengths of the property market and built up a $5mil portfolio. But after 20 years of experience, I realise that property has significant weaknesses too - slow growth, rates, bills and levies, tenants, maintenance, paperwork, insurance etc. And so while I still hold a lot of property, I'm more open-minded now to other asset classes like shares, commodities and cryptocurrency. And see their pros and cons for what they are.

If I had diversified and also invested in shares and gold since 2007 instead of just property, my overall investment portfolio would have tripled in that time. But I also thought shares were too risky and gold was too speculative. And the GFC crash only reinforced this perception at that time.

Bitcoin can be risky, volatile and speculative like with any asset class. It's risky if you intend to gamble on it's short-term price moves and put your whole investment allocation into it. Risk is lessened by investing for the long-term (years not months), riding out the pumps and the crashes, and buying bitcoin with a responsible % of your networth (1-10%).

It is volatile. Price can swing +/- 20% in one day. But the volatility is also it's strength to the upside. It's still in price discovery mode, and the long-term trend for the last 12 years supports the thesis for higher prices.

Investing in whichever asset class depends on your personal financial situation and risk tolerance. Bitcoin is not for everyone, but that doesn't mean it cannot be a rewarding investment for some.

 

For those that followed this experiment, I sold in June 2019 for a total of 4,200 from a total investment of 2,900 ranging over 2018.

@ yesterday those holdings would have been worth 24,000.

More proof that time in > timing .

 

Brilliant summary; this post is pin-worthy!
I also started out with property (echo chamber much?) then diversified into managed funds, shares, index funds, commodities and crypto. Every asset class has its place.

Crypto so far is the only asset class that has already more than paid for itself in locked-in profits. Weird situation where it's my lowest risk asset

 

Gold right there

 

Ooops

Man who forgot password on brink of losing $300m Bitcoin fortune

A San Francisco computer programmer has just two password attempts left if he is to unlock a Bitcoin wallet worth more than $300 million.

If Stefan Thomas fails and burns through his final two of 10 attempts, he will lose 7002 Bitcoin, currently worth an eye-watering and life-changing $303 million.

The forgotten password which is keeping Mr Thomas awake at night would let him unlock a small hard drive, known as an IronKey.

 

In this case it was definitely timing > time in

 

So what happens if he can't get in? Who then owns the bitcoin? Or does it sit there forever....

 

It would sit there forever

 

If you look through the previous pages, the experiment posted a loss for the first 12 months, then it posted an increase for the following 6 which is when I pulled out. If I had left it for 3 years instead of 1.5 the return would have been 800% as opposed to the 135%.

Originally it was a timed experiment, 12 months in but at the end of the 12 months it had lost almost half it's value so I decided to abandon my timing parameter and just leave it until it posted a positive result.

Time in wins in this case

 

So if it was lost forever beyond retreival. Would that then increase the value of the coin as there is less in market? or does it not work like that?

 

Schrodinger's Cat
Do the coins still exist in the "iron vault" or because the key is lost they no longer exist?

 

Interesting point, but if it is provable that they are lost forever then whilst they do still exist they are no longer in circulation thus reducing the supply in a supply and demand driven asset? I'm just thinking out loud here .

 

Isn't that the Catch 22 the only way to prove ownership (that coins do exist) is to open the "iron vault"?

Someone on here claimed they won't sell there coins till BTC is $500k each. Assuming that never happens then those coins will never be in circulation either.

 

Yeah thats a very good point.

 

Price discovery in equities comes from trading rather than those holding. I imagine it is the same with crypto. These coins can never by bought or sold so can never contribute to price discovery in the future.

 

They effectively no longer exist; it is mathematically impossible to recover them.

While this means accessible supply goes down, this fact is never publicly known; instead, when bitcoin floods from private wallets to public exchanges (to sell in a bull market) proportionally less bitcoin shows up, meaning less sell-side pressure and ultimately higher prices.

 

Limited supply of Bitcoin means limited utility. Gold stopped being used for currency and demand reduced because their was not enough of it, silver became the currency and price increased relative to gold. Silver became too scarce relative to the demand for money and the pound decoupled from the value of silver and hence gold. The limited supply of bitcoin will mean its usefulness is limited making its value limited.

 

Bitcoin has very little utility function. Transfers are expensive and slow, and supply is capped.

Its value comes from its use as a store of value and poster child for the more functional networks (e.g. Ethereum) in the blockchain space.

 

And here we would be today:



Why oh why oh why did I sell lol