As platforms. Darn things didnt even pace with inflation. Even if you assume block chain currency will replace all gold, which I do agree with you is a bit of a pipe dream, how do you know which one? Speculation is fine, as long as you are using only money you are willing to lose. Its trust is the full force of the weapons and arsenal behind it. John Tucker LOL. January 11, 2018, 12:03 am. Tulips? Full faith and what? Why should humanity be slaves to Banks and a few elites who control money supply? For a long answer you need to understand the technicalities of it which I am not going to educate you on! I am so happy to see this article! However, taking a very small gamble doesnt hurt 99% is invested in s&p 500 and that will remain like that :). MMM said Government-issued currencies have value because they represent human trust and cooperation. The Ramsey Show is a podcast by Dave Ramsey, a financial guru and bestselling author. Dit is je geld nu waard als je een jaar geleden Bitcoin, goud of andere assets kocht. Either way it wont end badly right? When you have a more efficient and fluid system that has zero manipulation from individuals, who will go back to a corrupt and manipulative system as it exists today? Dont know if youve seen JP Searss satire of Bitcoin but I think you might appreciate it. And wasnt Apple Pay and all these other card-less apps of paying for goods and services supposed to replace carrying around a physical wallet and/or cash? Anytime someone says they are investing in Bitcoin, I have to laugh. Is the logical conclusion to short a mania or stay on the sidelines? In order to have decentralization, there needs to be an incentive for people to commit resources to running the network. This bubble is going to break, the environmental waste is awful, and CNBC legitimizing this as investing with ticket symbols must stop. Vijay What ICO do you own? Christopher R Young If you were setting up your portfolio from scratch today, would you buy $500K of GBTC with it? Sir, its $0.33 for that pound of bananas. So no surprise thats the first one, especially considering you need it to make the system work at all. Im not saying Bitcoin is the saviour of USD imperialism. nVidia shares, purchased right after they were found liable in some court case and thus were a bit depressed, were some fantastic shovel sellers for me these last few years :), Dan Someone 2 years later, and each coin is 28,736.04 or $39,388.47. The most useful comments are those written with the goal of learning from or helping out other readers after reading the whole article and all the earlier comments. Maybe a real article will get the idea to sink in. Michael but fail to recognize that the USD also has no intrinsic value. If FIRE is your goal, Id get out. Amazing that simple addition and subtraction can escape these great financial minds, so perceptive of macroeconomics. January 2, 2018, 6:06 pm, Agreed! Chris Urbaniak January 19, 2018, 6:57 pm. Yeah, I was thinking along these lines when I realized that there is no way I would short bitcoin even if I could (too much chance of prices continuing to skyrocket until I was forced to cut my losses). The Money Mustache Community . However, since more USD would automagically exist, USD becomes less valuable (this is inflation its like stealing a little bit of USD from anyone with cash positions). It then proceeded to burst in spectacular fashion just ahead of the financial crisis, plunging all the way back to $30 before rebounding. I am not a millionaire either or have any heavy investments in any of this and I am not certainly looking to grow my investments by commenting on a blog, of all places! PS. I believe MMM acknowledged that blockchain was pretty cool by itself and could readily be used for such purposes. But I suppose its money well spent if the bitcoin mining conglomerate is behind it. They get to sell me their give cards at a discount and I get to buy stuff from Amazon for cheaper. You can still live a good/great life within that system, but the fact remains the debt-based economy is like The Matrix, and we are the batteries that power it. It doesnt mean they are in bubbles at any price. It is an honor to be doing this session! Crypto currency as an ecosphere financially has benefited the tech industry dramatically, and if you invest like Mr Money Mustache advises, that means you probably have a good amount invested into the S&P 500. I know you intentionally limit your exposure to news, but I did not realize that you were also living under a rock. So basically you dont understand any of this, therefore it must be a scam. January 16, 2018, 4:53 pm. No major government will transact in a currency it cannot control. Bitcoin is the viral buzzword that has the momentum. 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. But, these days you shouldnt use resistance heaters except for the lightest heating loads, because they are obsolete. The growing demand for more electricity is the most serious issue with Bitcoin, IMO. Dr-In-Debt Putting evaluation aside, what boggles my mind is how much electricity is being wasted on bitcoin every single day. We have never in history had such expanding currency supply backed by NOTHING. I was excited to get in on the IFCO (Initial Fingernail Clipping Offering) but the price had already shot up while I was reading. I did Control F, and verified that MMM never used the word Ponzi or Pyramid, and in fact Vijay, you were the first person to bring up the Ponzi Scheme topic, and then you linked some article (which I did not care to read). Bitcoin has its flaws and needs to improve as you mentioned: The bitcoin price isnt rising because people are buying the coins to conduct real business. That is about a 24% drop in 18 days. Bitcoin is mined using ASICs, not nVidias graphics cards. It stays below the prior high for decade at least, sometimes forever. Right now, I think that this space allows people to be their own VC. 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. El Penguin Youll note that without prejudice and emotion, he describes the actualuses of the technology, without getting intohow we should all place uninformed bets on its future value. Andrew Kravitz Unless youre a rogue nation trying to dodge sanctions? I completely agree, investing in Bitcoin is JUST like investing in lottery tickets. 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. The Money Mustache Community . Amazon has a stated strategy of no profithow does one price that? But if you have some play money, it doesnt hurt to speculate if that is what you enjoy doing and dont mind losing everything you put in. Missing the forest for the trees kind of thing. One book that I found very useful in understanding the greed-fear cycle (and Central Banking and the Federal Reserve system to boot) is the 2001 classic Towards Rational Exuberance by Mark Smith. That's right -- it really does not matter (to me) why they split up. 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). Because An investment is something that has intrinsic value.. You could grow more bulbs indefinitely. Appreciate the term scarcity. Over 3.5 billion people have no internet access; I am sure this is true as I thoroughly researched it for a chapter I published in a book this year. The real winners of the gold rush were the ones who sold shovels. Cryptocurrencies are the key to humanitys survival. You WILL be wrong. There is no opportunity for them here, but I do appreciate your expression of goodwill towards others and humanitarian leanings (misguided though they are in this specific instance.). Fair comparison? Yeah, IF YOU SHOUT LIKE THIS IT MAKES YOUR POINT COMPLETELY VALID. You are as usual missing the point and are behind trivia! Scott Nicholson I regularly visit flip this home seminars just to network with people who leverage all their credit to gamble on an endeavor they have no experience with. Some companies are already testing it in main net as well! Thank you. Adney's first tip is to change how you look at the prices of what you buy. You know what else they have at bars? That, is where were at. Take risks, but keep educated and with good money management. January 3, 2018, 12:06 am, Sounds like a classic case of sour grapes to me :-), Cameron That is what people said 1999/2000 for the dotcom bubble. I dont know if stock prices will go down. January 3, 2018, 7:32 am. It has reached the point that a big percentage of stories in the financial news and questions in Mr. Money Mustaches email inbox are about whether or not we should all invest in BitCoin. Stefan Brand January 3, 2018, 4:28 pm. So, they sell it at a discount instead of losing revenue. All that the US has done since 2008, is hit the ball further and further down the road while at the same time blowing it more and more with air (read Quantitative Easing). (Update from late 2018 Mike ended up being wayyyy wrong.). I dont buy that much stuff. !, What is money? Tim Beck January 3, 2018, 7:13 am. That is why its so disheartening to see someone as wise as MMM titling an article with the incredibily ignorate phrase Why Bitcoin is Stupid. That was called new economy. Not just stupid, insane. Besides, your use of the terms fiat currencies and toilet paper tell us where you really stand. Secondly, Governments are (by definition) other people, spending other peoples money on what other people tell them are other peoples problems often they screw up fiat currencies through simple incompetence they have no motivation to get it right. Because I still cant pay for groceries in my town without swiping a card or handing over some US dollars. A lot of stocks never pay dividends though. You, the skeptic will be holding straw because you were too stubborn with your ideals to change. Because it is. Like every state currency, it derives its worth out of the fact that the state says you can *always* pay your taxes with it (and that shops have to accept it). You sound like I poop-obsessed wing nut. 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. Yeah, I had watched/listened to lots of Andreas stuff as part of the research for this. China is also a leader in renewables space. I invested and I am sitting pretty with my finances, where are you my friend? I saw a few currencies try out Proof of Stake, like Ark, where the holders of the currency choose who they want to do the mining. Its a win-win situation.. Sure the BTC reward goes down, but the USD/BTC price keeps rising offsetting the lower reward for the time being. A REAL currency must be low risk+ zero (better subzero) return+good liquidity, and all those three things MUST go together. Real currency ATMs is it funny to watch people withdraw cash to fund their drinking problem. Mr. Frugal Toque Bond prices werent historically low in those other cases and Shiller PE has been high for basically ever since the guy invented it. I say its value is nil. Bitcart.io takes DASH. Only if you close your ears and go Na-na-na-na-na. Bitcoin is almost as irrational from current prices as are US stocks. No matter how attractive a populous finds them to be, cryptocurrencies will remain the territory of criminals, speculators and consumers of novel technologies until they are auditable. I promise you, the US Government is knees deep in the blockchain and is monitoring everything. False analogies. Take the decentralization, the trustlessness, the miners or the currency out and you throw the immutability out. No. But its not some spectacular Instant Trillionaire piece of magic. Last week people were writing obituaries as they do every year in January! Well then Biglaw Investor, youd better stop using websites or stop supporting any company that does big data research, because thats consuming considerably more electricity and its not fundamentally vital to us existing. Apparently they didnt like my edits, where I called out rogue nations for propping up BitCoin as a means to bypass sanctions. Just the same with crypto-currencies today. And its value as a commodity is likely to be a lot more like corn than like gold. Well, shit. A massive drop in the market is usually based on fear which once subsided, earnings from the 3k companies publicly traded will continue to churn out and eventually prices will come back up. As for spending your Bitcoin, I digress. Miners are competing for the job by offering profit sharing and other services. Thats why wind farms are much more economical in areas with large scale hydro. Justin C Maybe you are suggesting that in the future Bitcoin will be just as good or better than Fiat, but thats speculation. Individuals getting rich off speculation doesnt mean its not speculation. On the other hand, if youre cool with allowing remote-controlled robots to kill 3rd world women and children in your name, then keep using only US Dollars. https://www.cryptocompare.com/mining/calculator/btc?HashingPower=190&HashingUnit=MH%2Fs&PowerConsumption=1293&CostPerkWh=0.12, Matt Stephenson My Bitcoin friends always say the same, that all the problems are being solved and everything is the best thing ever. Gold has the 2 most important properties to make it function as money, scarcity and intrinsic value. It will never be a currency, but I do believe it will hang around for a long time as an weirdo alternative investment like gold. As a result, changes in perceived value result in big price swings. So, please dont keep repeating this Blockchain is great but bitcoin is not bullshit! (Then Ill get out, right? Heck no. Feel free to throw in some early questions. Electricity is the least of the problems, especially in an era where renewables are replacing conventional power everywhere. I totally agree. Ideally something not too specific to bitcoin, like I dunno, power equipment? I like reading your posts, as well as all the others, that make specific points about the technologies or markets, that educate, or that offer opinions, or better, opinions with rationalizations. Because I think they dont want to devalue the money too fast. Transaction fees on the DASH network are effectively 0. Do you have any stats to share? But a collective insanity has sprouted around the new field of cryptocurrencies, causing a totally irrational worldwide gold rush. Not a penny was wasted. Investing means buying an asset that actually creates products and services and cashflow for an extended period of time. January 2, 2018, 5:52 pm. What are the world currencies pegged to ? Also, just because something is open-source does not mean it cant be valuable. Long story short bitcoin provides value. https://www.youtube.com/watch?v=fw3WkySh_Ho. That is where we are with Bitcoins. That means over the next 2 years, the Shiller P/E will be rolling out some of the terrible earnings numbers from the global financial crisis. Also, saying Blockchain Yes and Bitcoin No is tantamount to saying, Social Media is great but Facebook is not so great, or Internet Search is Great but Google is not Great!!! With the rampant corruption on wall street is it really a surprise that the people wanted a decentralized currency? As the people in Greece and Iceland found out, along with people in many other countries. Yeah we could all gamble our way to FIRE, this week bitcoin, next week slot machines, poker, etc. Still no fundamentals. You know things arent a good investment when there are Bitcoin ATMs at bars. About half a trillion dollars worth of gnashing and rending. For me, its just like watching a show that I dont know the ending of yet. Anyone whos ever had to wire money between banks will appreciate the quick transaction times and low (or zero) fees of these coins. I advise you look at the 10-year PE ratio. I have to disagree with one of your points here: in a worst-case scenario, if you have enough gold, you may be able to beat it between some rocks to make a serviceable frying pan. The paper dollar is anonymous! The imaginary value of these valueless bits of computer data representsenough money to change the course of the entire human race, for example eliminating all poverty or replacing the entire worlds 800 gigawatts of coal power plants with solar generation. When evaluating investment bubbles, it means looking at where everyone is throwing their money no matter how many billions and being willing to say Bull. Trust IS the value of Bitcoin. Mr. Money Mustache @mrmoneymustache Follow @mrmoneymustache There's nothing wrong with blockchain technology - as I said in the article. SMH. Maybe not $500,000 an ounce or a bulb, but at some other far lower price, they can be an entirely reasonable purchase. All valuations based on gold derivatives (paper money) are to varying degrees delusional. I just wish it had come out before the holidays so I could have just pointed family members to it instead of attempting (unsuccessfully!) Yes, its unstable, and you wouldnt say trade it, but as a long term investment it has been proven itself. Mattheus Also, for the first time in history, you can create digital collectibles that are unique and non-replicable, just like my Wayne Gretzky rookie card which intrinsic value is about 1 cent of cardboard and ink, but which market value is in the hundreds (but that must be a bubble too). The big players in China use hydroelectric power. Why? Im not an IT guy of engineer so I could be wrong, but the energy issue and the safety issues you mention makes Bitcoin tera incognito for all intelligent human beings. 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. Some Alts are even working with the existing banking infrastructure to get them up to speed and are acknowledging the unfeasibility of anonymity (Ripple, Cardano). Its a speculation, pretty much like buying gold. But thats just the start. Well said, Bill. An investment is something that has intrinsic value that is, it would be worth owning from a financial perspective,even if you could never sell it. Episode 496: Why Bitcoin is Stupid - Part 1 by Mr. Money Mustache. So just like you say theres nothing stopping you from creating your own Bitcoin, its the same code.unless you could attract hundreds of millions of dollars of computing power to ensure data integrity on your blockchain, its as worthless as your nail clippings. Reward for Risk is worse for Powerball. Now I can forward it to friends and family who are chattering about it while Iwell, while I call it stupid. Do not let your own brain trick you for easy solutions! I do believe hyperbitcoinization will happen in a decade or two. January 3, 2018, 12:26 pm. If you introduced a brand new commodity to the world, would you expect the price to be stable? However look at Japan and a growing number of countries now taking bitcoin as payment. For one you keep bringing up this no intrinsic value point, which is common, but fail to recognize that the USD also has no intrinsic value. So, I use bitcoin to buy stuff with the gift cards from these people. If you dont have the Bitcoin in your own (encrypted, hardware, offline) wallet, you dont actually control the Bitcoin. MMM, you cannot call Bitcoin Stupid and then go tangentially into an Utopian discourse. January 2, 2018, 7:09 pm. Im interested to see how this plays out. Trust is important. At least theyre cute and the grand kids like them! If you know anyone heavily vested in bitcoin, stay in touch with them. Good to add this article to the (hopefully) growing list of rational explanations debunking the appeal of what my 76 year-old Grandma, a consummate investor, rightfully calls funny money. It pains me to hear friends, some of whom I have to believe are intelligent people, describing their vast spoils and commitment to cryptos. Well thats all due to the crypto currency craze. Some people like owning pretty jewelry. Your examples exactly prove the point: social media is great, but the first ones to take off werent the winner remember SixDegrees, Friendster, MySpace? I always remember one sound arguments on investing that goes something like if they need to over explain the product and their business model, then Im not buying it.. it is as simple as that. I agree that Bitcoin isnt an investment. Margin of Saving The bidding up of prices in pursuit of speculative riches is not fine. January 3, 2018, 4:51 pm. 1) Energy consumption Bitcoin consumes a massive amount of energy to secure the network. This is not going to happen. One way or another, at some point, the cycle will end, and the cycle will start again. I reply, if its gotten that bad, I dont want to live in that world anyway. Bitcoin is a universal currency and is not here to just replace your USD alone! Mr. Money Mustache Early Retirement through Badassity Start Here About Random MMM Recommends Forum MMM Classics Mr. Money Mustache View: Fancy Magazine | Classic Blog Welcome New Readers! I agree with you, Chris. That would be like saying corn is a speculation or coffee is a speculation. Whatever they are willing to pay to enjoy owning these things themselves is their business, and may make for a fairly rational purchase. Now the ball has reached proportions where it could blow up anytime, and people in this forum are talking about the small change like the bubble and P/E ratio in the stock market. ), You write that things that gold, tulip bulbs, Beanie Babies, 1999 dotcoms without any hope of a product plan, pre-construction pricing Toronto condominiums you have no intent to occupy or rent out, and rare baseball cards are not investments.. But there are interesting aspects to the technology and what it could develop into. Fiat currencies my friend is working overtime for its own demise. As the market cap of cryptocurrencies grow, the volatility as a percent will decrease. Spend $40,000 a year x 25 = $1,000,000 to be FI/spend 4% of $1,000,000 = $40,000 to spend each year. Im patiently watching on the sideline to see how this is going to pan out. Except for ripple coin. We have been in an expansion (the weakest one in US history) for almost 9 years. While stocks are likely a bit frothy, P/E ratios arent near the peaks they were circa 2000s: And important thing to note here is that underneath (almost all) stocks are actual engines of growth with hundreds or thousands of humans working hard, churning out profits, earnings, and dividends. Thank you! I for one am lucky enough to participate in the birthing of an alternative financial paradigm so that people have choices. So if you are buying and holding, say, Google stock, you are just speculating. Justin C Seems an awful lot of marketing being pushed for something of questionable value. They will have to learn the hard way. Mr. Butler In other words, if you truly need it to buy stuff, and thus you need to buy coins from some other person in order to conduct important bits of world commerce that you cant do any other way. Im always reminded of VHS versus beta max but on a few thousand options scale (rather then two) and a higher risk if you choose wrong (at current prices). Having interest rates all the way down to near 0% without a good exit plan should give you some pause how much you want to trust these people. Im only a mediocre computer scientist. January 3, 2018, 7:36 am. Gold may be irrational, if you insist that it is. These are preposterous numbers. Overall, it is just as likely to go up as it is down, especially in the near term, and is best to avoid all together unless you just love gambling and dont care about losing money. That is why our civilization used that rather than perishables or iron. If you want to continue the ride, why not let the original investment of $28,000 ride? Mining other coins can still be profitable with graphics cards, mainly ETH/ETC. However EVERY SINGLE BITCOIN TRANSACTION IS PERMANENTLY RECORDED AND TRACEABLE. A bit frothy? I linked to Aswath Damodarans video on my Bitcoin post also. Why would anyone do business with a medium of exchange that is accountable to nobody? Because hydro acts as a massive built-in storage in both the short term (ms, seconds) and long term ( hours, days, And pray blurt out as to why it is bad equivocation? remittances, credit lending for undocumented people. Use this 500K wisely and make our planet better! I was so sad that I missed out again ;). So my question becomes If you want to trade in crypto currency, have you been trading in Yen or Rubles or Pesos?. Most of the 1000s of cryptos (and maybe even bitcoin) will fail, but the few that remain will change the world. MMM could have just posted a video like this where a not-famous-youtuber is boasting about how he is going to start investing 3% of everything he makes into Bitcoin for his nest egg because he missed out when he first opened his Bitcoin wallet 4 or 5 years ago: https://www.youtube.com/watch?v=ubnMyPZS86E. 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