How to get into Bitcoin and how does it work?

[Texas Proud]

[Disclaimer: I hold a fractional share of a bitcoin, which I purchased a couple/few years ago ($100 worth at the time) to play with. I promptly forgot about it until this past summer. I've sold off $500 of it when bitcoin first hit 17K or so to "guarantee" a 5x return on my original "investment". As of this post, my holdings in bitcoin and the spin-off bitcoin cash are valued at approximately $4000 (down from 8k or so at the peak). ]

Finally, an interesting answer. What is the "value" of a dollar bill? It's value is in trust, that it can be redeemed for goods and services, and represents a store of wealth.

There is a lot of distrust of governments who issue fiat currencies. Not only in the United States but across the world. Thus the hunger for some place where wealth can be stored without as much government interference.

Look, I have no idea of the future of bit coin or any other crypto currency. What I do know is if there were some way of 'locking in' my wealth in terms of buying power for real goods and services, I would jump on it in a nanosecond. Unfortunately no such beast exists, and I am doubtful that anything could exist.

First, all money is 'fiat'... so there is no currency on this planet that is not fiat... I would argue that bitcoin is even more fiat since the only value it has is what somebody else is willing to pay..

Fiat money is an intrinsically worthless object, such as paper money, that is deemed to be money by law​

One of the things you fail to realize is that the gvmt 'interference' is the main reason that people trust money... IOW, you want something that stores money to actually keep it safe... if you put a gallon of something in a jug, when you come back to use it you still want it to be a gallon... now, there could be some evaporation (inflation), but if you know what rate that is you can live with it...

Bitcoin is no store of money.... it is so much like tulips or beanie babies where a hysteria has occurred that just makes it impractical for someone to store their wealth there...

I am sure that at some point in the future it will steady out and maybe act more like gold, but for now it is a place to lose wealth IMO....

 

[GrayHare]

Wait, now Fiat has its own currency?

I sold all my crypto for real money, Venezulan bolivars, so now I'm safe and secure.

 

[JoeWras]

My sister's bf has 6 bitcoins locked in a wallet but his ex gf has the p/w. My sister had her own bitcoins and had no idea they had become valuable. She spent them all a few years ago on e-invitations!

Am I a bad person because I chuckled at these two situations?

 

[Teacher Terry]

WE mined bitcoin 4 years ago and made $. Every time it gets high we cash a little out. WE cashed some out at close to 20k and are holding the rest like we always do. When we started we invested a very small amount that we could afford to lose. At this point we have made 50k and my son double that. No matter what happens down the road we are good with it.

 

[Texas Proud]

WE mined bitcoin 4 years ago and made $. Every time it gets high we cash a little out. WE cashed some out at close to 20k and are holding the rest like we always do. When we started we invested a very small amount that we could afford to lose. At this point we have made 50k and my son double that. No matter what happens down the road we are good with it.

Like most bubbles, the earlier you are in the game the more chance you have of getting out with a big gain... but people getting in at $20K or so stand a good chance to lose most of what they put in...

 

[Chuckanut]

Wait, now Fiat has its own currency?

Certamente!

Quando compra una macchina da Fiat, danno un sconto del 5% se paghi con i soldi della Fiat. E usa le parole 'ti imbicile!' per un altro sconto del 10% con un cambio di olio. Un altro 2% se usi il gesto della mano.

Ma, si usi la carta di credito GM o Ford o paghi con il bitcoin, devi mangiare solo la pizza Hawaiana quando in l'italia. Davvero un destino peggiore della morta!!

Ciao e arrivederci.

 

[copyright1997reloaded]

Like most bubbles, the earlier you are in the game the more chance you have of getting out with a big gain... but people getting in at $20K or so stand a good chance to lose most of what they put in...

OK, even though I am not a bitcoin bull I am forced to respond to this and I will argue (part of) the bull case on it: How do you know where in the bubble phase this is? What is magical about $20K/coin vs $10K vs $1K? It's just a number, just like Apple being 170/share is a number... by itself it means nothing. It only has meaning in terms of the underlying economics of the investment. So, you should be arguing that at $20k/coin with 16,000,000 mined the total market cap of bitcoin is 320 billion and THAT is why it is a bubble. Is it?

For bitcoin, one of the bullish arguments is that if it finds utility as a store of value, then it is supply limited. Mathematically, it is limited to 21,000,000 coins of which there are less than 5,000,000 left to "mine". So the argument goes that if even a somewhat small proportion of the worlds population utilize it, that the value of each whole coin must be a pretty big chunk of change. Unlike gold, oil, or other commodities, an increasing price of the item can't lead to a vastly larger production. (Again, because the production gets increasingly more expensive as further bitcoins get mined). So if the bull case is true, that over time a reasonable portion of the worlds store of wealth was represented by bitcoin? Well, google tells me that the worlds total wealth is $241 trillion. 1% of that is 2.4 trillion which would put bitcoin at 114K/coin (if my quickly done math is correct, assuming all 21 million coins mined.

Now you might think that is bull*hit (instead of a bull case)... I might agree, I was just laying it out. Certainly there are issues with the bitcoin case, e.g. 1) I can spin off other crypto currencies (e.g. bitcoin cash), 2) it is getting increasingly more expensive to get transaction confirmations, 3) the bitcoin block limit of 1 MB has become a significant bottleneck in terms of transaction rates.

One of my favorite long term investment themes I always try to remember and ask myself about is "disintermediation". How we represent stored value, how we do transactions, and other financial aspects are not immune to this trend.

Hey, I dunno. It hurts my head trying to think about this stuff.

 

[Texas Proud]

OK, even though I am not a bitcoin bull I am forced to respond to this and I will argue (part of) the bull case on it: How do you know where in the bubble phase this is? What is magical about $20K/coin vs $10K vs $1K? It's just a number, just like Apple being 170/share is a number... by itself it means nothing. It only has meaning in terms of the underlying economics of the investment. So, you should be arguing that at $20k/coin with 16,000,000 mined the total market cap of bitcoin is 320 billion and THAT is why it is a bubble. Is it?

For bitcoin, one of the bullish arguments is that if it finds utility as a store of value, then it is supply limited. Mathematically, it is limited to 21,000,000 coins of which there are less than 5,000,000 left to "mine". So the argument goes that if even a somewhat small proportion of the worlds population utilize it, that the value of each whole coin must be a pretty big chunk of change. Unlike gold, oil, or other commodities, an increasing price of the item can't lead to a vastly larger production. (Again, because the production gets increasingly more expensive as further bitcoins get mined). So if the bull case is true, that over time a reasonable portion of the worlds store of wealth was represented by bitcoin? Well, google tells me that the worlds total wealth is $241 trillion. 1% of that is 2.4 trillion which would put bitcoin at 114K/coin (if my quickly done math is correct, assuming all 21 million coins mined.

Now you might think that is bull*hit (instead of a bull case)... I might agree, I was just laying it out. Certainly there are issues with the bitcoin case, e.g. 1) I can spin off other crypto currencies (e.g. bitcoin cash), 2) it is getting increasingly more expensive to get transaction confirmations, 3) the bitcoin block limit of 1 MB has become a significant bottleneck in terms of transaction rates.

One of my favorite long term investment themes I always try to remember and ask myself about is "disintermediation". How we represent stored value, how we do transactions, and other financial aspects are not immune to this trend.

Hey, I dunno. It hurts my head trying to think about this stuff.

How do I know it is a bubble? Just look at the chart someone posted showing the gain in bitcoin to the gain in a number of items that were also bubble 'investments'.... has it reached its height? I have not idea... there are a lot of people who still think it will continue up past $100,000....

The limitation means nothing... your Apple comparison is laughable... Apple makes a LOT of money and is getting that money into the pockets of their shareholders.... bitcoin makes no money and it only goes up if someone else is willing to pay more for it than you did....

Also, if I put $100,000 into Apple stock I will not lose that as a broker is holding my shares and if something is hacked or whatever I still have that Apple stock... with bitcoin I can have it on my own device.... but if I forget my password I have nothing... if I have it in a digital wallet and it gets hacked I have nothing... OH, and if I die and did not give my password to anybody it is also lost...

A bitcoin is just a bookkeeping entry.... there is no intrinsic value to it... you can not make anything with a bitcoin... with commodities you can actually make stuff... that means there is value in that stuff you can sell...


Will bitcoin settle down to a price that is more stable? I do not know... it might not survive... I think at some point it will settle down, but there are a number of crypto currencies that have gone under... there is also nothing preventing someone else to start a currency... heck, Venezuela just started one that is 'backed' by their oil!!!!


One last comment that I have made before... if it is supposed to be a store of value you actually want that value to be stable.... I think anybody on here will agree that right now bitcoin does not have a stable value... so I will say that using 'store of value' by anybody is a crock...


Here is a list...

https://en.wikipedia.org/wiki/List_of_cryptocurrencies

 

[tinlizzy]

Am I a bad person because I chuckled at these two situations?

i thought it was funny too...and sad

WE mined bitcoin 4 years ago and made $. Every time it gets high we cash a little out. WE cashed some out at close to 20k and are holding the rest like we always do. When we started we invested a very small amount that we could afford to lose. At this point we have made 50k and my son double that. No matter what happens down the road we are good with it.

That makes me so happy that you made money and so did your son! What a great start for him!

 

[tinlizzy]

One last comment that I have made before... if it is supposed to be a store of value you actually want that value to be stable.... I think anybody on here will agree that right now bitcoin does not have a stable value... so I will say that using 'store of value' by anybody is a crock...

This

I just don't think I can wrap my head around an economy where the value of a currency is constantly changing. How would you know what to budget or save, ask for in wages?

 

[flintnational]

.............Well, google tells me that the worlds total wealth is $241 trillion. 1% of that is 2.4 trillion which would put bitcoin at 114K/coin (if my quickly done math is correct, assuming all 21 million coins mined.

We could then divide the $114K by the 1,500 competing crypto currencies and that would give us a value of $76 per bitcoin. Sell, sell now!

 

[Totoro]

I just don't think I can wrap my head around an economy where the value of a currency is constantly changing. How would you know what to budget or save, ask for in wages?

Tricky and painful. Ask citizens of Egypt, Ukraine or Venezuela. I think mostly they don't save, spend immediately on durable goods and staples, and benchmark to other currencies or goods.

Price stability is a very important 'good'. Without it it becomes hard to manage a decent economy.

 

[joeea]

What is the "value" of a dollar bill? It's value is in trust, that it can be redeemed for goods and services, and represents a store of wealth.

There is a lot of distrust of governments who issue fiat currencies. Not only in the United States but across the world. Thus the hunger for some place where wealth can be stored without as much government interference.

If you don't trust your dollar bills, feel free to send them my way.
I'm willing to trust cash for you.

 

[jim584672]

Bitcoin is the world's largest bubble and we are seeing it collapse in real time.

 

[nerdyJON]

Bitcoin is the world's largest bubble and we are seeing it collapse in real time.

I beg you all please do not use Bitcoin as an investment. Its a modern day pyramid scheme when you boil it down. There is no sense to valuation of bitcoin. The value is rather the block chain technology.

Think Beanie Babies, Pokémon cards, etc. These were all bubbles, but instead of Beanie Babies and Pokémon cards, Bitcoin is further fueled by "FOMO" and "keeping up with the Joneses." Basic economics, supply and demand. Supply is constant so price is driven by demand and the more demand people generate the higher the price hence why you have all probably heard of someone that put $X in and got $XXX,XXX back.

 

[OldShooter]

I am not concerned about Bitcoin buyers. We have so few Darwinian selection mechanisms left. ...

 

[CaptTom]

...OH, and if I die and did not give my password to anybody it is also lost...

You hear the stories of a friend-of-a-friend who "lost" the file or password that would have made them a billionaire... if only...

I wonder if anyone knows how many of these "lost" bitcoin are out there.

It seems there ought to be a lot of them. And a lot of money to be made by anyone who could recover them.

 

[flintnational]

You hear the stories of a friend-of-a-friend who "lost" the file or password that would have made them a billionaire... if only...

I wonder if anyone knows how many of these "lost" bitcoin are out there.

It seems there ought to be a lot of them. And a lot of money to be made by anyone who could recover them.

I listened to this NPR Planet Money podcast over the weekend. IIRC, they had an expert that estimated between 10% and 20% of bitcoins had been lost forever and could not be recovered. They were using some kind of rule of thumb that I do not recall.

 

[tinlizzy]

You hear the stories of a friend-of-a-friend who "lost" the file or password that would have made them a billionaire... if only...



I wonder if anyone knows how many of these "lost" bitcoin are out there.



It seems there ought to be a lot of them. And a lot of money to be made by anyone who could recover them.

haha...my sister's boyfriend is offering a reward of 2 bitcoins, from the 6 in his wallet, to anyone who can get the p/w out of his ex gf without tipping her off.

 

[Texas Proud]

You hear the stories of a friend-of-a-friend who "lost" the file or password that would have made them a billionaire... if only...

I wonder if anyone knows how many of these "lost" bitcoin are out there.

It seems there ought to be a lot of them. And a lot of money to be made by anyone who could recover them.

Or they are lost forever... when my brother was here over Christmas, he said he had a few coins, but he thought he had left them on his company's computer (he traveled so used theirs for everything).... did not think about that when he turned it in... probably wiped forever....

 

[sengsational]

haha...my sister's boyfriend is offering a reward of 2 bitcoins, from the 6 in his wallet, to anyone who can get the p/w out of his ex gf without tipping her off.

That's a good one! I'm still searching for that thumb drive with $5 worth on it. I don't think I'm going to find it.