Monday, October 16, 2017

Can Bitcoin be considered a Good Investment?

I have to admit, since I've gone full crypto-tard, I've been spending less and less time reading about the stock market and following local blogs. I've been a zombie for the last few months devouring and learning about the crypto-markets like crazy.

However, I saw these posts by B from 3Fs and Uncle CW8888 about what is a good investment and I'd thought I'd throw in my 2 cents on a particular "investment asset" that people are talking about these days, and one which I consider myself to be more familiar with than 99% of the population.

The basics

No, not the basics of bitcoin. But the basics of what I consider to be a good investment. A good investment has only simple quality in my opinion:

Future value of investment (and all its payouts / divdends) will be higher than current value

Some people are yield focused. Some people are capital gains focused. I'm into total returns. I do have a preference for yield though, but in all honesty, I rather higher total returns.

Therefore are collectible stamps an investment? Gold, silver? Pokemon cards? Autographs of famous people? They have no cashflow. But yes, they are investments. If you don't think so, you're a yield-tard. Take off your bias glasses and admit that though it might not be YOUR most comfortable style of investing, it is a legit investment.

Why Bitcoin

Is Bitcoin a ponzi? No.
Is the value of Bitcoin a ponzi? Maybe.

Bitcoin does not need more and more money pumping into it to stay alive and continue existing. Bitcoin exists, regardless of the value of each coin. It has no idea what it is worth. It just exists.

The value of bitcoins is another thing though. And it keeps going higher and higher and higher. Why?

Bitcoin cannot be tainted or manipulated.

This means that no single authority can suddenly create more bitcoins out of thin air. When people talk about bitcoins, they like to use "scarcity" to justify it's value. I might be disagreeing on technical definition, but to me the value of bitcoins comes from the fact that NO ONE can add more bitcoins into the system that what all users have already agreed on.

This means no QE. No money printing. No magical inflation. None of all that governmental interventionist crap. It is what it is, and no single user can overrule the fundamental rules of bitcoin. The only way to change this is to get the majority of stakeholders to agree to a change. And as stakeholders, you can be rest assured that they will only agree to changes to enrich themselves, NOT to dilute their holdings and end up with less value.

Bitcoin is not governed by governments, officials, central banks, or all these people who have no repercussions or punishment if they screw up with their experimental policies.

Bitcoin is governed by users and therefore everyone is forced to play by the same rules. No special surprises. Level playing field.

Bitcoin is permissionless and unstoppable

You do not need to apply for a bitcoin account.
You do not need to pay a minimum sum to open a bitcoin account.
You do not need to get security clearance or pass some KYC to open a bitcoin account.
You do not need permission to send money.
You do not need to declare when your value transfer is above a certain limit.
You do not need to ask questions when you receive money.
You do not need to justify from whom you received from.
You do not need to get permission to close your account and transfer away all your money.
No one can prevent you from making a transaction.
No one can prevent you from receiving a transaction.
No one needs to know your real identity to make a transaction.
Transactions takes within minutes to successfully be completed.
Transaction fees can cost just cents or dollars.

Is there a value to having a system of value transfer that is permissionless and unstoppable? I think that there is.

My thesis

The world is riddled with plenty of bad currency. It's a rotting and failing system that is going to collapse on its own weight. The idea of honest money is not some crazy and insane notion. It is what we used to have, before fractional banking and phony economics became the permanent feature of modern finance.

Bitcoin WILL be a global currency. Not only that, but it can also be a transitional currency for failing currencies with no backup plan (Venezuela is a key case study of this). A currency that no government can stop, control or manipulate. A currency where owners of it need not worry about hyper inflation or money printing. Along with it, it is also a global payment system with no third party, and all the benefits of peer to peer transactions.

There is value being both a currency and payment system that cannot be tampered with, that is true and honest, for every user, transmitting whether they are transmitting $10 or $10,000,000.

Ending note

While I am a strong believer of Bitcoin, I believe that a few other cryptos offer EVEN more compelling investment cases. I do own some bitcoin, but it is a very, very, very small portion of my portfolio.

3 comments:

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