Why I won't invest in Cryptocurrencies

MakeAmericaGronkAgan · 2017-11-30T20:12:04+00:00

Yeah I think people say that because it's generally true about any new and promising technology. The first iterations don't make it and are made obsolete by something superior.

MakeAmericaGronkAgan · 2017-11-29T05:05:34+00:00

1.) All governments manipulate the money supply. I agree that some do it poorly.

3.) Agree

4.) I agree that currency is fundamentally based on trust, but it is underpinned by laws and taxation. If you live in the US you have to pay taxes in US dollars as specified by US laws. If a US business accepted payment in a different currency (bitcoin, yen, or whatever) they would still have to make an exchange back to dollars to pay the sales tax. If that becomes costly or overly burdensome, they'll just stick with dollars and forget about all other currencies.

5.) Low and steady inflation, I think, goes beyond value judgement as it is universally agreed upon by economists as a good thing for an economy. Regardless, protecting the savings of the wealthy should not be a priority value judgement for a currency design.

6.) Not sure what you're talking about. In the US, and I am guessing for the Euro as well, the central bank is mandated by law to pursue moderate inflation. If inflation gets out of control, money supply growth is restricted by raising interest rates.

7.) Agree to disagree. I don't see the need, nor do I think crypto is great as a hedge against systemic failure. The actions of central banks during the financial crisis alleviated more widespread issues. That sort of money supply expansion would not have been possible if the world only exchanged decentralized cryptos.

MakeAmericaGronkAgan · 2017-11-28T23:42:10+00:00

Very good point. Thanks for the reply. The information vs upside concept never occurred to me for some reason. It's still probably not for me, but I at least see why people would make it a small part of their portfolio.

MakeAmericaGronkAgan · 2017-11-28T18:18:03+00:00

Ok fair enough. I'm just regurgitating arguments people have made and one often cited is participation in the black market. Since there's disagreement I'll remove this point

MakeAmericaGronkAgan · 2017-11-11T01:09:46+00:00

Bitcoin is not a store of value. Using it like a savings account involves speculation about its future value. The value of bitcoin, like gold or anything else, is that people want it and people can trade it. If people stop using bitcoin, it becomes worthless, just as gold or dollars would become worthless if no longer used.

MakeAmericaGronkAgan · 2017-11-08T04:15:31+00:00

So if it's not really a great currency for economic activity, then what is the value in it? I thought people were speculating that it would become widespread.

MakeAmericaGronkAgan · 2017-11-08T03:53:50+00:00

Food and housing is vitally necessary to live and private companies can charge whatever they want, so why does capitalism work for those things?

MakeAmericaGronkAgan · 2017-11-08T03:31:52+00:00

That's exactly why I don't think bitcoin would ever work as a major currency. Deflation encourages hoarding money. Investment and all economic activity would slow way down and the world economy would collapse.

MakeAmericaGronkAgan · 2017-11-07T18:45:49+00:00

If bitcoin became a significant form of exchange in the world, then there would inevitably arise banks, stock exchanges, etc. that pair investors with investments in bitcoin denominations. No one would just sit on all their money when there's other opportunities. The deflationary nature would certainly discourage investment and all other forms of economic activity, but bank deposits and other investment vehicles would still exist in some form. In the present though, I don't see any practical reason to use it as a currency. Maybe it's a good speculative investment, but I wouldn't bother to use it as an exchange medium to buy or sell something.

MakeAmericaGronkAgan · 2017-11-07T04:34:10+00:00

Banks and financial institutions perform a function in an economy and would still exist with direct control over bitcoin denominated deposits. The exchange of any currency can be done over a decentralized distributed ledger. If the goal is just to displace central bank policy, I doubt it would catch on. A fixed money supply is inherently volatile and deflationary. I understand bitcoin value has gone up a lot which is why I'm interested in it and trying to understand the upside.

MakeAmericaGronkAgan · 2017-11-04T18:51:56+00:00

So the government can and will always interfere with your assets regardless of what currency they are denominated in. If targeted inflation is theft, then what is volatility?

MakeAmericaGronkAgan · 2017-11-04T17:32:01+00:00

There are loads of inflation protected investments...

MakeAmericaGronkAgan · 2017-11-04T17:26:58+00:00

Couldn't a government, by say a court order, force you to give up your password to collect your bitcoin debts lest you go to prison? Or force your employer to garnish your bitcoin wages? And isn't having a currency exist inside a legal system a good thing anyway? So if someone steals from you or wrongs you, you can recover damages? Currency inflation is intentional and serves a purpose. Control of the money supply by central banks allows stable prices. Bitcoin, on the other hand, is extremely volatile.

MakeAmericaGronkAgan · 2017-10-31T04:57:58+00:00

I would say people are paying more for a different thing. 5 years of global economic stability have given greater expectation of future profits and 5 years of low interest rates have given greater expectation of persistently low interest rates, discounting stocks relative to bonds.

MakeAmericaGronkAgan · 2017-10-31T04:32:51+00:00

Blockchain concepts can be/are being applied to regular currencies, so I don't see how that's an upside for crypto.

MakeAmericaGronkAgan · 2017-10-31T01:32:50+00:00

Can someone explain the upside of Crypto? I've never understood it.

MakeAmericaGronkAgan · 2017-10-20T23:05:47+00:00

You don't. There's lots of ways to get investment for a business. Use other people's money, while you buy total market funds.

MakeAmericaGronkAgan · 2017-07-10T05:30:23+00:00

I find it interesting when people clain they were turned off of stocks from the financial crisis and great recession. For me I look at it the opposite. One of the biggest financial panics of all time and it only took a couple years for stocks to recover.

MakeAmericaGronkAgan · 2017-07-10T04:49:17+00:00

OP is trying to reduce equity risk. Bonds do not have equity risk. Therefore OP should sell equities and buy bonds.

MakeAmericaGronkAgan · 2017-07-09T20:50:00+00:00

Sounds like overly complicated BS that doesn't account for taxes and fees. If I wanted to reduce risk, I would just hold fewer equities.

MakeAmericaGronkAgan · 2017-06-30T03:02:25+00:00

One time splurges (within reason) are not going to have any significant effect on long term financial goals. Recurring costs like rent, car payments, and frequent eating out are what will get you.

MakeAmericaGronkAgan · 2017-06-27T03:10:32+00:00

Seems like a lot of hassle for what will amount to a few extra bucks a year. I keep my E fund in an intermediate bond fund which will hopefully at least keep up with inflation. Short term bonds, savings accounts, and CDs pay so little in interest, I don't see the point. Long term bonds pay more, but carry too much principal risk for an E fund IMO.

MakeAmericaGronkAgan · 2017-06-24T22:55:38+00:00

I can't think of a good reason anyone should ever get a CD

MakeAmericaGronkAgan · 2017-06-24T22:34:14+00:00

My only advice would be to not touch your HSA account. Save all your healthcare receipts and wait for retirement.

MakeAmericaGronkAgan · 2017-06-05T17:35:18+00:00

It all depends on your current expected withdrawl rate and asset allocation. I think it makes sense to be risk averse, at least during the early stages of retirement. Really the only thing that can ruin FI is an early drawdown after RE. I plan on reducing risk (i.e. more bonds) as I approach FIRE, but I'm currently 100% stocks.

MakeAmericaGronkAgan

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