Well but how do you get the money to buy any bitcoin in the first place ?
You don't invest in crypto currencies, you join early enough to sell to the next level of the pyramid you convince via social media post :s
But well you're right to say people should balance portfolio, I however don't see the value of the lottery, it's like paying taxes twice, with no chance of winning ever. At least bitcoin slowly loses value, a lottery ticket will lost its entire value a few days after purchase in 99.9999% of cases
Bitcoin slowly loses value? Even those who bought the very top in 2017 have more than doubled their money if they didn't sell. Bitcoin, when it does lose value, loses it very quickly but on longer time horizons nobody has ever lost money by holding bitcoin for 3+ years. That being said, buying at current levels is extraordinarily risky and more equivalent to gambling than anything else.
The expected ROI of the lottery is so low though It's hard to take someone seriously that mentions playing the lottery as an actual smart financial move.
People doubled their money on paper in unrealized gains. But since Bitcoin is being sold as a store of value and not as a medium of exchange nowadays, if you want to realize that value you need to sell. Where's that cash coming from? Other buyers, i.e. the next layer of suckers as indicated in OP's post. And if enough people decide to sell, then those doubled/tripled/etc values aren't going to last very long.
Note I'm not saying that it's not possible to win in this system - clearly some people will, at the expense of many others. Perhaps it's my own ignorance, but I genuinely struggle to see how this isn't a zero sum game.
Same's true of gold, silver, or cash-settled fresh bacon index futures. Consequently such commodities tend to have long-run zero returns, or returns that just equal the per-capita GDP growth rate, depending on how you look at it. I've watched people lose fortunes at that poker table.
The fresh bacon index is maybe less exposed to this kind of thing because, unless the world mass-converts to Judaism or something, someone will pay to eat bacon, so there's a floor on how low the value can go. But gold? Industrial use of gold is minuscule compared to speculative gold trading. Today GC trades at US$1773 per troy ounce, which is 10% down from a few months ago, late 02020, and 100% up from 02008. In 02001 it was barely above US$200. It could drop to US$200 again, and everyone who bought today and held will have lost 80% of what they invested.
That can happen with fresh bacon, too. What's different with gold is that, if enough people decide to sell, it could drop to US$20. It could drop to US$2. Or it could rise to US$20000. We have more history about gold: it's been a precious metal for many millennia and a widespread currency for the last three. So it's a lot less likely for it to lose 99% or 99.9% of its value like that, or go up 100× (though, as I said, it's gone up very close to 10× in a mere score of years.)
People — and, especially, central banks and governments — invest in gold because they dont think it's likely for that to happen, and because it doesn't have the secular inflationary tendency that fiat currencies do. It may bounce up and down by a factor of 10 in a couple of decades, but in 01687 it was probably also within that same factor-of-10 band.
They're not looking for an expectation of profit when they seek a "store of value".
They're just looking to reduce the risk of indigency.
Well, no comment on if they're suckers or not, but I think this is a misunderstanding of what a share in a company is. With a share, you own something with actual tangential value, i.e. claim on dividends/voting rights/cash flow/etc. Plus the company itself can actually go and do valuable things and make money - Apple can go and sell a bunch of iPhones and make a ton of money, and then reward their investors through dividends, buybacks, etc. That's not zero sum, there was something of value created and provided to the world. I do understand that in reality many people play the stock market like it's a casino, but that doesn't change the fact that it's still fundamentally different.
> The value of a stock is the present value of all future dividend
That is an idea from the 70s. Not many people would agree that there is an actual fair value for a stock anymore, much less that it is driven solely by accrued future dividends.
> No, that is an idea from economics predating the 1970s. Did you mean the 1870s? It predates that.
It really depends on what level of formalism you consider to be the basis of "the idea". I'm referring to the "dividend discount model" (DDM) here, which to me is the first real well defined model of this idea in modern economy. Exposed in early 60s and democratized in the 70s:
"The dividend discount model (DDM) is a method of valuing a company's stock price based on the theory that its stock is worth the sum of all of its future dividend payments, discounted back to their present value."
Stock buybacks are more tax advantageous to investors than dividends. The price goes up and you sell some shares and pay long term capital gains if you’ve held for more than a year. This is cheaper than paying income tax on dividends.
Crypto provides global access to a decentralized, permissionless, censorship resistant financial system. Bitcoin provides a savings vehicle that has a completely predictable and transparent supply. That's very valuable.
Why do you care so much about predictable supply if the price is anything but predictable? How is such high volatility commodity a good storage of value? It might be a good speculation vehicle, but people looking to store value typically look for something more stable.
It remains to be seen how resistant Bitcoin is if powerful governments really decide to take it down.
Bitcoin and Blockchain is an interesting project but 1 BTC > 50k USD... Yeah, sure...
> Why do you care so much about predictable supply if the price is anything but predictable?
Because the price will go higher. When the price goes over $x MM per BTC it will be very predictable.
> How is such high volatility commodity a good storage of value?
It stores more value than any other commodity. When the stock market started in 1920s it was no less volatile than Bitcoin. Volatility is a sign of disruption as much as it is a sign of value.
"Because the price will go higher" isn't really an answer. You can either explain it or you just have faith that it will do what you want. People could use that same argument for everything.
The stock market was never meant to be a way to store value but a public tool to finance and own projects that actually produce economic value. Comparing it to the bitcoin market is a false equivalence.
The NYSE was opened in the 1790’s and even in the 20’s stock volatility was significantly smaller compared to bitcoin, DJIA “only” grew around 5 times between 1920 and 1929 (so comparable to the decade between 2009 and 2020).
To find something on a similiar scale to bitcoin you might actually need to go back to the 18th or 17th centuries (see the “South Sea Bubble” or the “Tulip Mania”).
You don't invest in crypto currencies, you join early enough to sell to the next level of the pyramid you convince via social media post :s
But well you're right to say people should balance portfolio, I however don't see the value of the lottery, it's like paying taxes twice, with no chance of winning ever. At least bitcoin slowly loses value, a lottery ticket will lost its entire value a few days after purchase in 99.9999% of cases