Author Topic: Bitcoin-too late to the party?  (Read 3882 times)

mattee2264

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Bitcoin-too late to the party?
« on: December 13, 2017, 02:55:22 PM »

  Bitcoin is all over the papers and magazines. You now have adverts for crypto trading sites on the metro. It enters into everyday conversations. And the price has gone parabolic from $1,000 to almost $20,000 in just one year. I was interested in the summer but it had already had a good run and as it had a prior history of crashes I figured it would be safer to pick up a few coins once the price halved. But I never got my chance. So I figured I missed out.

 But another poster on here commented his friends were expressing similar sentiments and calling it a bubble. And the media coverage is also pretty skeptical. And it is still a bit of a hassle investing in these things. And fiduciaries certainly can't do it. And I don't think people are pulling money out of their tax sheltered pensions or remortgaging their houses to invest in these things (aside from a few crazies who obviously make headline news). And the market cap is still relatively low so it is not as if everyone is buying it. And it is still not institutionally recognized as a separate asset class. And maybe there are people thinking they missed it who willl be suckered in if prices continue to rise.

 Obviously it is pretty much impossible to value and for now at least these are primarily speculative vehicles. So you are playing the greater fool game. So it is crazy to invest more than you could comfortably afford to lose and take a philosophical approach about. But this game of enjoying a nice ride and then selling on to the next guy who also enjoys a nice ride etc etc can go on for some time especially in a global economy. And maybe the fact that it has become more mainstream and accessible means the game can go on a bit longer. In the past when it was less mainstream it seemed to make some progress and then crash when an obstacle to its adoption was presented.

 I dunno really I am just thinking aloud. But it is interesting when guys like Bill Miller and Murray Stahl are still on board and very bullish.

 

 

 

 

 

 


rkbabang

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Re: Bitcoin-too late to the party?
« Reply #1 on: December 13, 2017, 03:05:41 PM »
I donít expect 20X returns in 2018, but I am still bullish on its prospects. But I didnít expect 20x gains in 2017 either and here we are. Your guess is as good as mine. Maybe it will be back at $100 this time next year or $100,000.

netnet

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Re: Bitcoin-too late to the party?
« Reply #2 on: December 13, 2017, 03:17:00 PM »
Well there is no way to value it, so basically you are trying to estimate demand, hence it is Keynes's beauty contest problem.

In that case you are not judging what contestant you think is beautiful rather, you are try to guess what contestant other judges will deem beautiful, then trying to assess what they assess others will find beautiful, and so on recursively. In hindsight everything is of course is obvious, but prospectively....

Voodooking

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Re: Bitcoin-too late to the party?
« Reply #3 on: December 13, 2017, 03:18:19 PM »
Bitcoin is not an investment, it is speculation.

I personally think it is akin to a pyramid scheme. I would not advise investing / speculating any more than 1% of your net worth in it, and if you are interested in financial gain (which you obviously are given that you are posting on here, I would advise reading You Can be a Stock Market Genius; The Intelligent Investor, and the Buffett Partnership Letters.

mattee2264

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Re: Bitcoin-too late to the party?
« Reply #4 on: December 13, 2017, 03:32:41 PM »
  What do you think the chances are of some kind of shake out? Presumably the more recent buyers aren't blockchain fan boys with an almost religious faith in the technology and could be scared out of their positions. And I guess the options thing means traders can short it now and for the innocent there is nothing scarier than seeing easy gains evaporate. And for now at least it is in the interests of financial institutions to see this thing fail or at least for people to lose interest and stick to their 60/40 stock/bond portfolios.

 And yeah as I made clear in my original post I am fully aware these are speculative vehicles and 1% was about the amount I'd commit if I did decide to have a flutter.

Partner24

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Re: Bitcoin-too late to the party?
« Reply #5 on: December 13, 2017, 05:00:30 PM »
History repeating itself. Human nature at work.

SnarkyPuppy

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Re: Bitcoin-too late to the party?
« Reply #6 on: December 14, 2017, 02:53:57 AM »
The immediate kneejerk reaction of "bubble" continues to keep me interested.  No debate that this is inherently speculation/gambling (as opposed to investing with a margin of safety) - but simply because something is speculation does not warrant immediate rejection (in my opinion). 

If you're offered the opportunity to bet on a 50/50 coinflip with a payout of +$1000 if you win and -$100 if you lose, it would be irrational not to take the bet, despite the fact that this is quite literally gambling without a margin of safety.

I think the kneejerk reaction of calling bitcoin a tulip misses the point.   The 'gamble' has become less attractive at $16k, but the replacement of gold as a flight to safety store of value is a sound thesis.   The lunatics of the world have proven there is a $7tn demand for this type of asset (it's not a currency) - and what better attribute to have in a flight of safety asset than a decentralized coin which cannot be tampered with by the government?   It's perfect for gold freaks (long term).   

Bitcoin today is valued at $277bn market cap.   If there's a >= 4% of bitcoin replacing gold, this is a "good bet".   Not investing, but a good bet.   At $1k per bitcoin, the breakeven was >= ~0.3%.   Those who saw this without screaming bubble made money.   

In the short/medium term, I also would be keeping a close eye on the impact of institutional liquidity flooding in to an asset which today only trades at 1x the daily volume of Apple.   In some ways this is a reverse bubble in that retail is first to hold the bag.

I've sold some as the expected value has gone down, but I would be absolutely thrilled to buy more at a certain price.
« Last Edit: December 14, 2017, 02:56:43 AM by SnarkyPuppy »

mattee2264

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Re: Bitcoin-too late to the party?
« Reply #7 on: December 14, 2017, 04:17:05 PM »

   What is the significance of the futures contracts being launched on the CBOE and soon the CME (with perhaps exchanges in other countries to follow)? My understanding is that easily tradeable derivatives available to institutions allow big levered bets in both directions and being cash settled they could avoid the complications of actually owning bitcoins and associated custody issues etc.

   Has leverage been much of a feature in the run up to date? Presumably some of the bitcoin brokerages allow you to buy on margin. And of course there is little to stop people taking out a personal loan and promptly putting it into bitcoin.

    My issue with the flight to safety store of value argument is the volatility. Do you see the institutional liquidity/futures markets increasing or reducing that volatility?

 

   

SnarkyPuppy

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Re: Bitcoin-too late to the party?
« Reply #8 on: December 14, 2017, 06:41:55 PM »

   What is the significance of the futures contracts being launched on the CBOE and soon the CME (with perhaps exchanges in other countries to follow)? My understanding is that easily tradeable derivatives available to institutions allow big levered bets in both directions and being cash settled they could avoid the complications of actually owning bitcoins and associated custody issues etc.

   Has leverage been much of a feature in the run up to date? Presumably some of the bitcoin brokerages allow you to buy on margin. And of course there is little to stop people taking out a personal loan and promptly putting it into bitcoin.

    My issue with the flight to safety store of value argument is the volatility. Do you see the institutional liquidity/futures markets increasing or reducing that volatility?


Not sure I understand the volatility argument.   There's naturally going to be volatility in a new asset class as it becomes a store of value.   We're valuing the future state which is why the bet is so asymmetric.  If it hits $7tn, it won't be volatile.   Volatility has actually decreased as the price has risen over time.   

There's an interesting phenomenon in bitcoin where the bulls generally have an intricate understanding of the value proposition and underlying aspects of the technology (and breakthough) and bears have very limited understanding largely due to kneejerk reactions.   

Paarslaars

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Re: Bitcoin-too late to the party?
« Reply #9 on: December 14, 2017, 11:33:56 PM »
There's an interesting phenomenon in bitcoin where the bulls generally have an intricate understanding of the value proposition and underlying aspects of the technology (and breakthough) and bears have very limited understanding largely due to kneejerk reactions.

Maybe a very small % of the bulls actually understand the technology.
Most people are just jumping on the hype... recently had a friend (kind of a stoner, never invested in his life, does some football gambling) tell me he's concidering going into bitcoin as it seems like a guaranteed investment.  ;D