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Can someone explain to me how investing in cryptocurrency is any different than

5,636 Views | 96 Replies | Last: 6 yr ago by SACR
SACR
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AG
investing in commodities like gold or silver, or just speculating on currency on the Forex?

Investing in bitcoin or ethereum or litecoin is no different than speculating on the dollar or the yen or on gold.

Gold and silver really aren't investments in that there is no growth outside of price. Physical gold or silver doesn't pay dividends or earn you more gold and silver in the future, so you're just left hoping the price continues to go up.

Likewise, buying bitcoin or ethereum or litecoin doesn't pay dividends or earn your more coins over time, you just sit there and hope the value goes up.

As such, they're poor investments, and no different than speculating on currency or commodities.
redsox34
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Lol this should be good.
Ragoo
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A commodity you can hold and see and know practical consumable applications. Currency is backed by a government.
wheelskjm
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Sorry guys, too many bitcoin threads on the board. Stop promoting a ponzi.
dc509
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wheelskjm said:

Sorry guys, too many bitcoin threads on the board. Stop promoting a ponzi.
Yeah, that's an exceptionally myopic view. It may not be bitcoin specifically, but crypto currency is eventually going to be a big thing. People who doubt that are going to end up on the same corner as the people who thought personal computers would never be a thing, or that companies on "the internets" were all smoke and mirrors.

Just to clarify, I've never bought any.
ebdb_bnb
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He's the biggest cheerleader for cryptos.
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DallasAggie0
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I've bought ethereum because it will make me rich
1876er
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More like investing in beanie babies or pogs
dlp3719
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You "own" dollars as a store of value right?

Most every government puts out money. People use it as store of value.

Governments manipulate that store of value, governments default, governments revalue currency, etc. In some countries it sucks. India recently did a big crack down on the black market through cash and deeming some cash as no longer valid.

Crypto is a currency without the government involved to start. Many people in the world have bad experiences with currency and governments.

Lots of money leaving Asia into crypto right now. It also allows for much more (smart contracts, apps, etc)

Seems it is here to stay.
wheelskjm
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Eh, barclay, I'm glad you're interested. Maybe you can get Staff to undelete an ethereum specific thread I started back in Feb when it was tradin at $12.
wheelskjm
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1876er said:

More like investing in beanie babies or pogs


I love this. I think I'll put this quote next to my "bitcoin is dead" poster.
Cancelled
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A guy on CNBC was saying this bitcoin is not a currency, but rather a commodity. He stated this because with the exception of the internet, you really can't spend bitcoin...this was after a woman tried to live on bitcoin for a day in NYC. She was paying exorbitant premium fees. He said bitcoin was like gold...it's got worth, but try spending it.
wheelskjm
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Well I have friends that have been living on bitcoin (or other crypto) for 2-3 years now, as their only form of income. It's easier than it has ever been before to live solely off bitcoin/crypto.

For whatever that is worth.
bigcat22
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I believe I posted on an older Bitcoin thread about my BIL's Bitcoin ATM company, CoinSource. I know he is doing very well with the new popularity of cryptos (7% ATM transaction fees and the ever rising price of Bitcoin aren't hurting either). Every time I talk to him I'm facinated by the whole crypto world, I'm just not 100% sold that it's nothing but a proof of concept at this point.
wheelskjm
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What % are you sure it's more than a proof of concept?

What % are you sure that fiat money will always exist?
wheelskjm
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Cancelled
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How? If he wants a bottle of water when he's out, his does he pay? What if he wants a beer at a bar? Seems very limiting.
Al Bula
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wheelskjm
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https://www.forbes.com/sites/laurashin/2016/01/07/this-man-has-been-living-on-bitcoin-for-3-years/
SACR
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I guess places that accept bitcoin have to possess the technology that allow them to slice off a uBTC or two.
SACR
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wheelskjm said:

https://www.forbes.com/sites/laurashin/2016/01/07/this-man-has-been-living-on-bitcoin-for-3-years/
Quote:

He instead receives a dollar-denominated salary, converted to Bitcoin at the time of payment.
This sounds like a poor plan.

If he was getting paid in straight Bitcoin, great, he's getting paid in cryptocurrency. But getting paid a dollar-amount-converted-to-Bitcoin means he's subject to market fluctuations, and may receive more or less BTC week to week.
Diggity
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bitcoin is a lot more volatile than the dollar, which is why he is pegged to the more reliable currency.
Duncan Idaho
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I like the commodity vs currency take on it. But at least we have moved past the point where people so ignorant that they were claiming it was the ultimate fiat currency.
wheelskjm
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Diggity said:

bitcoin is a lot more volatile than the dollar, which is why he is pegged to the more reliable currency.
In economics, Gresham's law is a monetary principle stating that "bad money drives out good". For example, if there are two forms of commodity money in circulation, which are accepted by law as having similar face value, the more valuable commodity will disappear from circulation.

Fiat is "bad money" in this scenario.
Diggity
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let's hear more about your theory on derivatives.

Wildly volatile "currency" is not a good thing unless you're a trader
Latigo
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I don't know anything about crypto currency but I'm trying to understand it.

So how does this work? Someone creates a crypto currency and sells it to someone else for dollars because the dollars really don't have much value? The sales pitch doesn't seem to make sense. What am I missing?
wheelskjm
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Start with learning how the internet works, the history of money, game theory, Internet of Things, distributed systems, economic theories, physics and cryptography.

Or just assume other people have already, otherwise it would be if zero value.
Serotonin
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dlp3719 said:

You "own" dollars as a store of value right?

Most every government puts out money. People use it as store of value.

Governments manipulate that store of value, governments default, governments revalue currency, etc. In some countries it sucks. India recently did a big crack down on the black market through cash and deeming some cash as no longer valid.

Crypto is a currency without the government involved to start. Many people in the world have bad experiences with currency and governments.

Lots of money leaving Asia into crypto right now. It also allows for much more (smart contracts, apps, etc)

Seems it is here to stay.


All true, but the reason for the dollar being valuable is simple: We have to pay taxes with it, and if we don't the men with guns come for us. Cryptocurrencies and commodities don't have the same attribute.
ebdb_bnb
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Diggity said:

let's hear more about your theory on derivatives.

Wildly volatile "currency" is not a good thing unless you're a trader
He can't explain this. When he can't pay his landscaping bill because his btc moved 20% lower in a minute and half, he might figure it out.
dlp3719
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Dollar is the world's reserve currency. You are earning and spending in a good currency (though there are faults). Think globally.

Remember when Greece closed their banks and took deposits over a certain amount?

Can you imagine living in 40% inflation in Argentina?

In communist China or Russian where people worry about getting their money taken?

It's easy for people to move to crypto to protect their money from their local government. In the US, you may not have that need right now. Others do.

The US government will never pay back its debt on a real basis nor will they ever default. At some point, we will inflate away our national debt. When that currency manipulation comes you may not like your USD as much.

Ulrich
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wheelskjm said:

Start with learning how the internet works, the history of money, game theory, Internet of Things, distributed systems, economic theories, physics and cryptography.

Or just assume other people have already, otherwise it would be if zero value.

Here's the thing. I'm probably roughly in the top 1% of Americans in understanding each of those things with the exception of cryptography (keeping in mind just how low the bar can be; that's more of a commentary on the average person than on myself), yet I don't get why cryptocurrencies have any inherent value.

Your last sentence is wildly unconvincing, I don't invest based on trusting that other people have worked it out. That's a good way to lose a lot of money really fast.

So basically, I'm stuck with this vague idea that cryptocurrency is either the next internet and I'm losing a fortune standing on the sidelines... or it's Dutch tulips. Or maybe it's somewhere in between: the internet circa 1999 and the techies and enthusiasts are prematurely bidding it up not realizing that (a) the supporting technologies and infrastructure aren't there yet, and (b) the great unwashed masses are at least ten years away from integrating it into their lives to the extent that webvan can make money. The dangers of trusting the tech without realizing the importance of the human element and other practical concerns.

As for value: I understand the value of commodities, commodity-backed currencies, and fiat currencies, but so far haven't come across a paragraph that explains in layman's terms why cryptocurrency is anything but a shared delusion. The words sound harsh, but I'm trying to make a point more than I'm dismissing the tech. Until the value and safety can be articulated so the layperson can understand, it's not going to be adopted as a true currency and will remain a fringe speculation. A stock's value can temporarily be incorrectly valued due to these shared delusions, but in the long run they come out to discounted expected cash flows, which may be mathematical estimates but at least they make sense.

One of my main concerns is what sort of protections there are against counterfeiting. USD is protected by men with guns as well as physical technologies that I can see and touch. I have several thousand+ dollar computers with diverse, complex security, yet I still have to worry about any information on any internet-connected device.

The really weird part is that I WANT non-state currencies to work. It would fit in nicely with my basic economic theory and libertarian leanings, I'm just not sure it would actually work with the army of people out there corrupting and infiltrating every system they can get into for financial gain or sheer perversity. It's hard enough to trust that they won't crater currencies backed by the government, given how much activity is purely electronic now.

Ps- the new Android predictive text is killing me, so this was exhausting to write. Apologies for gross errors.
wheelskjm
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Ulrich, what resources have you chosen to begin understanding bitcoin/crypto? I can link the bitcoin white paper since you have the background to grasp the concept. I'd start there and fill in the gaps by googling from that point.

Your questions are basic though.
wheelskjm
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Quote:


One of my main concerns is what sort of protections there are against counterfeiting. USD is protected by men with guns as well as physical technologies that I can see and touch. I have several thousand+ dollar computers with diverse, complex security, yet I still have to worry about any information on any internet-connected device.


You should just Google "how to double-spend with bitcoin"


Edit:
Ulrich after re-reading your posts, do learn about "double-spending", 51% attacks, and "proof of work", and if you haven't heard those terms, I'm sorry but you really have done next to no research on the tech, and I can completely understand why you don't place any value in it.

https://en.bitcoin.it/wiki/Double-spending
wheelskjm
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Latigo said:

I don't know anything about crypto currency but I'm trying to understand it.

So how does this work? Someone creates a crypto currency and sells it to someone else for dollars because the dollars really don't have much value? The sales pitch doesn't seem to make sense. What am I missing?


Someone creates a new protocol, Like http, that allows direct transactions of provably scarce digital resources(tokens). The tokens which are provably scarce have a basic value, just like baseball cards, due to scarcity and inability to counterfeit. In Bitcoin's case, they require large amounts of computational resources called "mining" which uses "proof of work" to verify transactions moving across the bitcoin network, like banks verify that you have money in your account when you swipe you debit card.

Some people find cryptocurrencies to be valuable because they don't like inflationary Zimbabwe paper money, some people like that it increases in value over time where their paper money decreases in value over time. Some people just want to watch the world burn. Regardless people globally are increasingly trading their fiat monies for cryptoMonies.

You should probably spend a few weeks, an hour a day, reading about it. Or acquire some yourself as it makes more sense when you play with it than if you read some CNN crap article.

Can you explain the sales pitch on why I should sell my cryptocurrency (which is 100x more than I invested) for the good old greenbacks? Someone sell me on the USD. What is the value it represents? I don't understand USD, what's the pitch? Who controls it? Can I trust that if I hold it long enough it'll retain it's value or will it always be worth less than it was before because our govt needs to control our spending habits and incentivize us because they know what is best.

I'm sure someone here can help me out figuring out why the USD or Chinese yuan are so valuable. If your response is "taxes" that's not even true in some countries like Japan.


Why did I spend the time to type this out on my phone, fml.
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