Honestly, and this is coming from a Bitcoin bear, it will probably generate outsized returns in comparison to the S&P500 over the next 2 to 4 years. If it truly is a bubble then it will have a long way to run. The market cap at the moment is tiny, but probably too high to disregard now, and if institutional money starts buying in, it can probably easily go 10-20-30x again.
Don't forget it's still relatively hard for average folk to purchase crypto. But once you have acceptable ETFs and funds that you can purchase at a click of a button through your brokerage account -- a lot of people (and pension funds!) will probably allocate 1-2% of their portfolio to crypto. That is 1-2% of $300tn or so, or 30 to 60 times the amount of money in the space today (in terms of market cap).
If you think this bubble will run for a while, then I also think it's not unreasonable to assume you can multiple your initial investment by 10x by investing in either Bitcoin or Ethereum. But that's my opinion (and this is obviously not investment advice).
Whether it'll be around in 40+ years, I don't dare make that bet. But no one is saying you can't move money around to the better investment opportunity at a specific time.
That is the wrong measure. The counter argument to that is something like "How did going 100% all in to pets.com in 2000-2001 go?"
You cannot judge future performance by past results. That is the fundamental thing you need to understand before investing. Zoom in on the right part of 2000, and pets.com and a really nice upswing. There have been other stocks that had a nice and steady growth for years and years.. before exploding.
The SP500 has been growing consistently, has for quite a long time, and it's a bet on the future growth of the American economy. There will be ups and downs, but by enlarge, steady growth.
BTC has been on a wild ride, and could evaporate at any moment. I don't think it will, but it could, since there's no reason for anyone anywhere to own it.
There's no question the safer bet is S&P 500.
Now - in the range of outcomes, admittedly, the BTC owns the higher end of the spectrum - no doubt, there are possibilities where BTC completely outraces the S&P, however, it also owns the lower end of the spectrum of outcomes, where a lot of those outcomes are 0.
One fundamental of investing is that stocks represent an economically productive asset. In contrast, commodities just sit there. If I buy a chunk of a company, that company is working to become a bigger, more effective, more value-generating company. If I buy an ounce of gold, it stays an ounce of gold.
Index funds represent a broader bet still. Because they're composed of many things, volatility is lower and you're betting on whatever the common factors of the index are. So buying an SP500 index fund could easily be said to be a bet on the American economy.
And in many ways, Bitcoin is worse than gold. The historical value of gold is known. Bitcoin is new. Gold's floor price is set by the practical use value of it, both industrial and decorative. Bitcoin's floor price is that of bits. That is, zero. The gold market is broad, with producers and consumers all over the world, and open markets in many countries. Bitcoin is effectively controlled by a relatively small number of people and requires careful long-term cooperation of those people.
So it seems pretty obvious to me that Bitcoin is much higher risk. Which can mean higher reward. But as anybody who has shares in a failed startup knows, higher risk doesn't guarantee higher reward.
I beg to differ with regards to your valuation of Bitcoin. It, like gold, has a practical use value. It, also like gold, has a value attributed to it due to it's rarity. However, Bitcoin has an advantage over gold, in that it can be traded without having to be transported _at cost_. This is why so many people are bullish on it.
Oh, and so many people "who are in control of it" have too much of their own money invested into it to allow it to fail.
The advantage of gold over Bitcoin is that you can evaluate the non-"it's gold!" uses of gold and make a good guess of its floor value, what it'd be worth if people weren't hoarding it, and say something like "it might be 2-3x overpriced right now, but probably not more than 10x overpriced right now". So you can say, worst case, you probably won't lose more than half the money you put in gold, and almost certainly not all of it.
What is the floor price of Bitcoin, once you eliminate all speculation/hoarding?
Gold has use value in that even if the commodity speculation activity drops to zero, I can still turn the gold into jewelery and sell that. Or I could sell it to somebody who needs it for industrial purposes. Heck, I could sell it to the people who put gold leaf on candy.
Bitcoin has no such intrinsic floor. It only has exchange value. If people stop accepting it as a medium of exchange, you're left with bits. Bits are approximately free.
Ya. As per my comment below, it's a) the dissonance between a 'tech view of BTC' and an 'economic/financial' view of BTC and b) the religious nature of BTC hype. And by 'religious' I don't actually mean 'religious' rather, the old 'religious arguments over programming languages and frameworks' kind of trope.
Commenting against BTC is sure to get you down-voted.
It's ok though, it's just one of many HN quirks we're all used to :)
It doesn't surprise me. HN is very pro tech, even when they don't understand the foundation of what they are betting on.
I own 1 share of a SP500 ETF. That gives me an actual fractional ownership of Apple. That gives me an actual cut of the dividends of real american companies. It has an actual meaning of what you own.
What does 1 BTC give you? What is the fundamental purpose of a BTC?
Tulips went up in price too, but they were not a very smart investments. Tulip chases do not win in the long term.
What if you owned a US dollar (an actual dollar bill)? That gives you an actual fractional ownership of what? An American government? No. You have a currency, a store of value that can be used to pay a debt.
Owning a BTC is the same as owning a dollar, functionally. The main difference is that dollars, on the whole, tend to lose value, and that BTC tends to gain.
Having your life savings in cold fusion juice presses is just as stupid as having no stock in the above at all.
You need to think of the reason for an investment. If you are set for life, and want to gamble on it... cool, buy BC. You could also go to vegas, or bet on horses, or start a HFT trading shop. All are reasonable ways to gamble for fun and possibly profit.
If you are looking to build a nest egg to retire when you are old, it is very unlikely that BTC is a good route for that ;)
So something that only people with significant incomes and the ability to lose 98% of their investments should touch it? I am fine with that definition. Not sure most BTC investors would qualify to invest in a startup though (see qualified investors law)
> Please don't compare this to Vegas, where the odds are known to be against you.
The odds are against you in many markets. I would argue the odds are against you in BTC. It is a zero sum game, and there are many people looking to steal or scam. In a zero sum game with scammers, your EV is negative unless you yourself also want to steal or scam (which is a different conversation to head down.
> Have a small/tiny % of your investment in cryptocurrency is a smart move.
Why? Should you put a tiny % of your investment in horse races? For most people, a small bet with an unknown payoff is not something they should touch.
> only people with significant incomes and the ability to lose 98% of their investments
If you only invest 1%, you can only lose 1%. And with bitcoin, you can invest at $1 if you want.
> I would argue the odds are against you in BTC.
Seems that in reality they weren't.
> Should you put a tiny % of your investment in horse races?
Still talking about Vegas? In that case you don't seem to understand risk-return. NOBODY should invest in horse races or Vegas, or the lottery. Nobody! Not rich, not poor. Why? Because the risk-return ratio is known to be < 1. Why? Because casino's and bookmakers make sure it is < 1.
The risk-return of Bitcoin is not known to be < 1, and neither are that of startups. Therefore people can actually make money investing in these high risk things, by averaging them out.
Let me put this in another way, if you place a huge amount of Vegas bets, you average out the risk-return, and you will end up with < 1 return. If you place a huge amount of 'bets' on startups and similar investments, you can end up with > 1. That's why people are making money with it.
Instead of arguing with me, maybe you should consider that there might be a tiny bit in truth to all of this. And then maybe that wisdom can make you some decent money in the future. But I won't lose any sleep over it if you don't. I have a sane, pretty conservative investment strategy, and it's doing fine.
Don't forget it's still relatively hard for average folk to purchase crypto. But once you have acceptable ETFs and funds that you can purchase at a click of a button through your brokerage account -- a lot of people (and pension funds!) will probably allocate 1-2% of their portfolio to crypto. That is 1-2% of $300tn or so, or 30 to 60 times the amount of money in the space today (in terms of market cap).
If you think this bubble will run for a while, then I also think it's not unreasonable to assume you can multiple your initial investment by 10x by investing in either Bitcoin or Ethereum. But that's my opinion (and this is obviously not investment advice).
Whether it'll be around in 40+ years, I don't dare make that bet. But no one is saying you can't move money around to the better investment opportunity at a specific time.