[garybro]

I've made about $110k profit this year in crypto on a $21k investment earlier this year, and I think this is all a giant bubble. I was at my parents' house for Thanksgiving and a commercial with Ron Paul talking about Bitcoin came on, which coincided with around the time it went to $10k, and it hit me really hard that this isn't going to last forever (and probably will hurt sooner rather than later). I liquidated everything and just entertain myself doing some day trading on GDAX. I don't hodl anymore.

The entire thing is absolutely stupid, and isn't going to last forever. People are way too bullish on it. People who have no business investing in it are taking on debt to do so, with no clear exit strategy other than "the moon." A lot of people who don't have any money are going to get absolutely toasted when the pendulum swings the other way. They're in it to get rich. They have no idea what blockchains are. They just think they're buying magic internet money people get rich from.

To put a little perspective on how ridiculous this all is: Last night after Coinbase came back from maintenance, there was the (expected) sell-off, so I figured I'd make a quick buck and bought 300 LTC for about $241 each, then sold it a few minutes later for $251 after the instant rebound and went to bed with a nice $3k profit. I woke up this morning and was astonished to see that LTC was about $380. This was in the course of about 5 hours. Had I not sold it last night, I would have made almost $40k. I'm a little annoyed about that, but again: this is a stupid, irrational bubble that makes absolutely no sense. It's entirely speculative.

I think crypto and blockchain has a future, but it has to solve a few problems first (transaction fees/time and anonymity). None of the big three currencies do that well enough yet. This bubble is going to pop soon and I'm worried that a lot of people are going to get impacted badly.

[charlesdm]

Even if it is a bubble, that doesn't mean it can't go another 20x from here, depending which crypto you put your money in.

There's cheap liquidity (ho ho ho said the FED and the ECB), there are institutions (pension funds) that are starting to buy in, and in comparison, the dot-com bubble (which was mainly a US led bubble, not global) went to $5.7tn to $1.7tn. Gold is worth $8tn globally. Why couldn't Bitcoin get to part of that level, e.g. $2tn?

It sure looks like a bubble, and it probably is, but it could literally be the largest bubble in our lives -- unlike one stock in the market, this is a global phenomenon + you only have a few currencies that matter.

[exelius]

It's strayed so far from fundamentals that it's bound to crash. I really hope it's not that big when it does...

[CPLX]

Bitcoin doesn't have fundamentals. Stocks are a claim on assets, buildings, inventories, and future profits. Real shit, like a parking lot full of trucks or something. Those are the fundamentals. Cryptocurrencies dont have anything like that.

To the extent that there is an analogous concept it's their utility as a means of exchange. Which outside of drugs and hard drive ransoms is minuscule at best.

[JonnyNova]

Bitcoin has fundamentals though. Per the whitepaper it was designed to be just a means for individuals to transfer money to each other digitally without much friction. The further it gets from that the more we're asking the network to stretch to meet demands it was never designed to.

[exelius]

This only works if the value of BTC is pegged to one or more fiat currencies. As it is, people are basically speculating on blockchain address space on BTC.

[wallace_f]

And looking at this fundamental value, other cryptocurrencies have arguable superceded it in terms of better tech/efficiency, so the value seems incredibly hard to justify.

[piyush_soni]

Just curious, which ones in your opinion are better tech/efficiency?

[rtpg]

The pedantic response:

- if 1 BTC were $100 trillion, then it's clearly passed the fundamentals of "being a unit of exchange between commercial entities", since it would be way more than what any form of exchange would ever require.

The truth behind the pedantic answer:

- if it's a store of value, then the "fundamental" value is the amount of fiat that's gone into the system so far. If all the exchanges have roughly $100 in USD deposits, the base value of their bitcoin deposits will be at least $100, roughly.

- If it's as a means of transactions, then the fundamentals are linked to how much transaction volume is going on. For example the flow of USD into BTC and vice-versa. BTC <-> BTC exchanges in that universe probably help to define things as well, as it would be used as an alternative to USD.

The dollars don't come from nowhere, so there's at least some base numbers you can think about. Thinking of it as "USD going into the ecosystem" and "USD going out" is a good proxy for now I think. Obviously very fluid, though.

[DenisM]

You’re forgetting currency control evasion. If a businessman from a country with tight controls wants to move money out of the country he would buy bitcoin and then sell it the other side of the border. This sort of activity is going on all the time, and it creates demand for crypto currencies.

[analyst74]

I don't see how bitcoin can facilitate currency control evasion. The government can simply shut down all local exchanges, and some already did.

[DenisM]

With amounts this large they could meet in person to trade.

[ckastner]

> You’re forgetting currency control evasion. If a businessman from a country with tight controls wants to move money out of the country

Before you can move it out of the country, you have to get it out of the bank, and your bank will refuse to do that with currency control measures in effect.

[cm2187]

What I don’t get is that you can’t buy a car with bitcoin. So surely this should also create a selling pressure, unless they just buy bitcoins with the intent to transfer money at a later stage.

[TaylorGood]

Yes you can: https://i.redd.it/d5wrulv2ndjz.png

[jordanpg]

It's not obvious to me that "fundamentals" apply here. This is literally unprecedented and cryptocurrency economies are uncharted territory.

[andr3w321]

The fundamentals are at the current price of $17,000/btc bitcoin mining costs are about $14.5B annually(144 blocks of 12.5 btc/block plus ~3.8 btc/block in fees) in electricity expenses due to paying off miners which is about on par with the 8th largest company in the world Facebook. Bitcoin's revenue/year is however much money people feel like FOMOing in + however much tether money bitfinex feels like printing which right now is more than the mining costs. Once this figure changes, the price will decline. For reference, Facebook has ~$24B in revenue/year.

[smokeyj]

It isn't crazy to imagine crypto becoming adopted for actual transactions. Even if people are currently speculating, they're still downloading wallets they can spend from and loading it up with currency. For all these users there is now nearly zero obstacles to spending. This isn't even to say bitcoin is the transaction layer, but bitcoin still provides liquidity to any alt/2nd layer solution.

[umanwizard]

You don't need to physically control your own coins to speculate. I suspect many people are just keeping their stash on exchanges or online wallets.

[cm2187]

There is a whole (and very good) book titled “this time is different”

https://www.amazon.co.uk/This-Time-Different-Centuries-Finan...

[hn_throwaway_99]

It's not obvious to me that "fundamentals" apply here. This is literally unprecedented and the Internet economy is uncharted territory.

-- said a million articles in 2000

[charlesdm]

But how far? Corrections of 30% in say Bitcoin are common. Does this matter? I would say not -- it's not something I lose sleep over. It's fine, boom and bust.

If you buy in, buy in during a consolidation phase, when you see the price is stable. Ethereum had a huge run up, yet then consolidated for around 6+ months around $300. I would say that is healthy. Now it's heading higher. "Fundamentals" aside, of course.

[hndamien]

You love bankers that much? Boy we have come a long way since 2008.

edit: Oh you said "hope it is not" - my mistake.

[exelius]

It's not that I love banks; it's that we rolled back all the banking regulation that kept that stuff in check prior to 2008. Replacing that with a system with zero regulation does not seem like progress...

[frakr]

Can you provide proof of one pension fund that has bought in to crypto?

[seibelj]

I have heard many anecdotes about finance money coming in. We are witnessing it.

Also, rich Saudis are scared shitless about losing their wealth when political winds change. They put their money into crypto and it's much, much harder to take it from them, provided they own the private key. This is the best mechanism of wealth storage yet created, provided the value holds, which as more around the globe believe in, it becomes more likely. Bitcoin could be digital gold, but we shall see.

[patmcc]

>>>They put their money into crypto and it's much, much harder to take it from them, provided they own the private key.

That's not exactly trivial - how do you store a private key in such a way that it's safe, accessible to you and only you, cannot be destroyed by your enemies, and can be passed on to your heirs upon your death?

[saryant]

Judging by the lifestyle of the playboy branch of the Bin Laden family[1], probably stick it in a safe deposit box at a bank in NYC or London.

[1] yes, there's such a thing: https://www.goodreads.com/book/show/2211931.The_Bin_Ladens

[seibelj]

It's comparatively safer than holding millions in government-controlled banks, property which can be seized with the stroke of a pen, physical wealth like gold which is tough to store and move, and has value anywhere in the world (not many people in Europe care about your franchise holdings in Riyadh).

In contrast, if you buy bitcoins, when you flee the country you can bring your wealth with a memorized 24-word code or a slip of hidden paper, and people in other places will accept your Bitcoin.

[petre]

They will accept it now. Not when everyone wants to sell. But yes, instead of having the state take it away, it's better to store some value in BTC.

[btilly]

Use Shamir Secret Sharing.

If you have enough trusted friends, that should work.

[mccoyspace]

no, it's not trivial, but you can just follow these steps. https://glacierprotocol.org

[charlesdm]

Maybe not yet as of today, but they're coming. I have a friend (wealthy family with a substantial family office) who bought into crypto at the beginning of last year.

His dad runs quite a large traditional investment fund and knows of people in his network working at pension funds that are looking at putting money into Bitcoin / Ethereum and others. The family has done private equity deals together with some of these funds (mostly raising debt financing from them).

I'm not an extreme crypto bull, but I honestly think it's still early. But there will be massive volatility along the way.

Note: not investment advice, obviously. Just my opinion.

[amscanne]

Wow, pension funds should not be doing currency speculation. That's bad.

The problem with crypto-_currency_ is that it's not a productive asset. A share of a business pays dividends over time and thus has intrinsic value (and _some_ speculative value), while a currency does not. A currency transaction is a zero-sum game, which is good because it minimizes friction.

Buying cryptocurrency with the expectation of increases isn't investment, it's _speculation_.

[charlesdm]

Crypto has been one of the better performing asset classes in the last 5 years. That is just a fact -- if looking in percentage terms.

Pension funds generally allocate up to 5% of their portfolio to alternatives, which could be smaller funds investing in art, watches, music royalty rights, farmland, wine, and the likes. This also includes crypto.

If you're an investment manager, it isn't necessarily crazy to allocate 0.2 or 0.5% of your portfolio to crypto and try to capture some of those gains.

[TFortunato]

Absolutely -- To the parent: think of it this way. If you had $200 in your fund last year to invest last year, and put $1 into crypto, then at worst, you lose that entire $1, and your portfolio is down to $199 (notwithstanding what you did with the other money), a loss of 0.5%. If you happened to pick Litecoin, and bought 0.25 LTC when they were at a stable price of $4 a piece, today that 0.25 LTC would be worth $80, giving you $280 in your fund, or a gain of 40% in your total portfolio value. You can look at ETH, Bitcoin as well and also see large gains.

Even without perfect timing of the market, it's a pretty easy decision for a portfolio manager to look at this and say: "While, like any other asset, past performance isn't an indicator of future performance, given the price history and increasing trading volume over time, the risk/reward balance skews heavily in favor of putting at least some tiny bit of money into crypto for all but the most risk-averse."

[powvans]

I don't understand why you are being downvoted. Pointing out the difference between productive and non-productive assets is exactly what is needed at the moment.

Everyone is talking about what if scenarios where huge offshore money or sovereign wealth or whatever comes into Bitcoin YUGE. Well, ok, do you think that money is just parked somewhere or is actually invested somewhere in a productive business?

Most dollars which aren't spent on consumption are converted into equity in productive businesses. In this case, dollars are merely the unit of account. You aren't invested in dollars, you are invested in businesses that produce the things that people need and those investments are measured in dollars.

[Frogolocalypse]

> Most dollars which aren't spent on consumption are converted into equity in productive businesses.

Like real-estate?

[hrrsn]

You can take the crypto out of the above statement and it's still true - yet I know plenty of funds that speculate on currencies.

[amscanne]

You know pension funds that spend a material portion of their holdings speculating on currencies? I’m skeptical. Currency trading is zero sum and highly risky. Pension funds may keep small amount as a hedge, but to actively speculate on currencies seems like a breach of fiduciary duty.

[workthrowaway27]

I used to work for a hedge fund. Now I'm in a different industry. While many individuals at the fund were interested in cryptocurrencies, they weren't going to put client money there. In order for pension funds to invest in cryptocurrencies there have to be very liquid securities that they can invest in. Futures don't count because almost no pension fund will use them directly (though pension funds do invest in hedge funds, which might have a futures strategy).

[deepGem]

This is my belief too. I think if you can buy and hold for the next 5 years or so, massive volatility doesn't affect you. Volatility affects the day traders and the like.

To draw a parallel to the stock market is not appropriate, but those who bought into MSFT or AMZN even during the peak of the dot com bubble have nothing to regret today.

[ericsoderstrom]

What about people who bought pets.com or webvan stock, or any number of countless stocks which soon became worthless?

[njarboe]

Most coins will become close to worthless, but many will survive and support whole new industries. And this time it looks like it wont be an ad supported future, thank $DIETY.

[Mtinie]

That’s a risk on any day of any calendar year. We can find points and counterpoints to prove any scenario.

[ericsoderstrom]

That was my point... OP had cherry picked the examples of microsoft and amazon to support the claim that buying and holding cryptocurrency through a bubble is a smart investment, which is of course absurd.

[deepGem]

What I meant was that if you distribute your money across all cryptocurrencies even if some of them become worthlesss you won’t have anything to regret, in he long run. I don’t know if anyone who had the foresight to cherrypick MSFT and AMZN. Most of them invested in the tech basket. This is just general diversification principle nothing new

[alexcnwy]

It can also lose 20x. Losses hurt more than gains feel good. Utility theory suggests to sell if probability weighting of loss is high enough.

[vesrah]

How? If the value goes to 0 you lose 1x, not 20x.

[diab0lic]

It can become worth 1/20 of it's original value.

[qsucvatz]

Going to $0 is -Inf% loss.

[oscilloscope]

Then if I lose 100% of my investment, how much have I lost?

[kamaal]

Everything.

Sometimes its easier to describe this in terms of words, than numbers and symbols.

[garybro]

You're not wrong. It very well could. I think there will be a major correction before (if) that happens, though.

[charlesdm]

You're not wrong either. And the higher it goes, the riskier it gets. And while I'm seeing signs of a bubble, I don't think that (excluding a few volatile 30-40% corrections along the way) we will see an implosion in 2018 just yet. The entire crypto space "only" equals the value of Facebook.

In the end, if it goes another 30x from where we're at today, and then has an 80% correction, you'll still be up 6x. It only makes sense to exit if you think such a correction is imminent, or you believe the entire space is going to zero.

[matchagaucho]

Gold is worth $8tn globally

Drawing comparisons between gold and a fiat currency (BTC) is completely confusing.

[Mtinie]

“Fiat” usually implies something different from the way you are using it. No government has issued Bitcoin via fiat, there are no treasuries or armies backing it.

Gold is a tangible commodity. I’ve been in the cryptoasset space for a while and I’m still not exactly sure how to cleanly classify it.

[elif]

>I woke up this morning and was astonished to see that LTC was about $380. This was in the course of about 5 hours. Had I not sold it last night, I would have made almost $40k.

I can relate. If I'd done the exact paired trades i did this month (only between btc, bch, eth, and usd), only at different times than i did, i would have doubled my money yet another time, for a life-changing sum.

Instead I've been sleeping well every night for a month on a healthy exit. Even with hindsight, I don't have any regrets.

I didn't get into the space to get rich and sweat at night, I got in to socialize monetary control. Now crypto doesn't even want to be money. Once this bubble cools off I can start dreaming again.

[petre]

Astonished, why? Capital is fleeing BTC to LTC probably because of BTC holders getting nervous about high volatility and exchanges going down or temporarily suspending transactions. Which in turn will also screw LTC. This article is a clear indicator about this.

[cm2187]

The correct way to look at a missed investment in my opinion is to look back and consider if given the information you had at the time and the risk you were willing to take, you would have made any other decision. Ignoring these two factors is like regretting not having picked the right lottery number.

[harryh]

Do you feel any guilt that your profits are at the expense of naive speculators who "have no business investing in it are taking on debt to do so, with no clear exit strategy" ?

[garybro]

Not a bit.

[sumedh]

> naive speculators

They are doing it willingly to get rich.

[shak77]

If you invest in something you can lose, especially if you have no idea of what you're doing. There's no guilt to be had.

[Frogolocalypse]

They shouldn't be investing in unregulated markets.

[crystaln]

BTC will supplement gold for value storage and will hit a $5T market cap in a few years IMO. It certainly has utility for storing and moving value. Don't underestimate that.

[petre]

Gold doesn't have 30% volatility over 24h.

[crystaln]

BTC will not once it gets into multitrillion dollars. It's a young asset with no derivatives that the market isn't sure how to value. Also there are ways to hedge volatility.

[Frogolocalypse]

Gold doesn't go up 15x in a single year.

[rak00n]

You can't steal gold because someone forgot to update their machine and left it connected to Internet. For bitcoin, yes you can.

[drvdevd]

This is really cool that you made a profit on this bubble, and if I were to take that point to heart and start investing USD in BTC, I guess I would just become part of that. As you say, I would just be out to get rich.

But what about all the non-fiat purposes of crypto currency? It seems that is what’s currently getting lost in the conversation.

For example, I simply want a way to accept electronic payments from people without dealing with middle men.

I want merchants and the general public to become aware of the inherent value in some blockchain by itself as a way for us all to spend “money” and get “paid” in a peer-to-peer manner.

I hope the people who are buying into this bubble come to see this. But I’m afraid if they do get burned, they will have missed the whole point.

[asciimo]

This is the "intrinsic value" the media claims does not exist.

[junk_f00d]

Do you feel all crypto projects are included in the bubble you described?

Personally, I think many are extremely overbought (BTC, LTC, ETH, etc) but can't help but feel that those with real utility and industry value are (relatively) undervalued.

[toki5]

Wait, I'm confused by your numbers there.

Buy: 300 LTC @ 241 = $72,300 + 1.49% fee ($1077) = $73,377 cost basis

Sell: 300 LTC @ 251 = $75,300 - 1.49% fee ($1122) = $74,178 gross

$74,178 - $73,377 = $801 net

and that's before accounting for taxes. What am I missing here?

[dmcy22]

There are no fees on GDAX (Coinbase’s exchange) if you are a market maker, i.e. post only limit orders. So $801 + $1122 + $1077 = $3000.

Even if you don’t plan to trade, it might be a good idea to buy/sell through GDAX rather than Coinbase to avoid the fees.

[garybro]

I only post limit orders and pay 0% maker fee on GDAX. I've never paid to make a trade. If you do pay as a taker, BTC is 0.25% and LTC is 0.3%, but I set relatively conservative exits for my positions and haven't had much trouble making them.

[airmondii]

are those coinbase fees? gdax fees are lower, and they're zero if your resting order gets hit

[ll931110]

When you start trading, you quickly learn that regrets is the norm, and feel less bad about making mistakes.

[andrewmcwatters]

Hey, good on you: always be happy about selling early and not sad over selling late.

[anonu]

> I don't hodl anymore.

I've just been told that hodl means "hold on for dear life".

LOL

[agorabinary]

"it has to solve a few problems first (transaction fees/time and anonymity)"

Bitcoin Lightning currently works on testnet ... give it a few months and those problems will be solved. The price is exploding in anticipation of events like this.

[hossbeast]

I've used the testnet wallet and it works just like you'd expect. Very exciting.

https://play.google.com/store/apps/details?id=fr.acinq.eclai...

[emmasz]

Some people could be in it for the adrenalin. People do dangerous things all the time, so it can still go on... what's the serotonin level for crypto users? :)

[garybro]

I'll admit, I'm a gambler, so trading is kind of a rush.

[jgrowl]

I had the exact same experience visiting family over Thanksgiving. They watched foxnews the entire time and I remember seeing that Ron Paul commercial and also another one that was throwing out buzzwords and phrases like "Built with blockchain technology."

I was just like wow, this is going to be pulling in a lot of people that have no idea what they are doing. Everything seems irrational. Who knows though.

[byproxy]

I guess this applies to non-crypto trading as well, but, how do you manage taxes on these transactions?

[garybro]

I know what I put in, and I know what my profit is, so I am going to report the net gain and pay the tax on that (ugh)

[elif]

[IanaA] If your liquidated positions are open for over a year, you can do 15% long-term capital gains in the US.

The exchanges have an export history feature, which I'm planning to put into a spreadsheet to calculate profit. That's gonna be a fun weekend project.

[jerkstate]

There's a very nice library called ccxt that uses a code generator to produce python (async and standard), javascript, and PHP libraries that implement a standard interface for dozens (hundreds?) of crypto exchanges. I think a nice project would be an in-browser JS app that accessed each of the APIs in my exchanges (via logged in cookies or API keys or whatever) to pull trade history, deduct fees, and create a CPA-friendly tax form from all of my crypto exchanges.

[laksmanv]

Is there an email I can reach out to you at?

[subsaharancoder]

sure hope you put some aside for Uncle Sam..

[cadamson]

What prompted your initial $21k investment?