[master_shake]

In April, I watched the price of bitcoin every day. When it approached $200 I said "f*ck it," took out a student loan and bought in at $225. The VERY NEXT DAY the price collapsed. I watched bitcoin slide to $50 in a state of complete and utter devastation. I felt so stupid. I decided not to sell, and just considered the loan to be a write-off.

Point being, you should assess the quality of your investment in years, not hours. And in regards to the Chinese government, allow me to quote Mahatma Gandhi:

> first they ignore you, then they laugh at you, then they fight you, then you win.

[ivanplenty]

There's a few things weird about this story. Are you really proud you have a leveraged position in bitcoin? Isn't that among the riskiest positions you can take on a very volatile, illiquid, and possibly illegal asset? That's totally a personal choice, but it's certainly not one I would or a typical retail investor should ever take. Your decision to buy-and-hold during a sell off in the Spring is at best an anecdote and certainly should not be used as any evidence on what behavior to do now.

Government intervention is just one of a few significant black swans: blocksize changes, verification (i.e. mining) fragmentation (effectively doubles the money supply for each split), and SHA collision attacks becoming practical. None of this should ever happen, right?

However, this line should be clarified in every context:

> took out a student loan and bought in at $225.

In the US, this is generally _not OK_. To everyone else in the US, do not read this as a positive example. Do not use student loans for bitcoin or any other investment.

What can I use my federal student loan money for? You may use the money you receive only to pay for education expenses at the school that awarded your loan. Education expenses include such school charges as tuition, room and board, fees, books, supplies, equipment, dependent child care expenses, transportation, and rental or purchase of a personal computer. Talk to someone at the financial aid office at your school if you need more details. [1]

[1] https://studentaid.ed.gov/sites/default/files/your-federal-s...

(Of course you may have been one of the small percentage who took out an unregulated private loan, but the principles behind those are generally the same).

[dualogy]

Well it WAS kinda "educational" for him, wasn't it? ;)

[sambeau]

It's also illegal in the UK to reinvest your student loan.

Update: I can't find a link to back this statement up and at least one UK Bank (Barclays) seems to encourage it. My evidence is therefore purely anecdotal — I remember it being noted in the terms at the time.

[altoz]

Please spare us the lecture on what an investor should and should not do. What someone does with their money is their choice and the consequences of what happens with that money is their consequence.

[celticninja]

i love how you are telling him it was a dumb idea, when you have no idea if he sold enough at $1100 to cover his student loan, or that right now he is still in a position where he has doubled his money in a matter of months regardless of this crash.

Too many people offering investment advice in hindsight round here.

[tlrobinson]

Err isn't ivanplenty doing the opposite of offering hindsight investment advice? He's saying it was stupid despite it ending up being a profitable investment.

[achughes]

Just because it worked out well in the end doesn't mean it was a good idea to begin with

[celticninja]

It means it was a worthwhile risk that paid off.

[master_shake]

Thank you captain obvious. I had ABSOLUTELY NO IDEA that using student loans for unauthorized investments is a violation of the contract. Gee willakers! I better go turn myself in!

[forgotmycreds]

Your reply makes me think: You should buy more. Invest as much as you can!

[gruseom]

allow me to quote Mahatma Gandhi

Gandhi never said the "first they ignore you" thing. It's been traced back to a speech by a union activist in 1912 or so. Lots of previous discussion about this on HN.

[grey-area]

Should a currency be an investment?

[oznathan]

One of the greatest investors of all-time, George Soros, made billions betting against the British Pound. A pretty old currency.

http://www.telegraph.co.uk/finance/2773265/Billionaire-who-b...

[grey-area]

https://news.ycombinator.com/item?id=6927003

[oznathan]

I replied on the matter of investing in currency. Shorting is one investment strategy. Buy and hold is another one. I bet a lot of people would short bitcoin if they could.

Anyway this is ridiculous. People try to analyze an new phenomena with the old terminology. It doesn't work like that. You can't understand the change if you don't change your paradigm.

[richardw]

Wrong question, I think. This thing is barely a currency. It has built-in deflation, which makes it a great long-term store of value (assuming it isn't killed somehow) in a world of depreciating alternative stores of value, but a bad currency. If you want a currency for day-to-day use, USD is what you want. If you want to hedge against USD depreciation, BTC is one option.

[grey-area]

Wrong question, I think.

Bitcoin aspires to be a currency and is presented as one, at the same time as trying to boost adoption by presenting itself as a cannot fail investment (hence built-in depreciation, mining etc), so I think it's a fair question.

If I declare white pebbles currency, and that there are only 20 pebbles acceptable, and each year I'll throw one into the deep sea, I have an appreciating currency. What is missing in my pebble currency is confidence, an intangible and difficult thing to acquire, and an easy thing to lose.

If you want to hedge against USD depreciation, BTC is one option.

If you want a hedge against USD depreciation, given the huge volatility of Bitcoin, I'd say it's far worse than most other assets, or even most other currencies. A hedge against inflation should not be volatile, it is meant to reduce risk, and ideally it should have an intrinsic value or very predictable demand.

It should also be in a regulated market - I wonder which of these exchanges will go bust because of this crash? If they guarantee a price in USD for bitcoin to users and the price plummets straight afterward, or regulations mean they can't sell the coins, they're going to be in an awkward place. There are no guarantees that anyone who has money in bitcoin will ever be able to convert it out into another currency, because any of these companies could go bust and leave their customers with nothing. That's a very different situation from most other assets.

[lukifer]

Is a website a document? It is, sort of, but there's also Gmail.

BitCoin is a new thing; it does not map well to preceding concepts, be it "asset" or "currency" or something else entirely.

[tg3]

I think it maps decently well to the concept of a currency. It has no intrinsic value, and the amount of it in circulation is controlled by a central authority.

In the case of the US, the Fed constantly adjusts the dollars in circulation to further their monetary policies (typically low inflation, with economic growth), while in the case of BitCoin, the amount in circulation is set by a mathematical curve that is deflationary in nature.

Analyzing it as a deflationary currency (which many people treat as an "investment", because it increases in value over time) is about right.

[lukifer]

Currencies have additional characteristics in the real world, that are not part of the dictionary definition:

- I can file a police report if my dollars are stolen, and there is a non-trivial chance I could get them back.

- I can store dollars at an insured institution, with a high degree of confidence in retrieving them again. [1]

- I [get to | have to] pay my taxes in dollars.

In essence, for all of our lifetimes, "currency" has always meant "state currency", with all the good and bad that goes with it. Even when precious metals were the norm, states still tended to get involved (stamping the Emperor's face on certain coins and giving those coins preferential treatment).

While BTC meets the definition for currency in some ways, it's probably more practical in our current financial ecosystem to think of them as a highly fungible (and volatile) asset. (As with the stock market, no one should be putting all their life savings into crypto-coins.) As the ecosystem continues to grow, this may change.

[1] This might be the balancing factor to the deflationary issue, to the extent that it matters: that most people might end up keeping their hoard at an insured, well-secured BTC Bank, and paying a small steady percentage for the assurance that their whole pile doesn't disappear.

[richardw]

My point is that if you measure bitcoin as a currency it's doomed to be a failure. I don't care if its called a crypto currency, it's a crap currency. After one minute of reading about it the major benefit to me was its supply limit. Demand is erratic, supply is limited. It's an option on a black swan-like resource. Its name or what most people think of it as, doesn't change the fundamentals.

I'd agree my usage of the term 'hedge' isn't useful. But it is nice to have something that has appreciated so well over time, where my own currency has sucked.

I don't worry too much whether it succeeds or fails, but I assume if it succeeds it'll have to move through the hysteria and a trough of disillusionment to find some niche.

[JumpCrisscross]

>It has built-in deflation, which makes it a great long-term store of value

It also has a very large risk premium, which makes it inferior to other options for solely a long-term store of value.

>If you want to hedge against USD depreciation, BTC is one option.

Bitcoin is an imperfect hedge against U.S. dollar depreciation. There are valid reasons for investing in Bitcoin, but this should not be one of them.

[josu]

>It has built-in deflation, which makes it a great long-term store of value

Besides, so far, Bitcoin has been highly inflationary. In a bit more than a year, the number of bitcoins in circulation has doubled.

https://blockchain.info/charts/total-bitcoins?timespan=all&s...

[JumpCrisscross]

>Bitcoin has been highly inflationary

Inflation and deflation are not solely functions of the supply of money. They are functions of the price of money, which is a function of both supply and demand. The price of goods, which have been reasonably stable in U.S. dollar terms, have fallen in terms of Bitcoin. Thus Bitcoin is presently deflationary, not inflationary.

[josu]

You are completely right. I hope I haven't mislead anybody with my comment.

[mdemare]

If you want to protect yourself against USD depreciation, buy Treasury Inflation-Protected Securities (TIPS). Ultra safe, ultra boring.

But why would you want to? Inflation is bad if you have lots of money but no (prospects of) income. Retirees for instance. Most of you are in the opposite situation.

[greghinch]

Currency speculation is a risky but thriving market

[grey-area]

Speculation is not the same as investing.

You can speculate in currency fluctuations in any currency, but to refer to a currency as an investment is a huge red flag for it as a currency, and for investment assets you should prefer slow appreciation over wild fluctuations and speculative moves.

[twelvechairs]

investment and speculation are two sides of the same coin (pardon the pun). all investment has risk. bitcoin speculation is a high risk investment. this may not be good for everyone but its an investment nonetheless.

[prodigal_erik]

Speculation is not investment. The difference is that investments pay dividends, and buy and hold is a viable strategy. A speculator is relying on appreciation to make flipping the asset pay off, and is screwed if they eventually need a greater fool and can't find one.

[twelvechairs]

invest. "1. To commit (money or capital) in order to gain a financial return". nothing about dividends or buy and hold here. your definition seems very narrow by comparison.

[mattm]

It doesn't matter if it should or not, it is. As is most other currencies. See how George Soros made his fortune.

[grey-area]

George Soros made money from speculation (e.g. shorting the pound out of the ERM), not investment (buy and hold as the OP advocates).

[mattm]

It all depends on how you look at it though. For Venezuelans, the US dollar is an investment.

[confluence]

In 08' pension funds got wiped out. They felt so stupid. They decided not to sell, and just considered their loans a write-off. They stayed written off. You should assess the quality of your investment in utility, not years. And in regards to Bitcoin, allow me to quote myself

> Everything goes up in price, until it doesn't.

[harvestmoon]

Reminds me of the reassuring heart surgeon saying:

"The bleeding always stops."

[Greed]

I'd like to point out that, as an early adopter, it really pains me when I see people using situations like this to argue for the viability of Bitcoin as a currency.

Bitcoin is going to succeed because anecdotally you risked far more than was responsible on a winning gamble?

Prices don't just increase inexhaustibly. Bitcoin isn't going to 'win' if the only value it has is that people can wake up to find their investment multiplied overnight. These are the elements of a ponzi scheme, and you shouldn't argue for its success because of your kitschy miracle story.

[raingrove]

speculation != investment

[dualogy]

I keep hearing this but I never see any angle to this statement where it could possibly be true.

[mdemare]

An investment is productive - buying a share in a company allows that company to increase production, which should increase their profit.

Lending money to a company allows that company to invest, and increase their profits.

Buying BTC is nothing like that. It's speculation - hoping that the price will go up, nothing more.

[LargeWu]

FWIW, most "investments" that regular people make in the stock market are also, in fact, speculation. Once the stock has been issued originally, the issuing company receives no proceeds from subsequent sales of that stock. There might be secondary or tertiary effects that eventually lead to real investment, but for the most part, the majority of American's retirement savings are in speculative holdings.

[prodigal_erik]

"If you really think of it, when a stock doesn't pay dividends, there really isn't a whole lot of difference between a share of stock and a baseball card." - http://blogmaverick.com/2008/09/08/talking-stocks-and-money/