BITCOIN

Aegis

mooneysaver said:

Aegis said:

Sumselkb said:

I wont have a problem buying it. I'll buy it when its cheap and sell it when its high.

The problem is that it seems technologically complicated. I'm not very good with apps and computers and programs and it seems there's a lot things to learn/do eg software, signing up, verifying, transferring, save passwords, keep secure, exchange rates, fees, Capital Gains Tax. etc. I don't know where to start.

How will you know when it's cheap? Or expensive, for that matter? What is your metric? Is it based on the cost a year ago? 2? 10? If so, why? Is it instead based on a calculation of value based on your ownership of an economic activity? If so, what  activity, and how do you measure it?

You've mentioned you are new to this, but these are fundamental questions you should feel comfortable asking yourself about any proposed investment, and going from 0 to bitcoin is a strategy for tears in the long run if you don't understand the difference between a positive and a negative sum game when considering investments (basically, bitcoin is negative sum, in that the tokens themselves are not economically active, but a proportion of the total ownership of bitcoin is lost each year - this is the same type of structure as playing the lottery or going to a casino.  You might be ahead at certain particular points, but eventually the house edge means that you will lose money unless you change the nature of the game like card counters).

As long as you understand the risks you can dive on in to your heart's content, but I again ask "why is £20,000 cheap and not expensive?"  I sincerely hope that you have an answer better than just "line goes up" or similar.

Most investors use a discounted value calculation which is broadly done like this: decide when you are going to need to sell the asset and then determine the number of halvenings which will occur between that date to calculate the value at the sale date. You then need to discount by your required rate of return (or alternatively the risk free rate if you don't have your own discount rate) and deduct the value today to give you your overall profit in today's terms.

E.g. if you plan to sell within five years any price less than $54,000 will put you in profit assuming a discount rate of 3%

Right, but that assumption is just that - an assumption. You could literally apply the exact same argument for any assets.  For example, if I buy a load of pebbles and sell them in 5 years with 3% compound return each year, then I will get a return of 16%. Doesn't mean it's likely or even possible to do that, it's just an expression of what compound annual growth rate means.

In essence, what the discounting calculation is saying is "if this continues to grow at X%, then I'll get Y% total return" but it says nothing at all about why the asset should get that X% return.  To put it another way, what if instead of growing by 3% a year you lost 3% a year.  That way you would lose a little over 14% of your initial capital invested.  Which of these scenarios is more likely given the fundamental features of the specific token you have selected?

I can't possibly even begin to answer that because the reality is that the price of bitcoin is set by irrational supply and demand rather than being driven by a measure of economic activity of the individual tokens.  By this I mean the amount of money brought in to the bitcoin network as a whole due to it's operations less the costs of running the network - right now it brings in nothing through its economic activity (people trading the tokens for money doesn't add any money to the network as a whole) and costs money to keep it going.  If I had an asset that did that sitting in my portfolio, I would expect it to lose value rather than gain, in the very long run at least.

tg99

Hi, I have a small position in Bitcoin of a few £k via a spread bet account and am looking at finally getting round to moving it to a ‘physical’ holding instead. Any suggestions for which would be the best exchange to use eg in terms of fees and ability to deposit by debit card witth instant access to buy with, withdraw money, withdraw Bitcoin to a cold wallet etc? Just something v basic fine, would one of the main names like Coinbase, Kracken be best? As it’s a small amount I may just keep online in a hot wallet but if I decide to go for a cold wallet which would be the best to consider? Paper wallets generated online, hardware wallets like Trezor? Obv need to do some research on this but any pointers / suggestions useful, Thks.

mooneysaver

Aegis said:

mooneysaver said:

Aegis said:

Sumselkb said:

I wont have a problem buying it. I'll buy it when its cheap and sell it when its high.

The problem is that it seems technologically complicated. I'm not very good with apps and computers and programs and it seems there's a lot things to learn/do eg software, signing up, verifying, transferring, save passwords, keep secure, exchange rates, fees, Capital Gains Tax. etc. I don't know where to start.

How will you know when it's cheap? Or expensive, for that matter? What is your metric? Is it based on the cost a year ago? 2? 10? If so, why? Is it instead based on a calculation of value based on your ownership of an economic activity? If so, what  activity, and how do you measure it?

You've mentioned you are new to this, but these are fundamental questions you should feel comfortable asking yourself about any proposed investment, and going from 0 to bitcoin is a strategy for tears in the long run if you don't understand the difference between a positive and a negative sum game when considering investments (basically, bitcoin is negative sum, in that the tokens themselves are not economically active, but a proportion of the total ownership of bitcoin is lost each year - this is the same type of structure as playing the lottery or going to a casino.  You might be ahead at certain particular points, but eventually the house edge means that you will lose money unless you change the nature of the game like card counters).

As long as you understand the risks you can dive on in to your heart's content, but I again ask "why is £20,000 cheap and not expensive?"  I sincerely hope that you have an answer better than just "line goes up" or similar.

Most investors use a discounted value calculation which is broadly done like this: decide when you are going to need to sell the asset and then determine the number of halvenings which will occur between that date to calculate the value at the sale date. You then need to discount by your required rate of return (or alternatively the risk free rate if you don't have your own discount rate) and deduct the value today to give you your overall profit in today's terms.

E.g. if you plan to sell within five years any price less than $54,000 will put you in profit assuming a discount rate of 3%

Right, but that assumption is just that - an assumption. You could literally apply the exact same argument for any assets.  For example, if I buy a load of pebbles and sell them in 5 years with 3% compound return each year, then I will get a return of 16%. Doesn't mean it's likely or even possible to do that, it's just an expression of what compound annual growth rate means.

In essence, what the discounting calculation is saying is "if this continues to grow at X%, then I'll get Y% total return" but it says nothing at all about why the asset should get that X% return.  To put it another way, what if instead of growing by 3% a year you lost 3% a year.  That way you would lose a little over 14% of your initial capital invested.  Which of these scenarios is more likely given the fundamental features of the specific token you have selected?

I can't possibly even begin to answer that because the reality is that the price of bitcoin is set by irrational supply and demand rather than being driven by a measure of economic activity of the individual tokens.  By this I mean the amount of money brought in to the bitcoin network as a whole due to it's operations less the costs of running the network - right now it brings in nothing through its economic activity (people trading the tokens for money doesn't add any money to the network as a whole) and costs money to keep it going.  If I had an asset that did that sitting in my portfolio, I would expect it to lose value rather than gain, in the very long run at least.

If two halvenings are going to occur is it more likely to lose value or increase? Do you really need me to answer that for you?

Aegis

mooneysaver said:

If two halvenings are going to occur is it more likely to lose value or increase? Do you really need me to answer that for you?

Yep, I do. If I take a piece of paper and rip it in half, is the value likely to go up or decrease? This idea that "halvenings" matter is just another wholly irrational justification for price movements based solely on "line goes up" rather than actually looking at the fundamental economic principles of the asset. How fast the mining process happens is about as important as how quickly the sheet of paper gets torn.

Scottex99

tg99 said:

Hi, I have a small position in Bitcoin of a few £k via a spread bet account and am looking at finally getting round to moving it to a ‘physical’ holding instead. Any suggestions for which would be the best exchange to use eg in terms of fees and ability to deposit by debit card witth instant access to buy with, withdraw money, withdraw Bitcoin to a cold wallet etc? Just something v basic fine, would one of the main names like Coinbase, Kracken be best? As it’s a small amount I may just keep online in a hot wallet but if I decide to go for a cold wallet which would be the best to consider? Paper wallets generated online, hardware wallets like Trezor? Obv need to do some research on this but any pointers / suggestions useful, Thks.

CB or Kraken should be fine yep. I've never used a card to top up, I'd just send a bank wire in, but both of these should support it.

I've been using Swissborg for years too, a nice easy to use app with fiat/crypto/staking etc.

All of these options would need KYC, but shouldn't be too onerous for a small amount, POI/POA, the usual stuff

mooneysaver

Aegis said:

mooneysaver said:

If two halvenings are going to occur is it more likely to lose value or increase? Do you really need me to answer that for you?

Yep, I do. If I take a piece of paper and rip it in half, is the value likely to go up or decrease? This idea that "halvenings" matter is just another wholly irrational justification for price movements based solely on "line goes up" rather than actually looking at the fundamental economic principles of the asset. How fast the mining process happens is about as important as how quickly the sheet of paper gets torn.

Ah I see why you're getting confused. Bitcoin is not like a piece of paper as it cannot be infinitely split.

MeteredOut

mooneysaver said:

Aegis said:

mooneysaver said:

If two halvenings are going to occur is it more likely to lose value or increase? Do you really need me to answer that for you?

Yep, I do. If I take a piece of paper and rip it in half, is the value likely to go up or decrease? This idea that "halvenings" matter is just another wholly irrational justification for price movements based solely on "line goes up" rather than actually looking at the fundamental economic principles of the asset. How fast the mining process happens is about as important as how quickly the sheet of paper gets torn.

Ah I see why you're getting confused. Bitcoin is not like a piece of paper as it cannot be infinitely split.

Ok, think of it as folding a piece of paper. Any easier for you to understand?

(it's very unlikely paper can be infinitely split, but I don't think we want to get into quantum mechanics here)

Aegis

mooneysaver said:

Aegis said:

mooneysaver said:

If two halvenings are going to occur is it more likely to lose value or increase? Do you really need me to answer that for you?

Yep, I do. If I take a piece of paper and rip it in half, is the value likely to go up or decrease? This idea that "halvenings" matter is just another wholly irrational justification for price movements based solely on "line goes up" rather than actually looking at the fundamental economic principles of the asset. How fast the mining process happens is about as important as how quickly the sheet of paper gets torn.

Ah I see why you're getting confused. Bitcoin is not like a piece of paper as it cannot be infinitely split.

Neither can a piece of paper. Don't even need to get to quantum mechanics for that, the cellulose molecule that makes up paper is the limiting factor for dividing paper. Split that and you no longer even have a molecule of paper.

Malthusian

mooneysaver said:

Ah I see why you're getting confused. Bitcoin is not like a piece of paper as it cannot be infinitely split.

Only one of those things can be infinitely split and it's Bitcoin.

If you kept tearing the paper in half, you would eventually be breaking it apart on the molecular level to the point it would no longer be recognisable as paper. 

The miners can subdivide Bitcoin as often as they like. There is no point at which ten tenths of the previous unit stops being one. Mathematics never runs out of zeros.

Infinity, how does that work?

Scottex99 said:

HHarry said:

Scottex99 said:

Not like we all popped up at $73k and started shouting told you so and you need to put all your money in right now or you'll be left behind. I'll not bother with them right now.

 That’s exactly what happens.  This thread is like the Mary Celeste when BTC is down, yet it gets a bit of a spurt, approaches ATH and suddenly it’s on page 1 of the board with everyone shouting “to the moon”.

I’m sure you can back that easy enough with a quote then right 

A quote of months of silence? That's an interesting variation on demanding proof of a negative.

Instead of doing that, we could compare Google Trends' graph of searches for Bitcoin with the price. 


(Blue is the frequency of people searching "Bitcoin", green is the price in USD Tether)

HHarry

Scottex99 said:

HHarry said:

Scottex99 said:

Not like we all popped up at $73k and started shouting told you so and you need to put all your money in right now or you'll be left behind. I'll not bother with them right now.

 That’s exactly what happens.  This thread is like the Mary Celeste when BTC is down, yet it gets a bit of a spurt, approaches ATH and suddenly it’s on page 1 of the board with everyone shouting “to the moon”.

I’m sure you can back that easy enough with a quote then right 

 There was radio silence from this thread in early September 23 at $27k, with no posts until November 23 ($37k).  Since Nov 23 the price has steadily risen, as have the responses to this thread.

And I have no reason for singling out this specific quote, but as an example “ New ATH this morning.  BITCOIN overtakes silver in most valuable assets by MC.  Google next?”