I'm now in the crypto craze

[Dahlia]

Just putting it out there- about a month ago my partner learned about cryptocurrency through a conversation with a wealthy man on an airplane.

I had heard of it and dismissed it as a fad that was going to be as useful as beanie babies or pokemon cards.

But the more he researched it, the more I kind of thought there is a legitimate use for it (worldwide use) , several pros associated with it (no government interference or taxes), and it still seems to be in the infant stages (4% of the U.S. or world?-cant remember the population- is using it). Experts are saying that the generation entering the job market now has an "instant gratification" mindset- and this seems like it has Generation Millennium written all over it with daily and hourly influx. So I wonder if younger workers will divert paychecks away from stock market investing and into cryptocurrency?

So as much as it is worth now with a 4% popularity- I can see why people are predicting it (bitcoin at least) to go to $100k value.

So I gave my approval to get into it. I don't have the spare cash, but my partner does. So he put in $1500 and has seen a profit of $400 (give or take with volatility). Today he put in another $500, and is planning to put in $1k more in the next few weeks.

After that, I want him to stop and wait. And pull his principle out so that the profit just does its own thing in the market. He initially agreed to that plan, but now he's so excited and buying so deeply into the hype- I am concerned it will be a small battle to get him to pull out.

Not a real question here- just a personal observation from a non-expert, and non-industry vantage point.

This seems a lot like gambling over investing. Though I am watching all of this and I've now got a personal stake in crypto success too.

Anyways, just my .02.

[Tabs]

Seems to me that there is always some kind of fad at any point in time.... I personally don't see anything wrong with that, but I think it's also important to keep a reasonable perspective at all times.

Thing is, I just don't know anyone who knows for certain how the future will pan out. Some are certain of it going one way or the other, and like a coin toss, someone is going to be right about it, and someone there is going to be wrong. The important thing to me isn't what the current speculation or fad is, but in how we manage it.

If someone for example devotes 100% of all of their available money on black, and the roulette table of life lands on black, you win. However, if it lands on red, you lose it all. When you take more risk than you can afford, that to me would be gambling (or speculating). However, if for example, you decide you can only afford to devote 10% of all of your money, then at least you're showing that you know how to manage the risk through appropriate allocations.

Now, I can't tell you what will happen with cryptocurrency into the future. I can only say for sure that you are not the only one who feels that way, and certainly, you may very well be right and make some money too. For what it's worth, I too am bullish on the long term prospects of cryptocurrency. And hey, don't we all take some kind of meaningful risk in life or with our money somehow? We should, especially if it means something to us.

Still, the contrarian in me would also caution to consider the possibility that there may be a bubble forming. Cryptocurrency is fiat, not intrinsic. Careful that you don't step too deep into its blast radius.

As for why it may burst, well consider this more long term thought: The reason why it gained popularity in the first place is because it served a need for those who can't or won't rely on existing, government-controlled fiat currency. However, that same strength is also it's own weakness. In other words, because it can not be regulated by our governments, they will never fully accept or adopt the current crypto as it is right now. Rather, our governments are much more likely to create, integrate, and control their own cryptocurrency.

Plus, how does one even valuate something people use that is above government regulation? I haven't even the foggiest.... What I do know is that it's one thing if the world wants to share cat pictures and email messages without government regulation. It's quite another if we're talking about taking away a government's ability to apply economic and monetary policies. Cryptocurrency may have a place in the future, but that doesn't mean certain coins can and will endure.

I've mentioned this before on here, but I'll repeat it here again. I've already heard rumors that a lot of dark net are already leaving bitcoin, largely due to blockchain and law enforcement's ability to follow its paper trail. As you may already know, the dark net is the biggest supporters and users of cryptocurrency, and if THEY are leaving it for something else, then what do you think will happen to bitcoin prices when the mainstream finally finds out? Now, again, I could be wrong here, and you could probably still make a bunch of money before this story is over. Who knows? But me personally, I would not want to place my bet on this one. Now, if you can figure out what they're migrating to, then that's a different story. And if you should happen to figure out that one, please let me know.

While I'm here though, here's something humorous I just came across. Now that the weather is getting colder, and Ethereum is heating up, here's a device that can help you with both!

[Dahlia]

Thank you! I was not aware that the dark net was pulling out because the currency is becoming safer and more traceable. This is an interesting time to sit and watch. My partner is still in but not in huge amounts.

[disneysteve]

When you take more risk than you can afford, that to me would be gambling (or speculating).

Speculating isn't defined by how much you put in. It's defined by the nature of the purchase itself. I can be speculating with $1 or $1,000,000. If the "investment" is super high risk, it's speculating.

That's not to say there's anything wrong with speculating. But it should only be done with a tiny sliver of your portfolio. Certainly no more than 5% of your money should be used for speculation.

[Dahlia]

Update: BF just withdrew $500 ($493 with fees) from his account. He now has his initial investment amount still in the game.

We withdrew because the profit of $500 seemed to good to resist, and we didn't want to lose it by being greedy. And we wanted to see what the withdrawal process is like. I've read some scary stuff about not being able to get your money out of the system.

But we had no problems. BF is applying the $500 to his car payment.

Fingers crossed cryptocurrency is around to stay.

[rennigade]

Bitcoin is now at $5500 today. I remember when it was around $700 and people were going nuts...then it dropped to $400ish.

Im not touching it with a 10 foot pole and never considered...but those who did hopefully you all made out nicely!

[Spiffster]

Blowing up today. ATH around 6400

[Tabs]

This happened just a few days ago.

Another huge chunk of money lost, due to a bug triggered by an "upgrade" that was trying to patch a vulnerability that got exploited, resulting loss in a separate but also fairly large chunk. Again, not saying you can't put money into any of this, but buyers beware indeed.

[Tabs]

Linus Tech Tips just posted this several hours ago.

[Spiffster]

BTC nearing $12k, almost doubled from my last post on this thread on 10/31... so about a month ago.

[james.hendrickson]

BTC nearing $12k, almost doubled from my last post on this thread on 10/31... so about a month ago.

What in the investment thesis in bitcoin at this point?

It feels an awful lot like stocks in the tech bubble a decade ago to me - more downside risk than upside potential.

[msomnipotent]

A lot of people are comparing it to the tulip craze, and rightfully so. Tons of people driving up the cost of something they don't really understand (or know how to take care of) in the hopes that they can sell it for a profit. I don't want to be the last person holding the bag.

[Spiffster]

Comparing Bitcoin to Tulips underlines the lack of general understanding of bitcoin.

I think the reason it will continue to climb is because more and more people are becoming aware to the potential it has. Still very speculative and apparently not an investment. But many are buying and holding, making less available to trade. Bitcoin is still relatively unknown and will increase in popularity.

Im gonna go out on a limb and say that the US $ has a lot to do with what people are willing to pay for BTC as national debt continues to spiral out of control. But hey, lets give everyone tax breaks. yay!

[james.hendrickson]

Comparing Bitcoin to Tulips underlines the lack of general understanding of bitcoin.

I think the reason it will continue to climb is because more and more people are becoming aware to the potential it has. Still very speculative and apparently not an investment. But many are buying and holding, making less available to trade. Bitcoin is still relatively unknown and will increase in popularity.

Im gonna go out on a limb and say that the US $ has a lot to do with what people are willing to pay for BTC as national debt continues to spiral out of control. But hey, lets give everyone tax breaks. yay!

Spiffster - okay, so how is it different?

[Spiffster]

How are Tulips different than Bitcoin?

Its all about the infrastructure in place. Bitcoin is easily transferred securely around the world and has infrastructure in place that allows it to be quickly converted to just about any currency almost instantly. For transferring or converting money, its currently the most secure and effective medium for doing so.

Only 21 million will ever be produced. Which is why the amount available to trade will likely, always be in ever shortening supply. But that has no real effect on its utility for transferring and converting various currencies.

Obviously there are many nefarious uses as well... which is another reason why the government may want to interfere as we have seen with China and Bitcoin exchanges being closed down. Which had much less effect than expected. But if US government was to put its foot down then all bets are off, which makes BTC an even riskier proposition (Though I never said it wasnt).

These are the key differences I can think of.