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Bitcoin - what the heck is it and should I buy some??

Discussion in 'Non-Vegas Chat' started by TracyinVegas, Jul 5, 2021.

  1. DaiLun

    DaiLun R.C., L.C., and A.A.N.G.

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    I invest in Cryptocurrency, but BFF and other people I know shy away from it. One claims "because it's not backed by a fiat currency or any other form of precious metals (i.e. gold), others don't want to take the time to study what exactly the market is and why to invest/not to invest.

    It's not for everyone, just like the stock market isn't for everyone.
     
    HGS Weekend #2!!!!
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  2. notfromconcentrate

    notfromconcentrate Connoisseur of dive casinos and obnoxious outfits

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    To be fair though... what is fiat currency backed by? Or gold, besides its scarcity?

    It’s a question there’s no simple answer to from any angle of the discussion. I think it all comes down to how ACCEPTED a given asset or instrument is in trade or commerce. You’ll have no trouble exchanging US dollars or gold for other things based on their current respective valuations... but you might not have the easiest time doing so with random cryptos no matter how “bulletproof” their value proposition is rationalized to be by those who use or promote them.

    The US dollar has sustained its position as the incumbent global currency despite many conspiracy theories predicting its downfall or collapse (including as a result of the rise of crypto)... so I would consider sticking with it a safe bet :)
     
    Ritz-Carlton Dove Mountain AZ / 4Q Slot Tourney / 1-2 Strip Casinos
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  3. oghuman

    oghuman VIP Whale

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    I remember when it was $200 and I said I would buy 100 to a friend. Neither of us did, too late. Even after reading a multitude of articles, I decided I'm too late to the party andI don't need the risk of the volatility, purchasing something today at 3PM and when the transaction finally goes through I end up paying 5% more than intended. I'll stick with stocks and cash.
     
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  4. notfromconcentrate

    notfromconcentrate Connoisseur of dive casinos and obnoxious outfits

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    One other thing I should add is that as a gambler, I know it’s far too easy to get caught up in the price swings of an inherently volatile asset such as Bitcoin and shift from “passive investor” mode to “aggressive gambler” mode. I’m less likely to slip into the latter with blue chip stocks, index funds, and the like... so I consider abstaining from things like crypto to be somewhat of a defensive move knowing my own tendencies from casino gambling.
     
    Ritz-Carlton Dove Mountain AZ / 4Q Slot Tourney / 1-2 Strip Casinos
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  5. Vegas24_7

    Vegas24_7 Degenerate

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    LOL, yes, you can easily fall in to aggressive gambler mode with crypto. But the one thing I do believe in is that long term, BTC will increase in value. It has historically done so in the past 10 years. During this long term wait, the swings will be violent and it's best to not even look at it during this time as you are your own worst enemy if you sit there watching it move up and down consistently. To help answer the OP's question, yes, you can buy a few hundred dollars worth today and just sit back and check on it two years later. You might have to wait even longer and say 3-5 years later. But it will go up. Just my opinion.
     
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  6. woodsie

    woodsie VIP Whale

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    I've been in Bitcoin since 2013 when I bought at $200/each so I can share a few observations and experiences.

    1) A couple hundred bucks in Bitcoin in 2021 will neither make you rich or make you broke. You'll be entertained and that's about it. I still think there are strong gains to be made but the opportunity to make 1000x on your money has long since past. You aren't going to parlay $200 worth of Bitcoin into a million bucks even if you wait a decade.

    2) Despite the short term volatility, Bitcoin has been on a surprisingly consistent growth path ever since I started with it. Attached is a screen shot that I saved from 2014 which while not perfect has still held up surprisingly well.

    Bitcoin - Log Regression.jpg

    With that said, there have been updated versions of this approach since then which attempted to ignore data during "bubble" periods to establish a more reasonable baseline of growth. Benjamin Cowen on Youtube is one of those guys who takes that approach.

    Capture.JPG
    With that said, these are observations of historical data, not a guarantee of anything going forward.

    3) So with that in mind, why do I think that trend will continue? I think there are a few reasons.

    The first and most cynical reason is that I think Bitcoin is the most perfect unintentional bubble making scheme in the history of mankind. The protocol itself has a few automatic built in adjustments to control supply in a way that in a sense that new bitcoins only get more and more scarce. If there is a rush of miners trying to mint new ones, the protocol automatically increases mining difficulty to keep that supply at a controlled rate. In that sense, it is intentionally deflationary and the market so far has turned that into a self fulfilling prophecy.

    The one glaring difference compared to Tulip Mania is that tulips never were scarce and controls on the available supply never existed. If Tulip bulbs were rare to begin with and only increasing in rarity, then they probably WOULD still be high value. Gold for example only ever served as a form of currency and now just as a store of value because it is rare.

    The second reason is the possibility remains that a "killer app" for Bitcoin or some other crypto currency could be developed at some point. Like any cryptocurrency, Bitcoin is adaptable, extendable, and modifying able. It's like trying to pontificate on what the internet would be useful for in 2020 while standing in the year 1990. It's just simply difficult to say.

    In the meantime, it is undeniable that it has some baseline utility that gives it an intrinsic value that is greater than zero and that fact in and of itself is important. Definitely not $35k/each worth of intrinsic value but definitely something greater than zero. I've used it to make purchases online

    4) There are no guarantees and the possibility always exists that some newer more nimble crypto currency could replace Bitcoin at any point. At this point, I prefer to bet on Crypto in general by holding a few of the Top 10 Cryptos rather than putting all my eggs in the Bitcoin basket.

    5) Massive and shocking corrections are normal. If you can't stomach watching your "investment" tumble 50%+ in a matter of days, then don't mess with it.

    6) The average rate of return is declining for Bitcoin and Crypto in general over time. This is evidenced by non-linear regression curve shown in both of my attachments above. It makes sense that this is the case because as the total market for crypto gets larger, the amount of adoption and money required to continue to move the needle only increases. Understanding market capitalization for Bitcoin or any other crypto is pretty important to develop your own opinion of what is reasonably possible.

    The market cap for Bitcoin today is $650B. Could it be a few trillion at some point implying a 5x-10x return? Sure. Could it be a few hundred trillion at some point implying 100x+ returns? It's difficult for me to imagine how that could ever be possible short of world adopting it as the official global currency and you have to be huffing some serious glue to expect that outcome.

    7) Above all, Bitcoin can become nearly worthless. It's always a possibility no matter how things are going. Never discount the possibility of a black swan event to wipe it out. I don't think it'll be a matter of the market simply losing interest but rather an act of government, act of God, or some vastly superior technology making it irrelevant.

    Proceed with all that in mind. I'm still in it to win it but I understand the substantial risk involved and I can live with worst possible scenario coming true. The juice is worth the squeeze for now IMHO.
     
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  7. oghuman

    oghuman VIP Whale

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    I mentioned that I was going to buy Bitcoin at $200, I never did. I also had 300 shares of Tesla which I bought at $33 I sold some at $385, and I sold my last
    150 shares on April 2, 2018 at $258 when Elon Musk said it would go bankrupt. I didn't realize it was an April Fools joke by a genius idiot. I should have immediately bought back the shares but I was so annoyed at Musk I didn't. Yes, I shot my self in the foot and gave up hundreds of thousands of dollars. Between those to thing I would have probably $6MM maybe more with just those two mistakes.
     
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  8. Rookies11

    Rookies11 Low-Roller

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    Fast forward to 2020. Buddy of mine, was partly paid off ($3500) of a Sports Bet, through Bitcoin. Same thing... Gonzo! No going to the Police, of course.

    Now, I’ve done young & foolish things in my yute. Including, after making $2k at 10:00a.m. in the morning on $60k of retirement money, foolishly re- investing all of it @ 3:55p.m.on... wait for it... Nortel! Yep, that day!

    And this was decades before on line accounts. Flushed it. Only in the last five years, by good inheritance & diligence fortune, have I carefully used some of it, Day trading in Blue Chip Banks to “recover” that 60k.

    Further, because of my uhhh... gambling instincts, I do not permit myself to engage in options, warrants, etc., etc.In fact, the majority is in professional conservative hands, independent of me. Despite some conservative success with some simple strategies, my only goal is: “DON’T LOSE THE &*$#@** $”.

    My whole purpose in my senior years, is to build up inheritance via various things, including RESPs, for my Grandchildren.

    Be careful, as a young person. You can add significant financial success, through conservative methods and virtually zero to limited risk.
     
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  9. AyDee

    AyDee is getting too old for this

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    Some current headwinds are the stigma of it used for hacker ransom payments, China's govt ain't so big on it anymore, also there's now a self disclosure question on your income tax form.

    haven't touched it, interesting to watch.
    Kind of wanted to try one of those Vegas bitcoin ATMS for S&Gs,
    but will be conservative and just gamble it instead,
     
    Last edited: Jul 12, 2021
  10. DaiLun

    DaiLun R.C., L.C., and A.A.N.G.

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    Note that Las Vegas bitcoin ATMs take a "heavy" premium for their "convenience" The D had the first one and as I recall, the "premium" for withdrawals was 10-15%.
     
    HGS Weekend #2!!!!
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  11. TracyinVegas

    TracyinVegas Tourist

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    Boy, this info is fantastic! The reason I orignally asked this question was because I saw an article on the Winklevoss twins and Gemini. Looked up Gemini and thought maybe a good thing.
    ALL - again, never would I ever hold anyone to any suggestions on here. My decisions are totally my own:)
     
  12. woodsie

    woodsie VIP Whale

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    That's good because crypto is the Wild Wild West like the internet back in the 1990s. Who knows what's going to happen?
     
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  13. drapstar

    drapstar Tourist

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    The biggest risk to all Crypto currencies are going to be when governmental regulation comes along and it will. The Chinese have already denounced crypto because they cannot manipulate that valuation of it and they want control. Large corporations typically fall in line with Chinese trade practices as they fear being cancelled by China destroying their stock valuation. Corporate America will not adopt crypto as a form of payment and will lobby for crypto regulation. Laws will be passed and IRS will get involved and they will get there cut at capital gains. That's where the problem of crypto is. When you want to convert to hard currency for trade you will be taxed. Thus it will lose all the growth appeal and become more of a risk decreasing the appeal of it.
     
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  14. alanleroy

    alanleroy Click my avatar

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    YES. India completely banned the use and mining of cryptocurrencies two years ago, but that was overturned by their courts this year. Now they want to regulate the crypto out of it.
     
  15. oghuman

    oghuman VIP Whale

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    I could be wrong but I believe the the IRS is already questioning if you have crypto currency.
     
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  16. dmr

    dmr Registered Abuser

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    Now that you mention it, back when I had my taxes done a few months ago, I believe one of the questions they asked me was if I had any significant crypto transactions during the tax year.
     
  17. Chuck2009x

    Chuck2009x VIP Whale

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  18. Golfer

    Golfer Well-Known Member

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    It's been this was, formally, for several years now. Very similar to precious metals insofar as short term gains are ordinary income, and long term gains are capital gains. Of course crypto is much easier to track, notwithstanding some of the FUD which says otherwise.

    The wash rule doesn't apply to either for now, and the value of this is pretty obvious. The most common example would be taking a loss on BTC, repurchasing the BTC at a lower cost basis, and using that loss against a stock gain.

    I'd seek tax advice form a tax attorney as opposed to a CPA, but that is probably only applicable to a limited number of persons.

    In any event, since crypto has some characteristics of a currency, it make record keeping pretty difficult especially for those that purchases goods and services with crypto. Cash basis physical precious metals and gambling will continue to be more prone to tax fraud.

    The purchase of something with a crypto really furthers the argument of long term fiat if one thinks through it. Essentially it is several transactions, the most important is theoretically the crypto needs to be converted back to fiat, consequently the gain or loss, prior to the purchase.

    Personally I potentially made a huge tax mistake when I hedged my BTC profit with protective puts as part of my derivative gain was short term. But I'm not sure there was another way to take the gain (under $1,000 to $55,000 for multiple BTC in my case) and still own the underlying asset, which I wanted to do. I tend to be fairly conservative though, using derivatives which are conservative, as opposed to buy and hold (which is done incorrectly by a vast majority) and is incredibly risky.

    Whatever happens long term, and I have my suspicions, this is a fascinating topic that people tend to overcomplicate, and not properly investigate. The overcomplication, and lack of understanding, does provide some short term opportunity though. No different than any other asset class in this regard.

    Is it gambling? No, there is risk before the investment or lack of investment, whereas the situation is different at the casino. And contrary to talking points, one never really transfers risk, only the cost of risk. e.g., it's still your risk whether you buy a policy of insurance, VIX calls, SPX puts, etc. The cost of your personal risk is transferred, and you pay for this, but in no way is the risk ever transferred. Because it's still there no matter how some like to argue.
     
    Last edited: Jul 12, 2021
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  19. Marlin3

    Marlin3 Low-Roller

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    I’ll say simply that I retired at age 31 off of it after having $0 to my name 4 years earlier. I was forbidden to talk about it here when I tried to talk about it maybe a year or two ago
     
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  20. Marlin3

    Marlin3 Low-Roller

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    Lmao this is so far off it’s funny. How many times did tulip end up having a bubble? I do concede that bitcoin grows in bubbles, tulips busted in bubbles. Didn’t the dot com boom grow in a bubble too? There are reasons why it bubbles every 4 or so years