The Stock Market, Investments, and Investing Thread
#17
(06-19-2019, 09:08 PM)Rhyme or Reason Wrote: I think the long game with bitcoin is as a hedge against gov over reach and hyperinflation...but that's just my simpleton opinion.

I think you're on to something with your 'simpleton' opinion, and I'd like to expand on it further. I find the topic fascinating.

Also I’ve been meaning to do a Bitcoin post and my thoughts on bitcoin as an investment, so here it is. Long post incoming…

Traditionally gold has been the standard hedge against inflation. We saw gold prices surge from the 70's to early 80's when the US went off the gold standard (1971) and inflation went batshit crazy.  We saw this all over again from 2009 - 2013 when the Fed started implementing 'quantitative easing' and the markets were expecting inflation after the Fed had pumped a metric fuckton of money into the financial system through low-interest bail-out loans. That inflation never materialized, at least in the CPI, but gold still went up regardless.

And...we're still seeing the effects of the inflation bogeyman increasing the price of gold even today. Many believe that the fed is signalling that it will drop interest rates soon.  Lower interest rates means more loans which means increased money supply which means higher inflation. Today gold shot up ~2.5% to a five year high.

The value proposition of gold is that it's believed to be a scarce resource and it's been universally recognized as a store of value and medium of exchange for millennia. This is reflected in it's market value, and at today's price gold's total "worth" (market cap) is around $7.5 trillion dollars.

So what does Bitcoin have to do with this?

Put simply, Bitcoin could eat into some of gold’s market share and become an alternative store of value and a sort of reserve currency. It is also a ‘scarce resource’ as there will only be 21 million bitcoins created.

There's a strong bull case for Bitcoin:

+ It’s the most well-known crypto currency and currently has 57% dominance of the total crypto market based on market cap.

+ It’s the longest-running blockchain and the network’s security has not been compromised

+ Its use is becoming more normalized and ‘visible’. There were 637 ATMs in June 2016 and today 3 years later there are 4,894.

+ Bitcoin's market cap is a mere 2% of gold market cap ( ~$170 billion for BTC to ~$7.5 trillion for gold)

+ It’s more easily transferable than physical gold since transfers happen on a globally distributed network/ledger

+ Major brokerages (Fidelity, TD Ameritrade, Etrade) are signalling to make Bitcoin trading open to public, which would facilitate wider adoption.

+ It’s seen price appreciation and increase in demand in crisis situations (Brexit, Venezuela collapse, Argentina election)

+ It’s shown to make tech improvements (albeit slowly) e.g. Segregated witness, Lightning Network.

In short, with sizable current adoption, evidence of continued increased adoption, recent historical increases in demand in situations of unrest, and relative ease of transfer, it has enormous potential for more growth and improving its legitimacy as a store of value.

There are also reasons to be skeptical….and I’m not going to get into that here  But all told, IMO you could do a lot worse as a ‘store of value’ hedge on a speculative asset and portfolio wild card.

Disclosure: I hold ZERO Bitcoin, but I do hold Ethereum.


Sources

Fed Rate Cut (June 19, 2019)
https://www.reuters.com/article/us-globa...TL02X?il=0

Gold Price :
https://goldprice.org/

Inflation Data:
https://www.minneapolisfed.org/community...rates-1913

Bitcoin Price + Market Cap :
https://coinmarketcap.com/

Bitcoin at Fidelity
https://www.bloomberg.com/news/articles/...-few-weeks

Bitcoin trading at Etrade
https://www.bnnbloomberg.ca/e-trade-is-c...-1.1250240

Bitcoin Trading at TD Ameritrade
https://www.tdameritrade.com/investment-...ading.page

Bitcoin after Brexit (2016)
https://techcrunch.com/2016/06/23/bitcoi...-year-low/

Bitcoin in Argentina
https://www.ft.com/content/44bfb5b8-7d4d...85092ab560

Bitcoin in Venezuela
https://www.bbc.com/news/business-47553048
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RE: The Stock Market, Investments, and Investing Thread - by billydingdong - 06-20-2019, 08:54 PM

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