OT: 4 years ago today

[TheStateUofMS]

I hate when Bitcoin bros compare BTC to the S&P. The S&P is an asset class... Large cap US stocks. Crypto as a whole is an asset class... A speculative one at that. BTC is a single holding and should be treated as such.

Within an asset class, some individual holdings out perform. But guessing which ones will in the future is risky. We mitigate the risk by buying a bunch of them. If you want to have an Apples to Apples BTC comparison pick a single stock.

Since August 2019

Bitcoin is up 576% market cap $1.2 trillion
Eli Lilly is up 751% market cap $865 billion
Nvidia is up 3139% market cap $2.9 trillion



Bitcoin has been a great investment. But you're a maniac if you would invest 80-90% of your wealth into it like a rational person might with the S&P. Same with gold. Or Eli Lilly. Or Nvidia.

It's not an asset class, it's a single position. As far as single positions go, it is not in the top 100 performers over the last 5 years.

 

[Perd Hapley]

1. We'll have to wait and see, but my noncommittal answer is that this could be the case, but it doesn't have to be.
   • Yes: It could be that bitcoin follows two separate adoption curves: store of value and medium of exchange. In this scenario it makes sense that the store of value adoption would occur before the medium of exchange adoption. We are currently experiencing the store of value adoption phase.

Okay. I’ll ponder that.

1. • During this phase, it doesn't make sense to spend appreciating bitcoin when you can spend depreciating fiat currencies. This is why people prefer to hold without selling. That doesn't have to always be the case. One day, bitcoin will have already experienced the massive appreciation of its store of value adoption, making it less painful to use as a medium of exchange. Until then, I don't expect bitcoin to be used widely as a medium of exchange. View attachment 626800

Losing me here. Appreciating BTC? Depreciating fiat? In both cases, what’s the point of reference for determining the appreciation / depreciation? If BTC’s price in USD goes up over time, is BTC actually appreciating in value? Or is it just keeping pace with inflation, and being able to be converted for a larger share of USD in the future than in the present, but not able to really buy anything more after conversion back to USD, or directly?

This is the ultimate conundrum. You don’t really know what either currency is doing by only comparing it to the other one. This is why, at some point, you need the market to present parallel currency options for various goods….so that you can truly measure the spending power of each against each other. It seems this us a ways off from large scale adoption, if it’s even possible at all. To me, that’s a non-starter. If it has no real utility as a currency, the ceiling is far lower than what its being hyped

1. • No: The other theory is that bitcoin will continue to be a store of value while never being used as a primary medium of exchange. This is the digital gold analogy. Very few people use gold as a medium of exchange, but it is the most valuable asset by market cap in the world because of its store of value properties. I think bitcoin is a better medium of exchange than gold, so while I believe it is possible bitcoin will be used as a medium of exchange, I don't consider it necessary for its store of value proposition.

This is precisely where I see it going. It may be able to simply survive if its only a store of value, but it won’t thrive. May slightly outperform gold, but that’s not a very high bar.

1. • In this scenario, I think bitcoin can coexist with fiat currency for a long time. The market is already figuring out that depreciating fiat is for spending and appreciating bitcoin is for saving.

It probably can, but again, not buying the depreciating fiat / appreciating BTC theory at this time.

1. This is the unit of account adoption. It would come after the medium of exchange adoption. Without repeating myself too much, my answer is that it's possible but not necessary. But this would most likely only happen after mass adoption has stabilized the value so that prices aren't changing daily. Like the medium of exchange question, bitcoin can exist as a store of value, with fiat remaining the primary unit of account.

This seems to be another ominous sign. Its hard to imagine markets will uniformly start accepting BTC without hedging for the volatility in the BTC price of whatever good / service is provided. It seems this is where it has to be able to excel. If Wal Mart and Target have to compete in 2 different currency arenas, it opens up a lot of possibilities for bargain shopping in USD or BTC, depending on their current holdings of each…..should they ever adopt a dual currency model.

1. There are transaction fees associated with using bitcoin, but if done properly, they are less than wire transfer fees that banks charge and credit card fees that merchants pay (and pass to customers). For example, on-chain transactions are optimized for large amounts. Example in the last block: $158,235 transferred for $0.26. This should be compared to a $25 wire transfer. For a cup of coffee, you can use a second layer like the Lightning Network and pay the equivalent of less than a penny in transaction fees.

The fees I was referring to are more along the lines of what merchants would charge to own / operate the software that converts BTC to USD instantaneously with any transaction. This would be necessary for wide scale adoption. And they aren’t going to do it for free.

 

[pseudonym]

I hate when Bitcoin bros compare BTC to the S&P. The S&P is an asset class... Large cap US stocks. Crypto as a whole is an asset class... A speculative one at that. BTC is a single holding and should be treated as such.

Within an asset class, some individual holdings out perform. But guessing which ones will in the future is risky. We mitigate the risk by buying a bunch of them. If you want to have an Apples to Apples BTC comparison pick a single stock.

Since August 2019

Bitcoin is up 576% market cap $1.2 trillion
Eli Lilly is up 751% market cap $865 billion
Nvidia is up 3139% market cap $2.9 trillion



Bitcoin has been a great investment. But you're a maniac if you would invest 80-90% of your wealth into it like a rational person might with the S&P. Same with gold. Or Eli Lilly. Or Nvidia.

It's not an asset class, it's a single position. As far as single positions go, it is not in the top 100 performers over the last 5 years.

Bitcoin and 'crypto' have fundamentally different structures and purposes. While bitcoin is a decentralized protocol with no central authority or team, 'crypto' projects are centralized to some degree, often with a specific team or organization behind their development. This centralization is why the SEC considers many of them unregistered securities, whereas bitcoin, due to its decentralized nature, is not classified as a security by the SEC.

To draw a financial analogy, comparing bitcoin to the broader 'crypto' market is not like comparing Apple (AAPL) to the entire stock market. Instead, it's more akin to comparing gold to various tech stocks—both are assets but with very different roles and market behaviors.

While there are thousands of 'crypto' projects out there, their combined market cap is less than that of bitcoin alone. For context, the combined market cap of Microsoft and NVIDIA (2nd and 3rd largest companies, respectively) exceeds Apple's (largest company).

 

[pseudonym]

Losing me here. Appreciating BTC? Depreciating fiat? In both cases, what’s the point of reference for determining the appreciation / depreciation? If BTC’s price in USD goes up over time, is BTC actually appreciating in value? Or is it just keeping pace with inflation, and being able to be converted for a larger share of USD in the future than in the present, but not able to really buy anything more after conversion back to USD, or directly?

This is the ultimate conundrum. You don’t really know what either currency is doing by only comparing it to the other one. This is why, at some point, you need the market to present parallel currency options for various goods….so that you can truly measure the spending power of each against each other. It seems this us a ways off from large scale adoption, if it’s even possible at all. To me, that’s a non-starter. If it has no real utility as a currency, the ceiling is far lower than what its being hyped

The points of reference are goods and services that cost more dollars over time and fewer satoshis over time.

 

[TrueMaroonGrind]

Pseudonym what percentage of your portfolio is Bitcoin? I’m genuinely curious. You are obviously team Bitcoin and I want an understanding of how much you have bought in.

 

[pseudonym]

Pseudonym what percentage of your portfolio is Bitcoin? I’m genuinely curious. You are obviously team Bitcoin and I want an understanding of how much you have bought in.

By @PooPopsBaldHead definition, I've been a maniac since 2019.

 

[TrueMaroonGrind]

By @PooPopsBaldHead definition, I've been a maniac since 2019.

So your entire portfolio is bitcoin?

 

[pseudonym]

So your entire portfolio is bitcoin?

Basically. I'm too risk-averse to do anything else.

 

[Perd Hapley]

The points of reference are goods and services that cost more dollars over time and fewer satoshis over time.

View attachment 627166

Except you can’t actually buy a house with BTC, can you?

Knowing that you have to eventually convert back to USD, you could insert a lot of things in there besides BTC, and tell the same story.

For example:

2016 - The house costs 10,709 shares of AAPL

2020 - The house costs 3,095 shares of AAPL

2024 - The house costs 1,962 shares of AAPL

Only difference being AAPL and many other positions actually go up….and stay up. You don’t have entire 3 year stretches that you have to sweat out before a chance to convert to USD finally presents itself again. They also have physical assets and liquidity and utility that can be measured.

So ultimately, the question is why choose BTC only over every other choice, knowing the risks of each position completely going to zero?

 

[PooPopsBaldHead]

View attachment 627083

Bitcoin and 'crypto' have fundamentally different structures and purposes. While bitcoin is a decentralized protocol with no central authority or team, 'crypto' projects are centralized to some degree, often with a specific team or organization behind their development. This centralization is why the SEC considers many of them unregistered securities, whereas bitcoin, due to its decentralized nature, is not classified as a security by the SEC.

To draw a financial analogy, comparing bitcoin to the broader 'crypto' market is not like comparing Apple (AAPL) to the entire stock market. Instead, it's more akin to comparing gold to various tech stocks—both are assets but with very different roles and market behaviors.

While there are thousands of 'crypto' projects out there, their combined market cap is less than that of bitcoin alone. For context, the combined market cap of Microsoft and NVIDIA (2nd and 3rd largest companies, respectively) exceeds Apple's (largest company).

Okie dokie... BTC is still a single asset. Just like gold. If you own it alone you are not diversified. Within a broad basket index of equities like the S&P you own 500 companies that often hedge against each other in different markets. You get growth, income, defensive, etc. you are still not fully diversified, but much better than owning just a single stock... Or Bitcoin. Or ásscoin or whatever else.

I do agree that BTC is the best of the bunch. And many investors should look at a position (1-10%) of their portfolio to be allocated into BTC. Same as Gold or other commodities. But going all in on BTC, tulips, Nvidia, emus, Berkshire Hathaway, muni bonds, real estate, or anything else is foolish. It always looks good until it doesn't.

 

[TrueMaroonGrind]

Basically. I'm too risk-averse to do anything else.

Interesting. I’ll say that you being all in like that on one asset could skew the lens in which you are looking at this. Good luck to you.

 

[pseudonym]

And many investors should look at a position (1-10%) of their portfolio to be allocated into BTC.

This is probably correct for most people.

Most people assume bitcoin = risk. However, a modest allocation to an asset like bitcoin actually reduces the long-term risk of a portfolio.

Not every company has to have MSTR's approach. Not every individual has to have my approach.

 

[pseudonym]

Except you can’t actually buy a house with BTC, can you?

Knowing that you have to eventually convert back to USD, you could insert a lot of things in there besides BTC, and tell the same story.

For example:

2016 - The house costs 10,709 shares of AAPL

2020 - The house costs 3,095 shares of AAPL

2024 - The house costs 1,962 shares of AAPL

Only difference being AAPL and many other positions actually go up….and stay up. You don’t have entire 3 year stretches that you have to sweat out before a chance to convert to USD finally presents itself again. They also have physical assets and liquidity and utility that can be measured.

So ultimately, the question is why choose BTC only over every other choice, knowing the risks of each position completely going to zero?

Over time, housing becomes cheaper for those who save in bitcoin compared to those who save in AAPL shares. Hat tip to anyone who has held 80% or more of their portfolio in NVDA shares without selling since 2019.



I don't sweat waiting to convert appreciating bitcoin back to depreciating USD because I've never sold in 8 years. I think this is the fundamental difference. You seem to think converting USD to bitcoin is a trade, that the only reason to buy bitcoin is to one day convert it back to USD, realize a gain, and pay taxes on it. The conversion is one way. I'm converting to bitcoin with no plans to convert back to fiat. I'm trading ****** money for the best money that has ever existed. Why would I trade back into the ****** money?

Respectfully, people who buy bitcoin hoping to sell it for more dollars don't know what they're buying.

 

[horshack.sixpack]

I hate when Bitcoin bros compare BTC to the S&P. The S&P is an asset class... Large cap US stocks. Crypto as a whole is an asset class... A speculative one at that. BTC is a single holding and should be treated as such.

Within an asset class, some individual holdings out perform. But guessing which ones will in the future is risky. We mitigate the risk by buying a bunch of them. If you want to have an Apples to Apples BTC comparison pick a single stock.

Since August 2019

Bitcoin is up 576% market cap $1.2 trillion
Eli Lilly is up 751% market cap $865 billion
Nvidia is up 3139% market cap $2.9 trillion



Bitcoin has been a great investment. But you're a maniac if you would invest 80-90% of your wealth into it like a rational person might with the S&P. Same with gold. Or Eli Lilly. Or Nvidia.

It's not an asset class, it's a single position. As far as single positions go, it is not in the top 100 performers over the last 5 years.

I don't understand the purpose in pimping it non-stop. It feels very much like multi-level marketing stuff, but I can't figure out the end game on this one.

 

[Perd Hapley]

You seem to think converting USD to bitcoin is a trade, that the only reason to buy bitcoin is to one day convert it back to USD, realize a gain, and pay taxes on it.

Well, that’s the only reason that exists as of right now, because you can’t buy 17ing anything with BTC. You sure aren’t buying that house you talked about in the previous post with nothing but BTC at the closing table.

The conversion is one way. I'm converting to bitcoin with no plans to convert back to fiat. I'm trading ****** money for the best money that has ever existed. Why would I trade back into the ****** money?

Because one day, you might need to actually buy something with the ****** money, because the “best money that ever existed” isn’t really even money yet, and it might not ever be.

Respectfully, people who buy bitcoin hoping to sell it for more dollars don't know what they're buying.

Agreed. And that’s a LOT of people. And those are the ones driving the price.