Theres nothing fraudulent about Bitcoin its mass hysteria driving demand. Fiat currency has neither. Something only has value if ppl place a value on it. When I hear someone claim an investment in Bitcoin I end up smiling politely and correcting them on one point. Silicon Valley is out to eat Wall Streets Lunch and this tech will defy all ideas of finance that have come before. Sir, its $0.33 for that pound of bananas. I read an interesting article regarding the price fluctuations, but I cant find it now. But from now on, Im going to replace that sob story with this: Man, I missed out on MMM fingernail clippings! to remind myself of the absurdity of that imagined sunk cost Ive burdened myself with. Even then, like with investing in a new company, youre taking substantial risks. MentalArson The First Attack In 2012, I invited Pete and his wife to share a guest post on Financial Samurai when he was starting out called: Early Retirement: It's Not As Risky As You Might Think. It has a track record though ill give you that. All this bullshit about backed by faith and credit of my country goes out of the window when currencies die someday. The short answer is they can do nothing about it! The internet. I agree with MMM that cryptocurrency in general is kind of dubious, and that Bitcoin is a particularly stupid implementation of it. Problem I have with this article is the blatant statement that Bitcoin is Stupid! This is a known bug in our operating system, and we have designed some parts of our society to protect us against it. That is something very valuable just like stocks are. Why? (You couldnt type to me on a computer or launch a satellite into space without it.). Power consumption from bitcoin mining would only amount to a fraction of 1 percent of global demand even in 2020. Guys. Reply. The Money Mustache Community . For a shortcut to understanding good investing, you can also simply look up Warren Buffets thinking on almost any topic hes careful enough about offering opinions that by the time he makes a statement on something, you can be pretty sure it will be among the best answers out there. Its a little like taking out the garbage. The poorest in Sub-Saharan Africa earns the same money that you sitting in Manhattan, NY do. I believe MMM has missed the point completely in his rant above. Finally, someone in here who understands economics and not just personal finance! I am laughing my ass out. Probably, but I dont care. Mr. Frugal Toque Then you are in at twice the actual price of Bitcoin. Crypto currency as an ecosphere financially has benefited the tech industry dramatically, and if you invest like Mr Money Mustache advises, that means you probably have a good amount invested into the S&P 500. 1. January 15, 2018, 9:20 am. Even some cryptocurrencies that currently exist. There you go. Agree, the valuation of these cryptocurrencies are out of whack. Right now a nascent currency like Bitcoin is not able to handle the transactions in a similar fashion due to limited bandwidth, and people like you point that out and say, look it cannot even handle the current level of transactions how is this thing going to replace Visa or MasterCard? Is Bitcoin eventually going to replace the physical green back dollars and coins in our pockets? One thing in that seems to be missing in this conversation that Bitcoin maximalists will always point out: The imaginary value of these valueless bits of computer data representsenough money to change the course of the entire human race, for example eliminating all poverty or replacing the entire worlds 800 gigawatts of coal power plants with solar generation. Because of this, newspapers start reporting on prices daily, triggering so many tales of instant riches that you notice even your barber and your massage therapist are offering tips on how to invest in this new asset class. if there was something I wanted to buy online from another country and they didnt take the dollar for whatever reason its an OK solution. Overall, it is just as likely to go up as it is down, especially in the near term, and is best to avoid all together unless you just love gambling and dont care about losing money. Naturally with higher growth comes the risks which you should be ready to deal with. An investment then would not be considered wasteful now. You are correct to note that Since the late 1990s when Shiller started promoting the CAPE ratio stocks have regularly been in bubble territory. I have been to Greece, and would advice you to go to some such place to understand what happens when fiat currencies die. Rule of thumb is never put everything in one basket. The sooner we debunk the myth and come to our senses, the richer our world will be. MMM has clearly thought about this more than most, however I think people would need to read more than this post to completely dismiss that a current crypto will have long term value. Started by myrrh. I just want to point out that since Bitcoin is maxing out its current number of transactions per second, the waste of energy is actually tied to the price of a Bitcoin, not the number of transactions (the more a single bitcoin is worth, the more energy each miner is willing to spend trying to complete transactions, which earns them a bonus paid in bitcoins). Get out while you can. While cryptos are new, they also dont meet the needs of traditional cash flow analysis but for a new asset class but just because its new doesnt mean its a bad idea. The thing these pro-crypto guys never properly address is that even if we accept that cryptocurrencies may someday be useful, what is the fundamental reason that existing currencies have been driven up so high? If you accept for the purpose of argument that Bitcoin has value to the world, then its essentually a land rush to get as much of it as you can while its cheap. at best. I for one am lucky enough to participate in the birthing of an alternative financial paradigm so that people have choices. (which is more Mustachian..), Michelle, Mr Buffetts advice is clearly correct I mean, its Warren Buffett were talking about. Mr. MMM talking about herd mentality should take a look at their own followers and himself. Bitcoin and altcoins consume a ridiculous amount of energy. if you over leverage yourself in any of these you can find yourself in trouble. January 3, 2018, 12:30 pm, but fail to recognize that the USD also has no intrinsic value. Ryan Thomas I would say that I am above it all, but I have to admit, there are days when I get caught up and am tempted to get in the game (if only to short it!). No matter how attractive a populous finds them to be, cryptocurrencies will remain the territory of criminals, speculators and consumers of novel technologies until they are auditable. People fall in love with works of art. January 3, 2018, 12:22 pm. Congratulations, it sounds like you gambled and won. The ones who own the farms you mean? Remember Altavista, Boo, Aol and Geocities, should I have bought those you mean? This puts USD straight into the bank the Federal Goverment and allows paying of debt. Listen on: Apple Podcasts, Google Podcasts, Spotify, YouTube. What you are describing is called a silent crash. Vijay, what MMM is saying is that cryptocurrencies like Bitcoin cannot presently operate as currencies. Very good article! January 11, 2018, 12:03 am. Im not trying to convince anyone that bitcoin is the savior of the world but to put total trust in ones government, one that has a history of corruption is ignorant. Note that he didnt say the underlying technology (blockchain) is stupid. Ryan Thomas About the Comments Section:Normally, I try not to publish comments that are just emotional reactions or totally uninformed. coinwarz.com keeps track of profitability, but it can rapidly swing with changes in coin price. (a Case Study), https://medium.com/p/81f5ffa42deb?source=linkShare-6c666494704c-1516693614, https://www.statista.com/statistics/326707/bitcoin-price-index/, https://globalnews.ca/news/3977745/ethereum-blockchain-canada-nrc/, https://prestonbyrne.com/2017/12/08/bitcoin_ponzi/, https://seekingalpha.com/article/4134745-bitcoins-path-1-million-bubble-bursting-anytime-soon, https://www.youtube.com/watch?v=g-zIbVEjVpQ, https://www.youtube.com/watch?v=aeMv9uKpAZg, https://www.cryptocompare.com/mining/calculator/btc?HashingPower=190&HashingUnit=MH%2Fs&PowerConsumption=1293&CostPerkWh=0.12, https://en.wikipedia.org/wiki/Tulip_mania, http://contrarianedge.com/2017/12/01/bitcoin-millennials-fake-gold/, https://en.wikipedia.org/wiki/National_debt_of_the_United_States. Ms. Frugal Asian Finance I noticed that you didnt deny that you are invested in Bitcoin. Nobody needs to worry about whether terms will be met. Jul 25, 2021 164 comments Cmon, only wealthy people evade taxes in amounts that would matter & theres a cottage industry made of tax lawyers doing just that for them. Mr. Money Mustache talks about his divorce. We will see you on the other side of the crash. I was so sad that I missed out again ;). January 23, 2018, 12:50 am, Why Mr. Money Mustache is wrong and Nassim Taleb is right about Bitcoin: https://medium.com/p/81f5ffa42deb?source=linkShare-6c666494704c-1516693614. But I did put about $600 in Bitcoin over a year ago. Mustachianism the mental training that gets you to very early financial freedom requires you to evaluate inefficiencies in our culture and call bullshit upon them. People are looking for something that is undervalued to put their money towards. This MMM article seems almost contradictory to what has become an investment philosophy that reciprocates with many people. Mr. Money Mustache is. LOL. Im more inclined to trust contracts that cannot be broken. I was hoping that when bitcoin futures became a real thing, Id be able to short it in a more normal way. Humans are conditioned for shortcuts in all aspects of life. There valuation of pretty much everything but Bitcoin and Ethereum is unjustifiable. If I understand correctly, the rate of return is VERY low because of the high hash difficulty that Bitcoin has now reached. The cryptocurrency is the glue that holds the system together. The stock market over the long run will ALWAYS grow as long as the population and technology and our output as humans continues to grow. And society is comprised of them, and nothing else. It seems like youre advocating for scenario #2. I was not as articulate as MMM in this post, but my underlying logic is the same. I agree with you, Chris. Yeah, I had watched/listened to lots of Andreas stuff as part of the research for this. His rhetoric about trusting the wise elites of the Federal Reserve also irks me. What if anything gives a compelling reason that bitcoin or any one of these other currencies will end up in the group? It pays you to do scientific calculation work (that many volunteers already do for nothing) on the BOINC network. Thats a tricky question. I wonder why. Invest in anything wisely and safely. Thats cool. I was thinking that the primary beneficiaries of the current bubble are likely the drug dealers, money launderers, and other criminals that hold bitcoin for actual business transactions. Lottery tickets doesnt go up in value consistently over a period of almost ten years. So by definition we need to start talking about things that dont exist yet because they *cant* exist without immutable blockchains. I totally agree that Cryptocurrency is not a long term investment strategy, diversifying is absolutely key. Evidently you werent invested in Pets.com and other rising stars with no hope of ever getting profitable. January 4, 2018, 2:48 pm. Im not saying to build a bunker or anything but just diversify your portfolio for different economic times. Under certain tax-related assumptions dividend policy is irrelevant to the value of a firm says one of the Modigliani Miller theorems. I imagine that we are both smiling at this point. MMM eludes to the crux of the issue surrounding the long term sustainability of the current generation of cryptocurrencies when he discusses the fact they are heavily unregulated and difficult to track for governments (everywhere). BURST ( http://burst-coin.org ) as an example uses PoC (Proof of Capacity). The fees are incredible. Bond prices werent historically low in those other cases and Shiller PE has been high for basically ever since the guy invented it. If you're careful to invest in an altcoin that has a clear value proposition (ripple comes to mind) you can set it and check once a day at most. Thats pretty much it. As for USD working has many reasons, required to participate in the largest economy in the world, the military power behind said economy, etc. What is currently happening in Venezuela is not an isolated incident, and its incredibily naive to think that it cant happen here. Stop Ironing Shirts January 10, 2018, 11:01 am. Why? So in order to have immutability, we need decentralization. Governments have no choice here. Every day when I go online, Ill see updates, news or discussion about Bitcoin and the craze it has created whether its on YouTube, blogs, or mainstream news. January 4, 2018, 7:42 am. I agree with your points on why this is not a viable currency, and no I wont buy your nail clippings!!! It also has technological demand. For this article, I have set the bar much lower to show you the religious conviction that crypto speculators have. Why do you think so? But thats just the start. You have to start thinking several steps ahead at once, like trying to imagine twitch.com in 1990. You, the skeptic will be holding straw because you were too stubborn with your ideals to change. If a good provides value to just one person without hurting anyone else, then it provides value to society. Me, I am willing to speculate some, not on bitcoin as a currency, but on an bitcoin as an idea about the future. Not the only reason, but if earnings dont pan out, stock prices wont necessarily drop. Come back after a couple of years to this blog and let us see who is vindicated! January 2, 2018, 5:52 pm. You need some sort of fundamentals, and in bitcoin there are none. Its like Winston Churchill said: Gold is the silliest, most irrational thing you could ever use as money. The reason Bitcoin has been driven so high is because its a limited supply. LennStar Most people understand nothing apart from my friend bought some BTC for $5k last month and now theyre worth $20k. 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