It's as simple as getting any brokerage account and buying the Vanguard Exchange traded fund called VTI, or getting a Betterment account and setting your allocation to at least 90% stocks. Good to add this article to the (hopefully) growing list of rational explanations debunking the appeal of what my 76 year-old Grandma, a consummate investor, rightfully calls funny money. It pains me to hear friends, some of whom I have to believe are intelligent people, describing their vast spoils and commitment to cryptos. Bitcoins etc does not make it easier at all. It's natural to just look at the price itself and how much it's . Get listed and sell some shares. The Ramsey Show. Ignore this utterly irrational FUD and embrace the digital world. It can have applications in the monetary system, contracts, and even as a component in higher level protocols like sharing files. Mr. Money Mustache shares his opinion about Bitcoin. 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. Amazing. Since the Fed can always print as much currency as it wants, I would probably bet on scenario #2 as well, so perhaps were half in agreement. Bitcoin is used for some pretty awful things, the accountant at my dads prior employer stole $500,000+ and likely hid it from the authorities. You will also have to pay a fee to transfer from the exchange to your wallet. Because if youre going to be an evangelist for anything, it needs to be purely based on the underlying merits, not what you hope it will do for your personal fortune. Hows that Nvidia stock doing now that GPU sales have been skyrocketing this last year giving them two record years in 2016 and 2017? There are other points that I cant think of right now. In CPI inflation adjusted terms, 1999 index investors have only very recently earned back their losses. Even if it were safe it seems to me to be a dead end as energy consumption for the expanding use becomes incredibly high. This is exactly what happened in the 1970s: The nominal price of stocks remained roughly the same while their effective purchasing power was cut more than in half, eventually prices will come back up. Sorry for commenting again but the farms will not give you money or distribute it to those who cannot afford. Try doing one thing the Banks dont want you to do, or the regimes in half the worlds countries dont want you to do, and you will know how financially ruined you will be! Take a look at the German Mark after WW1. Andre Kostolany. Im just curious what your motivations are for all your comments. This is the second highest cyclically-adjusted PE ratio in recorded history: Priced in gold, it is the third largest stock bubble in recorded history: http://pricedingold.com/charts/SP500-1880.pdf. 2) Volatility the market cap of Bitcoin and other cryptocurrencies is small compared to that of fiat currencies. But the fantasy that the world will switch to Bitcoin so you'll need it to conduct commerce so you better get yours now is just totally implausible to me. All these ICOs are just insane. In a world of human trust, putting the wisest and most respected people in a position of Adult Supervision is a useful tactic. Your entire new medium of exchange is part of the black market. When we talk about Bitcoin, or Ethereum or any other digital coin, for that matter, neither ponzi nor pyramid are perfectly accurate descriptions for how these systems actually work., The cryptocoins represent a new kind of scam, a Nakamoto Scheme: https://prestonbyrne.com/2017/12/08/bitcoin_ponzi/. Sure.. that is until the government keep printing it until its worthless. ie beauty counter for nerds. 3. I reply, if its gotten that bad, I dont want to live in that world anyway. Because hydro acts as a massive built-in storage in both the short term (ms, seconds) and long term ( hours, days, Bitcoins arent duplicable, your fingernails could be replaced by other fingernails and nobody would notice unless they do a mass spectrometry. Theres no way I could have paid down my debt and netted $14.5k in stocks in less than a year with less than $5k in capital. Most people understand nothing apart from my friend bought some BTC for $5k last month and now theyre worth $20k. Redirecting to /r/mrmoneymustache/comments/mz1sma/thoughts_on_mmm_why_bitcoin_is_stupid/h094ynt (308) 0 transaction fees, infinite scalability, instant transaction times (2-10 seconds), and no mining (aka no ridiculous power consumption). Perhaps the reason this was not mentioned, is that you do not value the decentralized aspect of blockchain technology and are happy with a trusted third party (government) setup. If you know anyone heavily vested in bitcoin, stay in touch with them. Noticed this ad on the corner of a website recently because we ALL need daily updates on an obscure piece of niche software technology! One of my coworkers at MMM-HQ works for nVidia, and part of his job is hunting down mining thieves who comandeer virtual servers (cloud computing) to mine coins on their behalf. Bitcoin and other Cryptos are attractive for that reason and that why people spread this misinformation about it to sway people from backing it. Last May, when I announced I had inked a deal with Harriman House to publish my new book, Pathfinders, I invited those of you who had embraced The Simple Path to Wealth to share your stories. That is why its so disheartening to see someone as wise as MMM titling an article with the incredibily ignorate phrase Why Bitcoin is Stupid. remittances, credit lending for undocumented people. Also appreciate fungibility. That means an implied 100% cash-on-cash return every year. Danny Livewire People only invested in it because it was an internet company and investing in internet companies can make you rich overnight. Stop Ironing Shirts I read an interesting article regarding the price fluctuations, but I cant find it now. A bit frothy? It is an honor to be doing this session! We dont need to prey on their consumerism also. Basic Economics Vijay. Ive been investing steadily over a 20 year period. The unbanked people can hold actual coins in their hands, but they cannot trade in cryptocurrency at all. Its a vicious cycle, but Ive just got to bite the bullet instead of going Wah, it was $2 cheaper a week ago.. Mr. Money Mustache Even if you assume block chain currency will replace all gold, which I do agree with you is a bit of a pipe dream, how do you know which one? Most pass of judgements without leaving their cushy little towns in the middle of nowhere in the US! January 3, 2018, 12:21 pm. Buying it is not necessarily speculative. Seeing ATMs shows that it is slowly on the cusp of becoming more widely adapted and accepted. January 3, 2018, 4:34 pm. Why? So I also read a lot about investment bubbles and fundamentals and how to tell those apart. MissSaraBee January 4, 2018, 7:36 am. Jeremy Collins I do believe hyperbitcoinization will happen in a decade or two. MentalArson Mr. Money Mustache Crypto currencies are a must have component of your investments and should constitute not more than 10% of your overall investments, based on your risk appetite. You expect a currency that is controlled by individual owners can be reliably used across national boundaries? Now the ball has reached proportions where it could blow up anytime, and people in this forum are talking about the small change like the bubble and P/E ratio in the stock market. That is wrong. The market can remain irrational longer than you can remain solvent. No one knows what the stable value of bitcoin will end up, and betting in either direction just seems like a fools errand. It is 110% of your total and entire GDP, and that is just your Federal Debt. Love this blog and agree with most of your opinions on Bitcoin. Bitcoin has just 200 billion capitalization currently. So you are further wagering that Bitcoin will literally supplant the USD as the world medium of financial exchange, and frankly, that is kinda bonkers. You call it trust. Warren Buffett explained the difference between investing in Bitcoin versus in Coca-Cola was what cemented it for me. Margin of Saving This has happened with EVERY speculative event throughout recent history. One book that I found very useful in understanding the greed-fear cycle (and Central Banking and the Federal Reserve system to boot) is the 2001 classic Towards Rational Exuberance by Mark Smith. Let me know when you find a buyer for your $70k fingernail clippings. The Money Mustache Community . The bubble crashed and the internet didnt die. The reason Bitcoin has been driven so high is because its a limited supply. Thanks, MMM! Episode 496: Why Bitcoin is Stupid - Part 1 by Mr. Money Mustache. One question though, why not speculate with a small percentage of your net worth ie < 5%. Speculating on bitcoin for this reason only really works so long as there is some new greater fool who joins in on the speculation after you have bought. College, Medical, Cars, houses, Child Care, Stocks, Bitcoin, hell even dining out is all overinflated. Its not that I enjoy seeing people suffer, but who am to talk them out of it? Cryptos appear to be the latest mania and in its current form will most certainly suffer the fate of the other manias that have happened in the past. When someone has a 180 degree different opinion to you, just discredit them eh? Tim Beck Rather like italicising. Do you really believe that we should go all-in when it comes to trusting our institutional financial establishments? If THAT does happen (BTC=100K), it will prove once more that BTC is not a currency at all. Thank you Jane, I have been waiting for someone to point this out! Why is the author so angry about this fact? Im not sure why the author is so angry at people who speculate. I think that the point being missed in all of this is NOT that people want to evade taxes, but that they are being screwed backwards & forwards by the banks (& the tax evaders-in-chief that run them). In the US we call it the full faith and credit of the United States. Everything is awesome, we cannot fail, it is great! You could always follow the Long Island Iced Tea model: 1. Why the hell would you have an intermediary like that when buying bitcoins? Mr. Money Mustac. A network like bitcoin that possesses millons of users and consists of billions of dollars of wealth means that in times of crisis around the world, the network itself can provide relief to anyone without discrimination. Bitcoin only has one, scarcity , and even that is debatable. This leviathan now stands at around $233 trillion, or 318 percent of global GDP. You write that These are all things that people have bought in the past, and driven to completely irrational prices,. I remain open to more information on the uses of Blockchain, but Ive never seen a valid fundamental reason for betting on future increases in the prices of these things. ;). (Update from late 2018 Mike ended up being wayyyy wrong.). I can have a stash of cash that is inflation proof just in case the government decides to wildly inflate the currency. Say I trade you a car for 1 bitcoin on Jan 8. Also true. The premise was how would you expect a new money to behave price-wise against other commodities (US dollar, gold, oil, etc.)? I have seen several bubbles grow and then burst, and one thing you learn is that an actual bubble rises like crazy and then totally pops. The truly irrational. Well start with the answer:No, you should not invest in Bitcoin. I have been hearing Bitcoin is a scam and a bubble since the time it was 200 bucks! Why not one of the other 1500 cryptocurrencies? MMMers have unplugged from debt, but putting all faith in the designers of The Matrix seems ironic. Evan Drake People then go on to say, If theres even a ONE PERCENT CHANCE that this happens, Bitcoins are severely undervalued and they should really be worth, like, at least a quadrillion dollars each!!. Do we really want a place where youre either an Amazonian or Walmartian? Unconfirmed BTC transactions already in the 6 digits now. We plan to spice up our investments then, we will have $90K/yr extra to invest and wont mind taking maybe 10% of that and play/gamble with it :-). January 2, 2018, 6:23 pm. Plus $20 to run the transaction. Given that China has a lot of bitcoin mines and electricity is produced by coal in China mostly thats a lot of unnecessary CO2 that just got bumped in the atmosphere. Do pay attention, please. Dr-In-Debt Yes, it is true that bonds are *also* in a bubble at the present timeand that the bond bubble is so big that it makes stocks look relatively cheap by comparison. Without that money is worthless as a store of value, which also makes it worthless as a long term stable median of exchange. January 2, 2018, 6:46 pm. babysitting, lawn mowing, snow shoveling, etc..) So, how is Bitcoin replacing that? So, how is Bitcoin better or different? ), but to include gold bullion is not quite fair. All I had to do was sell the integrity of my blog for $100 non-bitcoin bucks (via PayPal of course.) You sound like I poop-obsessed wing nut. Not a repeatable strategy though, Im sure. This one is just simply incorrect. So in order to have immutability, we need decentralization. https://www.youtube.com/watch?v=aeMv9uKpAZg, The Wealthy Accountant Today, Jan 26, at 11:30 AM, its trading around $31,850. You cannot have blockchain without bitcoin. Its the last one! But its likely just down the toilet. Transactions takes as long as for banks (and soon banks will do trasnfers in seconds too, the real life tests have already started) and cost MORE. While I agree with your sentiment about Bitcoin I have been echoing similar warnings to friends and family since its mid-2017 breakout to $2k I think several other cryptos are definitely deserving of a portion, albeit small, of an investment portfolio. This is also wrong, Zimbabwe did not abolish taxation yet the worth of Zimbabwe dollar has vanished anyway. What are the world currencies pegged to ? =. Everything thats happening in the crypto space is just so normal as you would expect investors struggling to get the price right for something beyond the control of regulation. MissSaraBee If youre one of these credible people, please do so in the comments or in a blog post on Medium that we can all read. Why? When the supply of foolish speculators dries up, the value evaporates often very quickly. Rule of thumb is never put everything in one basket. Its hard to quantify the lost energy and human potential, but the cost is real. Consensus over its value. Ive been wondering this too. If you are disgusted with the mining costs of Bitcoin you should be but the fact remains new inventions like RaiBlocks has made cryptocurrency frictionless and without mining or fees with transactions at over 7,000 per second. January 4, 2018, 2:23 pm. A REAL currency must be low risk+ zero (better subzero) return+good liquidity, and all those three things MUST go together. They could also plateau until earnings catchup with prices. Nothing is 100% guaranteed in life. January 14, 2018, 1:05 pm, https://en.wikipedia.org/wiki/Foreign_exchange_market. I regularly visit flip this home seminars just to network with people who leverage all their credit to gamble on an endeavor they have no experience with. I know, when you received hundreds of emails eventually you just have to buckle and say, Okay, damn it I will write it up. But how do you know youre investing in Amazon, and not Pets.com? That is why I also invest in government bonds. Thats a lot of electricity that can be used to power 3.3 million homes wasted. When evaluating investment bubbles, it means looking at where everyone is throwing their money no matter how many billions and being willing to say Bull. No one controls it, so no one can rewrite the data. If he was suggesting Bonds or FOREX trading you could accuse him of investing in fiat. Thats crazy. Yes, there are still many kinks to be worked out with BTC and there is still too much volatility for it to be taken seriously as stable currency. 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. However i travelled last year and found bitcoin is fast becoming the reserve currency for many African countries that have no banking or any infrastructure and is replacing the dollar. Bitcoin and altcoins consume a ridiculous amount of energy. I believe I may be allergic to mercury. Governments have no choice here. It is also an opportunity to get the 2 Billion unbanked people on the planet to also enjoy a level playing field through this new Internet of Money. Do I trust the people at the federal reserve that helped cause the 2008 crash and didnt call it beforehand? How much do you have invested in BTC? Great post. 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