People are taking out mortgages to buy Bitcoin, says securities regulator
cnbc.com
cnbc.com
Over the last few months, it's gotten to the point where I can't snark about Bitcoin (to my security industry friends) without getting aggressive pushback from the people I went to grade school with, none of whom are in the technology industry, many of whom are cheerleading their social circles into investing in Bitcoin.
None of them are transacting in Bitcoin (to a first approximation: nobody is transacting in Bitcoin). They're buying for the same reason people bought into Pets.com.
Here's an example:
November 29 at 11:03am: Bitcoin just topped 11k! That's a 77% gain in just the last 30 days. Who wants in??? [21 likes, 19 comments].
This is from a home mortgage loan officer I went to grade school with. The comments are all variants of "Me, I want in."
I don't know what weird threshold we crossed in the middle of this year, but cross it we did.
To me, this indicts Bitcoin's most aggressive promoters, not the investors.
Nobody should do risky things with systems they don't understand. Accidents can and will happen in these cases. And besides these sort of things happen enough number of times that most people can easily see the 'scary action at a distance' thingy happening here.
Seriously, some time ago you could debate if you're an early adopter (winning from a raise in the bubble even if it pops later) or a laggard who'll only lose in it; but if you're investing after a random taxi driver has taken a mortgage to do so, then (hint-hint) you're not one of the early ones.
It's not wrong, buuuuut....
1001101's person is betting that it will, and I agree that it's a possible outcome. Wouldn't put all my eggs in that particular basket, but hey, maybe I'm wrong.
Thanks for sharing.
Whereas before those millionaires may have been reluctant to open an account with (i.e., send all their identity documents to) some unregulated crypto exchange, they already have brokerage accounts that can now or will soon be able to trade them.
All just to make up for somebody's bad investments?
If you want to know how stingy people are with their money, you have to only look at how they think about paying taxes.
[1] https://steamcommunity.com/games/593110/announcements/detail...
What bitcoin is useful for is simply as a store of value -- as digital gold. In that regard it is working perfectly. It is a well defined property right on a good with limited quantity.
Given that there will be way fewer transactions for a store of value than for a currency, I am not as concerned.
Further, it makes sense for its value to soar as more demand increases for it as a store of value. I'm not saying it isn't a bubble -- it will likely correct at some point. But long term I think it will still hit $100K to 200K per coin given the limited supply and still increasing group of people who will use it as a store of value.
Investments have a 'Store of value' feature by default built into them.
For Bitcoin to be viable its value has to endlessly increase over time. Or you are simply better off storing your cash beneath your mattress.
Well, what else could it be?
I think slowly selling on the way up is a good strategy. For example everytime it doubles you sell 10% or 20% (depending on the risk you are willing to take). At https://bitcointalk.org/index.php?topic=345065.0 there's a better description of this approach and at http://bitcoinsavingsplan.com/ there's a calculator to check scenarios with different numbers.
Any other better approaches?
If I lose the current amount, i won't care and every time it goes to high, so I would care. I just go out. I don't need to stress about it and I don't have FOMO, because I have some.
Also, I set/adjust my limit orders every 3-4 days and hope one hits.
Timeouts and software glitches are hardly the point here. You can't sell it, unless you have a buyer. And you won't have a buyer because every one is trying to sell it. You are forced to hold it, because what else can you do?
As for your strategy, if it really keeps doubling, and you only take out 10-20% per doubling, you'll end up with 90% of your net worth in bitcoin, which seems unreasonable. But that comes down to a question: even if you give it high odds that it will continue to go up, if you're not certain of it, then you should probably want to accept some risk of losing future gains to avoid some risk of losing what you have.
If you are certain it will go up...you have bad judgment.
I decided to try to minimize my future regret. So I sold some, and kept more, and as it kept going up I sold more.
There's only one thing I regret: It reached a price that I thought was really sweet at the start of December (I don't remember which year). It was a really tempting price, but I didn't sell because I would pay too much of the gains in taxes. I wanted to wait until next year, when more of the profit would be in a lower tax bracket. Two days after I decided that, the price dropped dramatically.
The early transactions were at a much lower conversion rate so they would be of larger BTC that tended to raise the average $/txn. But if Bitcoin as a payment network were growing exponentially, we would expect a large proportion of transactions to be relatively recent and at recent valuations.
So either: A. Bitcoin is used for transactions of over $1000 on average, or B. speculation is driving up the valuation far beyond its utility.
In either case, it's clearly not about frictionless microtransactions anymore.
I mean, if I had made a killing out of the various petty crimes available to public officials and wanted to retire on that, what's my other option? Trying to ferry precious gemstones through customs?
I'd take the transaction fee, the challenge would probably be finding an exchange that would let you cash out that kind of money.
This is something I just don't understand about Bitcoin's value proposition.
> what's my other option?
I hear Oriental rug import businesses are popular.
> the challenge would probably be finding an exchange that would let you cash out that kind of money.
Even if, I hear the IRS is requesting transaction records from the major exchanges.
What's involved in processing a transaction?
https://en.bitcoin.it/wiki/Proof_of_work
I'm not well-versed on any of this, so I might be wrong.
"I thought of how Henry Ford called his broker and instructed him to 'sell everything' when his doorman or elevator-operator (anecdotes differ in detail) started telling him about stocks in 1929."
I got into Bitcoin back in 2010. Unfortunately I only have a small percentage of my Bitcoin "fortune" intact, having cashed out most of it below $100.
I'd buy them for shits and giggles but the transaction costs are ridiculous.
Stop calling them tulips. The most “educated” answer is that you don’t understand them. Stop pretending you do. A thing like this is the first off, many rules of economics don’t apply.
"The price of land is solid, they aren't making more of it" - 2007
Tragedy of the commons. Even if I "want" the price of bitcoin to go up, any dollar I invest in Bitcoin will only increase the value that I actually capture by an infinitesimal amount.
No.
Once everyone is invested the pool of potential new investors has been exhausted and the bubble pops.
Bubbles are generally about Human psychology not about the underlying asset. Tulips, student loans, homes, internet domains, websites etc etc.
The problem there is really Human psychology. For that matter people still continue to take student loans, buy homes, buy tulips or whatever. Its just not at the bubble prices.
The only problem: none of these stories are true.
https://www.smithsonianmag.com/history/there-never-was-real-...
"That’s not to say that everything about the story is wrong; merchants really did engage in a frantic tulip trade, and they paid incredibly high prices for some bulbs. And when a number of buyers announced they couldn’t pay the high price previously agreed upon, the market did fall apart and cause a small crisis--but only because it undermined social expectations."
"In this case it was very difficult to deal with the fact that almost all of your relationships are based on trust, and people said, ‘I don’t care that I said I’m going to buy this thing, I don’t want it anymore and I’m not going to pay for it.’ There was really no mechanism to make people pay because the courts were unwilling to get involved," Goldgar says.
> That’s not to say that everything about the story is wrong; merchants really did engage in a frantic tulip trade, and they paid incredibly high prices for some bulbs. And when a number of buyers announced they couldn’t pay the high price previously agreed upon, the market did fall apart and cause a small crisis—but only because it undermined social expectations.
The tulip craze was real, it just didn't cause society to crumble.
I see it mentioned at least 10 times a day.
We're already past the point where bitcoin could have any value as a currency, as the higher and higher transaction fees ensure the only remaining users are traders. I mean I can hardly see anyone using bitcoin today as anything but a store of value for speculative reasons. Any real users (which treat it as a currency) should have already left for cheaper currencies. It's going to fall, and fall hard, and it will be painful. When it will crash, it's going to take similar protocols (who can use the same setups / hardware / asics) down with it as miners try to reuse their hardware on more effective currency.
I love Bitcoin and other crypto currencies but driving yourself into debt to buy in is grossly irresponsible. Worst of all these will be the same people clamoring for regulation when they lose all their things.
Ultimately, the mania present in a bubble can persist longer than one can stay liquid, i.e. Bitcoin could double or triple before the bubble bursts, which would trigger a margin call on a short position.
You already own property and take a loan with the property as security.
The big questions are if that's ever going to happen, and if so, when?
Unless you've got a time machine or have cornered the market, though, I'm not sure how you could ever know.
With bitcoin though, I don't see a good way to say bitcoin "is overvalued, here's x, y, z that explain why it's overvalued." There's really no explanation for it's value at all, that's the aspect of bitcoin that resembles a currency.
I suppose you're trying to guess why those first sellers would sell? Seems like a pointless exercise. There could be any number of reasons. A mysterious authority figure convincing them that BTC is overvalued is just one (unlikely) possibility.
It really is as simple as other posters are saying: when there are more buyers than sellers, the price goes up, and when there are more sellers than buyers, the price goes down. The reason for there being more sellers than buyers could be as simple as people losing interest and moving onto the next shiny thing. You can't eat either gold or bitcoin, so in the absence of continued attention, there's natural selling pressure.
There are already problems withdrawing from exchanges, if a mass of people panic and want out, it could trigger a run on the exchanges, some of which are rumored to be running some kind of fractional reserve.
All it’s going to take is a few grannies losing their retirements for the congressional hearings to start, etc.
I think it can probably still double or triple from here, so I’m not gonna try and call the top, but chronologically, I don’t think it’s too far off—6-9 months is my guess.
At some point in time. The price of one single coin will be bonkers to the point of disbelief. Round about the same time, there won't the next set of greater fools to drive the prices any more up.
Then a good deal of people will want out. Demands comes down, supply goes up and prices come crash down.
At the end people just sit down and realize along the way it generally never was a good idea to be playing this game at all.
This information needs to be the first thing people learn about cryptocurrency.. long before putting any money in
Bitcoin: my answer to the repeated questions. No, there is NO way to properly short the bitcoin "bubble". Any strategy that doesn't entail options is nonergodic (subjected to blowup). Just as one couldn't rule out 5K, then 10K, one can't rule out 100K. Gabish?
You will go broke first when the price first doubles.
Then them will go broke when the price crashes.
At this point, the market's too hot - there's too much going on. And Bitcoin itself isn't seeing the meteoric growth today that it has over the past 2 weeks - where is the growth from the Futures exchange?