sassypants

Can you pick 20 small cap stocks which have outperformed the dollar over four years? Are there tens of thousands of merchants that will accept said stocks as payment for their products? Are there payroll systems and employees eager to accept these stocks as wages?

The fact that my post is even controversial is kind of silly if you think about it. All you're saying is, "Yeah, but!"

I've been through college level statistics classes. Nothing I learned in them suggested that holding currency for less than a year was an appropriate measure of savings.

You're complaining that Bitcoin hasn't been around long enough to make a proper measure of its performance. Then you complain that people who gave control of their coins to Mt Gox didn't get their coins back.

I don't understand what these complaints have to do with the fact that Bitcoin has been a fantastic savings vehicle for five years running. (Or four if you prefer)

Bitcoin remains the best and most liquid savings vehicle over the last five years of its existence. Assuming savings = holding currency for over 1 year.

On 98% of the days that you could have purchased Bitcoin you would have realized an increase in purchasing power in a year's time. In those 2% of cases where you could have purchased Bitcoin and seen a loss over one year, you would have still seen an increase in purchasing power in another 300 days. (This is mostly dealing with the June 2011 bubble)

There has never been a time where you could hold Bitcoin for 2 years and lose purchasing power. On the contrary, holding Bitcoin brings on average a 5x per year return in purchasing power.

Past performance, future gains, blah blah. Judgement is about taking into consideration the facts we have now and comparing them against past performance. There are very good reasons why Bitcoin is valued around $6billion now and very good reasons to think it will be valued higher in the future.

You should be placing your life savings in Bitcoin, and only purchasing the USD that you require and holding it for as short of a period as possible. This would have been the best strategy for 98% of 1 year periods over the last five years, and 100% of 2 year periods over the last 5 years.

Debit cards that draw on Bitcoin balances and allow you to use the VISA and Mastercard networks should be the most interesting products -- because they allow you to expose yourself to the dollar's periodic collapse against Bitcoin for the shortest period of time.

I'm sure I'll be downvoted and that people will tell you that Bitcoin is super risky and that you should only invest what you can afford to lose -- but shouldn't that be the case for the dollar and not Bitcoin?

The dollar loses 90% of its purchasing power against Bitcoin on semi-regular schedules, and people keep purchasing more after each collapse. This routine should get old after a while, but that's what happens when you don't use Bitcoin as your unit of account!

But that's my point. Arbritrarily declarations that exponential growth must stop soon are not meaningful in the positive or negative.

There are reasonable methods, however, to estimate likely outcomes of successful growth. I think its reasonable to predict that Bitcoin is likely to reach valuations of large publicly traded corporations. There are those that estimate it reaching valuations similar to gold, or the GDPs of industrialized nations.

But saying that the growth must stop because growth must stop isn't really saying much at all.

In my example I was using a 1 year horizon. So none of those closing prices would be charted until they had a year to mature.

I think I would need to make a slider so that you could explore the concept at various time horizons -- 8 months might bring a 50% occurrence of profit.

But my expectation is that at 1 year 95% of investments are sound, while at 2 years it would be 100%.

I've been meaning to build a chart to evaluate this. The question would be: What are the longest periods of time one could have held Bitcoin and lost money? And secondarily, how frequent were the opportunities to have lost money?

My ballpark guess would be that the longest you might have held Bitcoin at a loss were if you purchased during a few day span during the peak of 2011. You would have had to have held for almost two years to have turned a profit. But on 95-99% of days in which you could have purchased bitcoin, you would have profited within 1 year.

I'll try and put that together. Should be interesting.

But why would it stop sooner than a $200 billion market capitalization? Or $700 billion for that matter?

When Facebook was raising money at $10 billion valuations would it be wise to predict that it had to "stop very soon"?

I don't disagree that Bitcoin will at some point stop revaluing upwards by orders of magnitude, and I don't pretend to know what the market cap will be in a few years time. But I don't think it would be all that surprising if Bitcoin were to be more valuable than say, What's App. And for that to happen we're going to likely see another order of magnitude adjustment.

Bitcoin has shown predictable, steady growth sustained over a many year period.

https://i.imgur.com/kV2IRT5.png

Tulips experienced exponential an order of magnitude shift in price during the course of one year in 1637.

Unlike tulips, Bitcoin is widely appreciated for its utility. I don't think the comparison is as meaningful as critics would make it out to be.

Steady logarithmic growth in valuations is a normal phenomenon among tech startups -- yet it seems to me that many otherwise smart people are flustered by this growth when applied to Bitcoin, thinking it must be too good to be true.

What exactly is the problem with a store of value with 500% annual returns?

I read people talking about the supposedly awful volatility, but they fail to mention that the volatility has a very distinct trajectory. Bitcoin is volatile as it increased in value by orders of magnitude year after year.

The article repeats this fear of volatility in the context of one's live savings. How frequently do people tap their life savings to pay for grocery runs? Isn't it the case that Bitcoin is by far the best possible store of value one could have adopted for their life savings over the past five years?