Bitcoin - Virtual Currencies and the future of Cash

[insite]

The current speculative frenzy in virtual currency such as Bitcoin is quiet something to behold.

More are climbing onto the bandwagon .....

Cash is being slowly closed down !

Where are we going with this , what are the risks and opportunities of such an investment and how will this impact on ex pat life here or elsewhere.

[earthdome]

I have been following this since 2010 and as a computer programmer understand the technical side fairly well although I am not a cryptography expert. I did try doing remittance using bitcoin but with the fee's to convert from USD to bitcoin then back to peso's it ended up costing about the same as using WU, XOOM, etc. Now that the median fee for doing a bitcoin transfer is around $15 it is no longer competitive. I do have some small crypto currency positions that have done ok but missed many of the major moves.

[earthdome]

FYI, if you decide to put some money into crypto currencies please only invest extra money you could afford to lose and be very careful. WIth crypto currencies now valued at over half a trillion USD there are many scammers trying to take people's money. Be careful and do your due diligence.

[Reboot]

I've done rather well but this will not end well.

[Gentleman.Jack.Darby]

4 hours ago, insite said:

The current speculative frenzy in virtual currency such as Bitcoin is quiet something to behold.

More are climbing onto the bandwagon .....

Cash is being slowly closed down !

Where are we going with this , what are the risks and opportunities of such an investment and how will this impact on ex pat life here or elsewhere.

Well, I think calling Bitcoin and other so-called digital currencies 'investments' at this point is a little too optimistic; what's going on right now is plainly speculation and it reminds me of the tulip mania and collapse that happened in the Dutch Republic in the 17th century.

That's not to say that money can't be made from the speculation, but it's not for the faint of heart nor is it for those who hold a traditional view of what constitutes 'investing'.

I've had a series of discussions with a co-worker who is bewitched by the media's breathless scorekeeping of the daily price rises and the wild speculation of where the price will be in 2 years or in 5 years, etc. However, he just can't wrap his head around why the price is rising as well as why digital currencies, being nothing more, in essence, than the computer implementation of provable mathematical theories,  have value.

I think that his, along with a lot of other people's, 'forgetfulness' of the basics of investing, such as that one should never invest in anything that one doesn't understand well enough to explain to someone else, the higher the reward the higher the risk, and that no one will take better care of one's money than oneself are why Bitcoin has turned into a bubble.

My personal view is that, barring a mathematician finding a flaw in the underlying mathematics, which I think is unlikely since elliptic curve cryptography, which underlies Bittcoin, has been around awhile and has been used and tested in other applications or, more likely, a flaw or flaws in the software implementation of the underlying mathematics, we'll see the bubble pop in a spectacular fashion and probably for one of the reasons all speculative bubbles pop - nothing exciting there.

Once the bubble pops, as we've seen with other speculative (investment) bubbles, so long as the assets, in this case the underlying mathematics, their real-world implementation, and someone else's willingness to trade what they 'have' for my Bitcoins, truly have 'value' (and I think digital currencies do), we'll see a more orderly and sensible adoption of them and they will, in time, become an accepted and unexciting part of our financial life, much as things like credit cards or derivative financial investments. 

 

 

 

Edited December 14, 2017 by Gentleman.Jack.Darby

[scott h]

as soon as my local bakery and sari sari store takes bit coin ill start paying attention 

[Gentleman.Jack.Darby]

9 minutes ago, scott h said:

as soon as my local bakery and sari sari store takes bit coin ill start paying attention 

That's a very sane way to look at it - at that point, digital currencies will have lost their mystery and novelty and will be, more or less, like any other currency with transaction costs for converting to and from one's fiat currency having been driven down into the realm of reasonableness.

I think that may take a while in the PI since credit cards and debit cards are not nearly as widely accepted there as they are in the West, but eventually they'll get there.

[Gentleman.Jack.Darby]

5 hours ago, earthdome said:

I have been following this since 2010 and as a computer programmer understand the technical side fairly well although I am not a cryptography expert. I did try doing remittance using bitcoin but with the fee's to convert from USD to bitcoin then back to peso's it ended up costing about the same as using WU, XOOM, etc. Now that the median fee for doing a bitcoin transfer is around $15 it is no longer competitive. I do have some small crypto currency positions that have done ok but missed many of the major moves.

The relatively high transaction costs for converting amongst fiat currencies and that there are relatively few businesses that accept Bitcoin in my neck of the woods are two things that have made digital currencies unappealing to me.

I do think that, barring a major flaw in the mathematics or the software implementation of the math, as people's understanding and perceptions of digital currencies change, more people and businesses will accept them for real goods and services and transaction costs will decrease.

For those old enough to remember (I'm 56 and it's been within my lifetime), take a look at the overwhelming rise, acceptance, and use of credit cards - in the early '60s, they were pretty much unheard of except for a small, well-heeled minority of people. Thanks to a loosening of attitudes toward credit and debt amongst all but the smallest minority of people, the development of (mainframe) computers and networks to tie them together, and a few killer advertising campaigns (Karl Malden telling us: 'American Express - Don't leave home without it') from an advertising industry in it's infancy, VISA and MasterCard are everywhere we want to be.

For Bitcoin and its brothers, computers and networks as well as the advertising industry have evolved into something along the lines of Nitsche's 'Ubermensch' (Superman) - people's attitudes are going to change a lot faster than they did during the rise of the credit card.

If you can resist the temptation to cash out your Bitcoin position, and I admit that I'd find it very difficult to avoid doing so, probably not a bad idea to hold onto it beyond the bubble popping because I expect it will become a lot more practical sooner rather than later.

[Dave Hounddriver]

My opinion, and its just a gut feeling, is that buying Bitcoin now is like investing in Commodore computer stock way back when.  It was the rage of the day but in the long term was overtaken by bigger and better managed companies.

My gut feeling says that crypto-currencies have a future, but that future will be in the hands of the big monied corporations. When one of them goes mainstream it is time to get on board.

Here is a list of the 6 frontrunners, but as I read it I am reminded that Sony Betamax was a much better machine than the VHS when video cassette recorders came out, but we all know which one made money.  This stuff is too volatile for me.

[Dave Hounddriver]

54 minutes ago, Gentleman.Jack.Darby said:

For those old enough to remember (I'm 56 and it's been within my lifetime), take a look at the overwhelming rise, acceptance, and use of credit cards - in the early '60s,

Great point.  The first universal credit card, which could be used at a variety of establishments, was introduced by the Diners' Club, Inc., in 1950

So, where are they now?  Point is don't get involved with the first one to come along.  Wait until the second or third generation when they get the bugs out.