The Case Against Investing in Cryptocurrencies

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[Vlastimil]

Bill, check resistance.money by A. Bailey and others. Top notch site, and book.

[BV]

Will do. Thanks, Vlasta. I hope you and my other Czech philosophy friends are doing well.

[BV]

By Bailey, the philosopher! Wow. We have interacted on this blog, but not about money, but about modality and such. https://www.amazon.com/Resistance-Money-Andrew-M-Bailey/dp/103277780X

https://x.com/resistancemoney

[james soriano]

Bill,

I believe you’ve mentioned several times that you’re holding on to some precious metals as a precautionary move in the face of an uncertain future.

You are prudent to do so. If I may second the advice offered in the article you posted, do not add bitcoin into the mix. Stay away from it, unless you want to scratch a speculative itch.

I haven’t read *Resistance Money,* but I looked at its entry on Amazon. The book makes a pro-bitcoin argument. I take the word “resistance” in the title to be a reference to bitcoin’s underlying block-chain technology, which, according to bitcoin advocates, ensures privacy of transaction, eludes government intrusion, and basically privatizes money creation, so that it’s taken out of the hands of interest-rate-fiddling central banks.

These are worthy traits. They appeal to a healthy sense of individualism. Block chain enables such things. Its proponents say the technology has applications beyond its use in crypto-currencies, but what are they? Perhaps the book gets into that subject, but we are now years into the bitcoin story and a layman would have to search hard to find instances of block chain’s non-crypto use.

At the Amazon entry you’ll find the inset photos of the three authors. Does something strike you about them? They’re all youngish men. Okay, all the grey beards here on the Maverick Philosopher, check your age privilege; but age has relevance because many bitcoin maximalists tend to be youngish men. My guess is that they have never had any adult life experience living in a world with a stable-value currency system.

Guesswork says they were all born after August 15, 1971. On that date the United States, as humanity’s lone remaining keeper of a stable-value system, severed the dollar’s definition in terms of a objective standard.

Since then the world that has known nothing but fiat currencies. The values of all currencies have been in flux against each other, sometimes more and sometimes less, but no currency has had a fixed definition apart from referring to itself. Now the U.S. dollar has been the most successful among them, but even the dollar has been coursing through the last half century like a rouge planet untethered to a mother star.

The bitcoin camp thus lives in a false bipolar world. They see a two-sided fight. In this corner, in various colored trunks, are the world’s fiat currencies; and in this corner, wearing the livery of block-chain technology, are the crypto-currencies. The odds makers say the days of the fiats are numbered. Bitcoin fans wait with anticipation for the cryptos to knock the fiats out of the ring.

What’s missing is the presence of a third party. It’s off-stage right now, but if you listen carefully, after decades of slumber, it’s beginning to stir. It has a wide following in Asia. It’s waiting to make a come back. After governments have debauched the fiats, and after the cryptos fail to live up to their billing, it will pick up the pieces.

In these uncertain times, it would be prudent to get some and hold on to it.

[BV]

Fascinating analysis, James.

I see that gold at the moment is up over 2500 USD/oz.
https://kitco.com/charts/gold

It is extremely volatile. however, and that fact must be borne in mind. It therefore strikes me as the height of folly to take well-diversified IRA holdings and replace them with a gold-backed IRA. Agree?

I expect gold to go up so that even now at 2500/oz it is a good investment. I expect it to skyrocket if Harris-Walz make it to the White House.

>>The bitcoin camp thus lives in a false bipolar world.<< Yes.

>> What’s missing is the presence of a third party. It’s off-stage right now, but if you listen carefully, after decades of slumber, it’s beginning to stir. It has a wide following in Asia. It’s waiting to make a come back. After governments have debauched the fiats, and after the cryptos fail to live up to their billing, it will pick up the pieces.

In these uncertain times, it would be prudent to get some and hold on to it.<<

Good advice.

What are you buying when you buy bitcoin? Nothing real as far as I understand it -- but then maybe I don't understand it.

A wise maxim: don't invest in something you don't understand.

Finally, given the current state of the world, 'thanks' to the Dementocrats and the rest of the depredatory Left, Pb joins Au on the list of precious metals.

[dd]

https://static.bitwiseinvestments.com/Research/Bitwise-The-Case-For-Crypto-In-An-Institutional-Portfolio.pdf
Bitwise put out a good overview of it's impact on a portfolio, volatility isn't a bad thing if it's non-correlated with your other assets.
The positive impact of a small allocation on portfolio building isn't really a question.

The longer term use as an asset for international trade is also laid out in the article by vaneck, and possible issues preventing that.
https://www.vaneck.com/us/en/blogs/digital-assets/matthew-sigel-bitcoin-2050-valuation-scenarios-global-medium-of-exchange-and-reserve-asset/

The article you linked is simply ignorant and flat out wrong, glossing over the difference between Bitcoin and other crypto assets is just deceitful.
> and no way of measuring the supply part of the supply-and-demand equation. “I couldn’t tell you what the supply is for crypto,” says Canally. “Technically it’s unlimited.”
Bitcoin is in fact the only thing we can actually be 100% confident in supply of, it's 21 million and that is all it will ever be.
"Crypto" is just not a thing, specific crpyto-assets are, and each have their own definition of supply. Many are controlled by individuals companies/have changing supplies, many do have hard supplies or at the least distribution rates. This just reads to be a similar thing to Krugman's famous quote "By 2005 or so, it will become clear that the Internet’s impact on the economy has been no greater than the fax machine’s"

[BV]

I don't buy it, Dmitri. (In both senses of the sentence.) From the internal link within the original linked article:

>>A significant factor driving volatility is that there is no established or intrinsic value for cryptocurrencies. They're worth what people believe they're worth on any given day. For long-term investors who will rely on
income from their portfolios to meet their lifestyle expenses in retirement, a combination of nonexistent cash flow, increased volatility and lack of liquidity is highly problematic, and cryptocurrencies check all of those boxes.<<

Buying crypto is not investing but a form of currency speculation. What's the underlying asset? Nothing real. Buy a house and you buy something real -- that's why it is called real estate -- whose use value is independent of its exchange value in a a housing market. The house I bought in '99 for 150 K I could sell now for 450 K -- but the use value is pretty much the same, and it's the latter that counts.

Similalry with stocks.

I will grant you, though, that crypto is a good way to resist totalitarian CBDC.

I have no objection to playing around with crypto using money you can afford to lose -- any more than I object to gambling. But if you are a retiree, speculating with a substantial portion of your net worth is imprudent.

So I say TIAA's advice is sound.