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I'm not going to buy any more cryptocurrencies until I get my next paycheck, which will be towards the end of the month.
There are some who regard BitCoin's quickly-rising exchange rate to be an investment bubble, much as the dot-com boom was followed by the dot-com crash, as well as the real estate bubble that crashed in late 2007.
I agree for the short term but disagree for the long term.
That it is a bubble is evidenced by all the BitCoin Get Rich Quick advertisements that I see on Facebook. Doubtlessly they're appearing all over the Internet.
Most disturbing to me is an ad that describes BitCoin's rise as a "paradigm shift". If someone ever says the words "paradigm shift" to you, turn around and run as fast as you can. The dot-com boom was claimed to be the conceptually similar "new economy".
Cryptocurrencies sometimes crash when someone burglarizes an exchange by hacking its website. Just once so far - that we know of - the alleged burglary is an inside job. Mt Gox blamed its burglary on a flaw in the BitCoin BlockChain protocol. A forensic accounting investigation by the Japanese authorities led to the arrests of some of Mt Gox' top executives.
These crashes have all recovered quickly.
The current bubble is the result of naive investors buying lots of BitCoin. The most likely cause of a crash will be sales that are made by sophisticated investors and investment banks that want to realize their gains. There will come a point where even a small drop in price will lead the naive investors to sell as fast as they can so they can realize their gains before the crash.
Those same sales will be the cause of the crash as the naive investors panic.
When that happens I won't sell my BitCoins as I am confident the price will recover for the following reasons:
Each new BitCoin is minted by a cryptographic computational process denoted as "mining". The algorithm described by Satoshi Nakamoto's original paper placed as strict upper limit of 21,000,000 coins that can ever be mined. At present there are about 16,000,000.
The mining process gets more difficult with each new coin. The last coin is estimated to be minted a hundred years from now.
What to me is the best argument for BitCoin's long-term price is that increasing numbers of merchants are accepting it for payment. The first such merchant was a Papa John's that sold two pizzas in return for 10,000 BitCoins. Today there are 100,000 such merchants. BTC 10,000 could buy a vast number of pies.
Amazon doesn't accept BTC because it has its own payment system called Amazon Payments. But its competitor NewEgg has been accepting BTC for some time now.
There is a very simple way you can still buy pizza with BitCoins: purchase a Domino's eGift card at NewEgg then use that card to pay for your pizza delivery. I was doing just that with PayPal when I was working as a Mentor for CodeMentor.
Not long after that CodeMentor provided the option of paying Mentors with BTC. I haven't checked but I expect there are lots of other services that pay in BitCoin.
The IRS has ruled that cryptocurrencies are assets, just like stocks, bond and real property. One pays Capital Gains Tax on the profit one makes by selling one's crypto assets. Sales made from coins held less than two years are taxed as regular income. Assets held for two years or more are subject to the Long-Term Capital Gains Tax rate which for me is just 15%.
While I might buy and sell some of my cryptos I intend to hold most of them for two years. If indeed cryptos are in a bubble, the crash will have already occurred then recovered by then.
I might buy an Antminer S9 BitCoin mining rig but am having trouble making up my mind. My concern is that the fans might be too loud.
An argument for buying the S9 was made by a friend who pointed out that I could resell it. What's really ludicrous about his argument is that a new S9 costs ~$1500 for late January delivery whereas used ones are sold at Amazon for $3999 for immediate delivery.
If I did buy an S9 it would mint roughly one coin per year, as predicted by a BitCoin Mining Profit Calculator that I tried. My next paycheck will enable me to buy ~$12000 worth of cryptocurrencies. There is a strong argument for buying it but I remain uncertain.
I won't have to make my mind of for a while as Bitmain only accepts BitCoin Cash as payment. I don't have any BTC yet, but I do expect to buy some with my next check.
(Score: 2) by MichaelDavidCrawford on Thursday December 07 2017, @12:02AM
Last night I ordered a pizza.
It was good.
I was up all night last night writing code for my client. This because the product I'm developing for them is totally borked on High Sierra. That last paycheck was looking farther and farther away the more I tried to debug the problem.
Happily the client's Rocket Scientist coder came up with a workaround that quite suddenly and completely out of nowhere moved that last paycheck up to Real Soon Now.
I own my beloved, long-suffering mother a vast quantity of money. This morning I mailed her a check for $100, with that last check I'll send $1000.
My client originally planned for me to do one more project after this one ships, but now they are not so sure. An old and close friend asked me to join his stealth-mode startup. While my friend's proposed product is quite promising I'm going to be working without pay, just equity.
So I might be living off of nothing but cryptos, rice and beans next year.
I'm going to put $13k of that last check into cryptos, then sell a thousand dollars worth each time I need some fiat currency.
Without a doubt BitCoin is in a bubble, but I speculate - SPECULATE now - that I will know well ahead of time when it's going to burst. That will happen when the bitcoin get-rich-quick schemes are all over the conventional press - not Soylent but the Fairfield, California Daily Republic.
One of my biggest regrets is that I knew well ahead of time when the dot-com bubble was going to burst: I read an article from Reuters that reported that the Palo Alto venture capitalists were being pitched to fund business plans that didn't even pretend to involve creating a product or service. Rather all those business plans aimed for nothing other than going public.
I was in a world of hurt when my year 2000 client's investors all disappeared. That client stiffed me out of $21,000. I asked a commercial collection agency to help, but they told me that client was sure to declare bankruptcy if I forced collection, so I didn't.
I got married in July 2000. In October 2000 I made an offer for a real nice house in midcoast Maine, but when my client stiffed me I had to borrow $17k from my parents - money which I won't have the wherewithal to pay back for quite a long time from now.
I managed to get what I figured was a real good client, but they went down just a few months after I started coding for them.
For extra credit, I cashed out my 401k then used all that money to pay off collection agents. What I should have done was to dig a deep, dark hole, ask my blushing bride to get into it with me so I could cover us both up with dirt.
As hard as things were during my homelessness, I was quite happy most of the time. I regard the very worst period of my life as my desperate struggle to survive the dot-com crash - having a mortgage and car payments back then totally rained on my parade.
Life is good now.
I even have designs on a waitress who clearly likes me. I'm going to give her a rose tomorrow evening.