Bitcoin is becoming more stable over time. The fact that after each bubble the people that really believe in Bitcoin buy at the the lower priceis a market feature that increases the price floor of bitcoin. Like myself these true believers definitely tend to have steady hands when it comes to their bitcoin investments. They hold hold hold and rarely ever sell. I purchased more bitcoin at the bottom of the burst and the few bitcoiners that I know offline did the same. This type of behavior raises the lower bound of the price as people, who hold their BTC no matter what, gain a larger part of the market. One other effect of this bitcoin transfer is that there will now be higher prices over all because the steady hands decrease the supply of bitcoin available.
Bitcoins have recently become a hot topic as the exchange ratio of USD to Bitcoins has gone up at a respectable rate and continues to flirt with $50. I think that Bitcoins are a relatively risky investment, but the potential returns are still huge. I could easily see buying in now and selling after a couple percent gain, but I am in it for the long haul. The number of people who have Bitcoins now is still pretty small which is easily less than one percent of the population of the US. As the price continues to go up I think that the media attention will increase.
As the Bitcoin community and infrastructure has matured and developed, the price of Bitcoin has become more resilient to price shocks. While still varying in exchange rate much faster than most other currencies Bitcoin is much more stable now than its drastic price spike and crash of 2011. In March there was even an issue in the Bitcoin system that was quickly resolved by the decentralized authority of the Bitcoin miners. The price temporarily dipped around 20% but took little time to return its previous price.
Also worth mentioning is that the publicity, Bitcoin is receiving, is much more positive than past strong criticism. The price has not responded as drastically, as before, to the increased media attention. In the bubble of 2011 the price went up very quickly then crashed. Since then the price of Bitcoins has gone to new highs much slower than previously. These recent circumstances indicate a healthier infrastructure and a gradually maturing market presence for Bitcoins.
I repeat Bitcoin is a risky investment. I happen to believe that the potential return outweighs the risk; however I make no guarantees. I own a few Bitcoins myself. Please do your own research.
Beware of fake bullion from private non dealer sellers. I have been horrified on several occasions, while perusing the internet, to find that there are a number vendors that sell so-called art bullion. These bars are fake bullion. They are clad in either silver or gold and look very much like real Bullion when they actually contain only a few milligrams. The majority of online vendors don’t try directly try to deceive the buyer.The real danger is the people that fraudulently resell or trade with the art bullion with full knowledge of the bullion’s fake metal value.
For example there was a guy on craigslist who was selling the bars as a great investment because he was selling silver bars at 5% of their value. Wow! what a great deal! NOT! Stay away from a too good to be true deal on bullion from craigslist. Another ridiculous and borderline fraudulent example of “art” bullion is the 2013 $50 Buffalo Proof from National Collector’s Mint. The proof is sold as a good investment with a solid value and potential for profitable resale when it contains about 60 cents worth of gold, about 14 milligrams.
If any of these terms is used when someone is selling bullion then become extremely skeptical and cautious:
Pure silver or gold
Replica or Copy Bullion
Also beware of Mini, Copy and Replica coins
I am trying to compile a list of known “fake” bullion as it were. Please comment with links to examples of the bullion so potential secondary buyers can increase their knowledge before they enter into a disappointing deal.
Disclaimer: The vendors who clearly label their products as not real are not being fraudulent. I am concerned about the people who buy the fake bars in the hopes of deceiving others.
List of “fake” bullion links/examples:
Example of Gold Maple Art Bar
Please be careful when you buy from private sellers who have nothing to lose in the way of personal and business reputation.
Silver and Gold Coins as a way to pay less taxes
This article demonstrates a very cool and clever way to avoid taxes. Every one dislikes more taxes on themselves right? Does anyone agree or disagree that this could be done with US government issued gold coins with US dollar denominations on them? Could it be done with Bitcoin?
Ex. Car Title Tax in Georgia is 6.5 percent of the bill of sale. If you bought a used luxury car for $22,500 in paper then the taxes are $1430; but with the Car Title Tax on a bill of sale denominated in pre 1964 dimes, quarters, and half dollars for $1,000 the Tax is $65.
Warning it is a gray area.
Saving Bitcoins and just sitting on them is actually taking part in the Bitcoin economy; but there are definitely ways to be more active. In my last post I talked about how I would either sell half of my Bitcoin or loan it out. Considering the recent upswing in price I decided not to cash out the dollar value of my Bitcoin and see if I could invest or loan my Bitcoin and end up with more.
While searching among the interwebs for ways to invest Bitcoin I found a couple of sites where one can buy stock in companies that are involved in the Bitconomy. Most of the value of those stocks seems to come from the fact that they pay Bitcoin dividends. Those sites are btct.co , mpex.co/, cryptostocks.com, and picostocks.com/ . What really got me interested in Bitcoin investments was the Bitcoin lending website btcjam.com. I lent out half of my Bitcoin out at 4.5% interest a month for 2 months. That is a phenomenal rate of return.
The lending terms are fairly straight forward and the potential returns are tantalizing. An average return is any where from 2 percent to 8 percent a month; but the caveat is that there is a high chance of default. The last default rate on btcjam that I saw was about 30 percent of the loans made. The borrower’s credit history on the website can be viewed by potential lenders. I lent half of my Bitcoin out to BTC Quick a company that enables people to easily buy Bitcoins with a credit card. This borrower had their website up as well as a phone number. I contacted them and talked a bit with someone from the company. I also looked at their borrowing history and it is perfect.
I think that a lender on Btcjam who applies a little rigor and good judgement on Btcjam can make a very nice return with out too much worry.
Cha Ching and until next week (hopefully),
Bitcoin has a lot of potential since it is a fascinating work around of traditional fiat currencies. Bitcoins are needed to be all over the world. They are a revolutionary way to increase personal freedom, economic freedom and prosperity for everyone. If Bitcoin use continues to spread, given the fixed supply there is a reasonable chance that someday the Bitcoin I own may be worth a respectable fortune. A lot of the people who bought Bitcoin early on are probably of the same opinion. But that attitude is putting a strangle hold on the adoption of Bitcoin.
The Bitcoin Millionaire Syndrome is where individuals are hoarding Bitcoin due to its potential value, therefore it is keeping Bitcoins out of the hands of people who need them as a medium of exchange. In economic terms the velocity of 50 to 70 percent of the Bitcoins in circulation is practically zero (http://eprint.iacr.org/2012). If Bitcoin were to be adopted by even a fraction of the world as medium of exchange then each of the 11 million Bitcoins in existence would be much more valuable than they are now. Therefore early adopters expect to be better off than the late adopters.
It is up for debate as to whether Bitcoins are backed by the value of the computing power and electricity used to create them. What is not up for debate is that Bitcoins represent a praxeological and real way to exchange and account for value. Those properties are needed universally by individuals for their day-to-day economic calculations. Those properties in fiat currencies today are all hugely distorted by inflation from government spending/printing and from monetary expansion as a result of fractional reserve banking.
I worry tho that my hoarding and lack of participation in the Bitcoin economy is accomplishing the opposite of what I like about Bitcoin’s potential. From now I will be looking for ways to participate in the economy. That may mean selling half of my Bitcoin or maybe loaning them to an individual so the Bitcoin circulates but eventually come back into my possession. Whatever action I take it will be better than just sitting back and waiting for Bitcoin’s widespread adoption.
Cha Ching and until next week (hopefully),
picture is from http://transhumanity.net/articles/entry/bitcoin-a-means-for-redistribution-of-wealth
I find that it can often be quite difficult to keep increasing the amount of money in my savings account, considering that it is way too easy to transfer money from savings to my debit account. As a young adult, I have trouble not spending money that I don’t need to when whatever small item I want is just a card swipe away. I can only imagine how my easy spending habits would be magnified with a steady income.
My best savings strategy by far has been to lock my savings into something that can’t be accessed online within minutes of opening up my bank’s website. Whenever I get a respectable savings balance, I make a withdrawal and go to my local pawn shop where I purchase all the bullion I can afford which is pretty much always silver. Of the silver bullion options out there, I prefer pre-1964 – 90 percent silver coins.
These are commonly referred to as junk silver, but the term is misleading. If you compare the look and feel of a silver quarter to the crap that passes for pocket change today, you will find that it is a beautiful and real store of value. This may be odd, but I think the clink a handful of silver makes is much more satisfying than that of modern coins.
Someday I may liquidate my silver savings to fund a surefire business idea or pay for an emergency expense, but until then, it will remain in a safe place where it can’t be stolen without extreme difficulty or sold by myself when the current dollar price becomes too tantalizing to pass up.
Cha Ching and until next week (hopefully),