

You Asked When To Buy Bitcoin...Well Now's Your Chance - CryptoJunky
http://cryptojunky.com/blog/2013/12/18/you-asked-when-to-buy-bitcoin-well-nows-your-chance/

======
gexla
I'm not convinced. Like gold, Bitcoin isn't an investment. Warren Buffet will
tell you that investing is putting your money into something which creates
real value, like a business. He would also tell you that you should stick to
what you know, otherwise its just gambling. For me, that's investing my time
and money into building my own income streams.

I don't really care that I could possibly get a return of 10x or more on my
money in Bitcoin (or I could lose that much.) I could do the same with my
businesses if I do them right, and having everything in Bitcoin would keep me
from being able to allocate those resources elsewhere. While the rise in
Bitcoin could be a one time thing before it stabilizes (or tanks,) my efforts
elsewhere will provide me an income for a lifetime.

I'm more interested in using Bitcoin as a currency. A temporary hold for my
most liquid assets which I can use to pay bills and other expenses. If I
really believe in Bitcoin and want it to succeed, then I know I should try to
run some of that activity on what's possible with Bitcoin now. The more
mainstream and the larger the Bitcoin market, the more stable it should
become. But I'm not interested in risking a large amount of assets to be a
revolutionary or financial martyr.

ETA: To me, a currency is a place I can park my cash and know that it will
hold approximately the same purchasing power as when I put it in there in the
first place. I don't care to see it go up (as I said, I have other schemes for
making it grow) and I really don't want it to go down. I just want it to be
relatively stable. Living in the Philippines for a number of years and working
with people around the world, there is 6 different currencies that regularly
affect me or the people paying me. Since I have been here, the Peso has gained
as much as 20% on the dollar. This sucks and it's not something I want to deal
with. Bitcoin would drive me crazy.

~~~
JumpCrisscross
> _Warren Buffet will tell you that investing is putting your money into
> something which creates real value, like a business._

Warren Buffet is an _investor_ , i.e. someone seeking returns from interest,
dividends, or capital gains from the reasonable expectation of future interest
or dividends. Healthy markets have three other fundamental actors: _hedgers_ ,
who trade to offset a preëxisting risk, _arbitrageurs_ , who trade to profit
from establishing the Law of One Price, and _speculators_ , who absorb excess
risk and illiquidity other participants do not want.

Speculators absorb the error term. Healthy markets don't function without a
proper amount of speculation. So if you believe Bitcoin has fundamental value
as an asset and think the upside at least fairly compensates you for the risk,
go ahead and absorb that risk. By boosting the asset's value you make it more
attractive to others to hold and possibly transact with, thereby giving you a
return on your risk.

Point is, you may want to speculate or not. I do not. But that doesn't mean we
need to moralise investing over speculating any more than an arbitrageur need
find himself intellectually superior to investors.

~~~
gexla
Thanks for taking the time to make such a well written reply to my comment.
This further backs up one of my main points. I'm not a sophisticated trader
(nor do I wish to become one) so I probably shouldn't be speculating.

------
pron
I have a question that may sound stupid to Bitcoin aficionados, and yet is the
first question that comes to my mind whenever I read something like this, and
I'm asking it in all seriousness: _why_ would I want to buy Bitcoin (given
that I don't wish to profit from Bitcoin speculation)?

I get that there is some novelty to using an online crypto-currency. But other
than the possible fun factor (which I don't expect to experience) what other
reason would there be? Now, I'm not asking about Bitcoin's general merit as a
currency. Personally, I believe currencies are better when regulated. But
that's not what we're talking about. The question of using an unregulated,
deflationary crypto-currency instead of "regular money" for most uses by a
large population is a theoretical one at the moment, and will remain so for
years to come. My question is about using Bitcoin casually _now_ as a
supplement to money. A vanishingly small number of vendors accept it. It is
not more secure than money: I keep hearing about Bitcoins stolen from online
"banks", and I wouldn't trust myself to keep it securely on my own machine. I
don't intend to perform an illegal online transaction. So, why _would_ I want
to buy Bitcoin?

~~~
anoncowherd
>> Personally, I believe currencies are better when they're regulated by
governments.

Stop believing that. The exact opposite is true. If we could all use a
currency that _no one could manipulate_ at the press of a button somewhere
behind the scenes, _we would_. But as long as governments control money, we're
shit out of luck there - they're printing and borrowing money as they please,
debasing their currencies and causing all kinds of grief to the little folks,
ie. _us_.

You're right to be skeptical about Bitcoin though. It's basically a
"speculative investment vehicle", as someone mentioned. Until that changes,
you should be cautious about buying them. The gold rush is probably over.

( Or not. But _no one knows_. )

~~~
pron
I think that kind of manipulation is good, but you know what? Let's agree to
disagree on that one. In any case, this is still a theoretical question at
this point.

~~~
anoncowherd
You may think so, but it's not.

Imagine a scenario like this.

    
    
      - There's 10 units of wealth in the world
      - There's 10 units of currency in the world
    

At this point, 1 unit of currency corresponds to 1 unit of wealth. But what if
someone presses a button and conjures up 10 units of the same currency into
his own bank account?

    
    
      - Still 10 units of wealth in the world
      - Now there's 20 units of currency in the world
    

.. So now, after someone printed money for himself, 1 unit of currency only
corresponds to 0.5 units of the wealth available in the world. So everyone who
holds that currency just lost half of their purchasing power, which is kind of
bad. But the guy who printed money doesn't give a fuck - his share of the
total purchasing power went up from zero to five, after all, while everyone
else's dropped.

Of course, this is grossly simplified, and possibly partially wrong/inaccurate
etc, but you get the idea, right? We really _do_ lose purchasing power when
more currency goes into circulation.

Besides, we haven't even touched the effects of zero interest rates, borrowing
massive amounts of money that will never be repaid, economic stagnation, an
ever larger portion of the national tax revenues going towards paying interest
on the ever more massive debts, and so on.. It's _all_ bad, and it's all
something that: 1) we do not want to happen, and 2) _would not happen_ in a
free market (with a market-chosen currency etc).

But don't take just _my_ word for it: [http://mises.org](http://mises.org)

~~~
pron
That's not how the economy works (international trade is different from local
trade, you're not taking employment into account etc.), but for now let's just
say that some think a regulated currency is better and some don't. This has
little to do with buying Bitcoin now.

~~~
anoncowherd
>> That's not how the economy works (international trade is different from
local trade, you're not taking employment into account etc.), but for now
let's just say that some think a regulated currency is better and some don't

Feel free to tell me why what I described there does not correspond to reality
in any meaningful way. If you can't, then maybe you should reconsider your
position on "regulated" currencies.

Also, you should investigate [http://mises.org](http://mises.org) \- they'll
tell you all you need to know about economics. You'll find out that
governments are always only a net loss on any economy.

~~~
pron
I don't know if the reference to mises.org is sarcastic, but pointing to that
site to learn about economics is like referring to Glenn Beck's site to learn
about President Obama. Obviously, most economists have some ideology, but I
think you should try to learn from people are are at least not so fanatic.

~~~
anoncowherd
>> pointing to that site to learn about economics is like referring to Glenn
Beck's site to learn about President Obama

So where _do_ you learn about Obama? -The mainstream media? How's that "change
you can believe in" going? -Oh well, I guess stripping away your civil
liberties counts as "change", right?

>> Obviously, most economists have some ideology, but I think you should try
to learn from people are are at least not so fanatic.

Nah, I'm fine learning from people who are actually talking about how
economics works here in the real world. You just keep on keeping on.

~~~
pron
I see. Did they teach you about the very real Gilded Age? Because that's when
the US was doing things their way; it didn't turn out so well for the very
real American people back then.

~~~
anoncowherd
I'm not sure what your point is supposed to be, but I suspect you don't
actually have one.

You didn't even give the Mises Institute a _chance_ to educate you. If you
listen to their in-depth videos on the fundamental "mechanics" of economics,
but find yourself disagreeing with what they say, you're pretty much just
refusing to hear anything, or simply not very bright.

They're not "fanatic", they're just explaining how economics works, in very
clear terms, and in a way that obviously corresponds to reality (because it's
all based on the way humans _actually_ behave).

------
DannoHung
When can I actually use Bitcoin as a currency rather than a speculative
investment asset?

That's when I want to buy Bitcoin.

~~~
guard-of-terra
What is "currency" for you? People refer to "currency" all the time as if it
was one thing.

Cash is one kind of currency, plastic is another, bank account - yet another,
savings - yet another. Converting between those is not instant and not free.

Bitcoin works OK as a bank account. That is "currency".

~~~
bushido
Converting between Cash, Bank and Plastic(Credit Cards) IS near instantaneous.
It may not be free but the speediness hasn't really been in question. Also
these are all instruments that store value, but are all different instruments.

Though Bitcoin is NOT yet a currency. It cannot store value, the volatility
ensures that.

An example to illustrate: Part I: Cash - Bank etc. If I have $2000 in Cash,
Credit Card has a balance of $1000 (maxed out) and $0 in my
Checking/Chequing/Savings account (bank).

I can visit a branch that's 10 mins away, and deposit the all the money, total
wait time would be < 5 mins. (transaction cost free)

I can immediately go to an ATM and withdraw $500. (transaction cost free -
$0.30)

After that I can walk back to my home and access all the $1500, this can be:

a) $500 transferred from account to high yield savings account. (transaction
cost free)

b) $500 transferred to grand parents using interac (transaction cost free -
$1.00)

c) $500 transferred to credit card (transaction cost free) \- Note: (i) Credit
cards can take up to 3 days to reflect the payment (ii) Credit Cards will
consider the original transaction date as the payment date thus not incurring
interest for the delay in reflecting the payment and (iii) some credit card
issuers will let you make a transaction before the payment is reflected thus
reducing the unfortunate "Check kiting"[1] nature of the delay in reflecting
the transaction.

Part II: Cash - Bitcoin - Cash Will not go into explaining this in detail, but
just answer this 1) Can you take cash and transfer it to bitcoin without using
the bank? 2) Will it be nearly as quick converting between instruments as
traditional stores of value? 3) In a day or two when you want to make a
purchase can you guarantee or even confidently assume that the value will be
the same as when you deposited it? Hell can you assure yourself that the value
will be the same < 1 hour from when the transaction occurs?

[1]
[http://en.wikipedia.org/wiki/Check_kiting](http://en.wikipedia.org/wiki/Check_kiting)

~~~
guard-of-terra
_1) Can you take cash and transfer it to bitcoin without using the bank? 2)
Will it be nearly as quick converting between instruments as traditional
stores of value?_

Yes, I can take my cash, dump it into Qiwi machine and btc-e accepts that. It
will be faster because Qiwi machines are denser than bank branches.

 _3) In a day or two when you want to make a purchase can you guarantee or
even confidently assume that the value will be the same as when you deposited
it?_

No, but neither it is with your currency.

 _Hell can you assure yourself that the value will be the same < 1 hour from
when the transaction occurs?_

Why are we again talking about day-to-day spending? I don't care about the
value in one hour, I care about value in one year and Bitcoin shows pretty
good performance. It's more reliable than USD/EUR and USD/RUR swing, believe
it or not.

------
macspoofing
You can't have 20-40% weekly swings in an asset and still expect to use it as
currency. Neither merchants, nor consumer can trust it, and speculators just
sit on it and distort the entire market. I hate that Bitcoin as a currency is
almost worthless.

~~~
danoprey
Every new currency has to go through that. That's unavoidable for a small,
relatively new currency. With every boom and smaller bust it grows larger and
more stable.

~~~
vkou
New currencies aren't born in a vaccum. When the US switched off the gold
standard, the price of a bag of rice at the grocery wasn't changing by 10%
every other day.

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arbuge
Who can say whether this is a good price for Bitcoin, even after the recent
drop? The author says this is the time to buy but goes on to say:

"I have no crystal ball, and can’t say that Bitcoin is at the lowest price it
will be at over the next several days/weeks/months. It may very well be that
Bitcoin goes lower"

If you want to speculate, try the stock market. It's been around since
forever, and you might actually have a bit of an understanding of the
fundamentals driving some of the stocks there.

~~~
moocowduckquack
Given the difficulties in buying and selling quickly, at least with bitcoin
the game is not currently dominated by HFT algorithms. I'd say that
understanding the fundamentals driving the pricing of the modern stock market
is at least as difficult as making good bets on bitcoin.

~~~
vkou
HFT competition is only relevant for day traders. If the author is that
financially insightful, he should be stock-picking, and ignore the HFT noise.

------
emirozer
Please don't fall into these cheap speculations..Cryptocurrency itself proved
that its pure speculation bubble and nothing else.Everybody saw that a few
weeks ago when china central bank issued bans / warnings and the markets
reaction to it.I believed in crypto currency until a month ago, but now i
believe that it is literally impossible for it to take place of a daily
currency.Just pump/dump games richer people getting rich, poorer people
getting poor.Oh and don't expect it to be adopted by merchants/vendors as
anyone who did lost money because of bitcoin's fluctuation..oh by the way out
of my head i can assume that %80 of people that has bitcoin only cares about
gaining fiat..

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belluchan
What a terrible post. It doesn't justify buying bitcoins at all, it's
basically squiggly lines go up and down, it just went down, so buy it before
it goes back up again because that's what squiggly lines do.

At some point he equates the _price_ of bitcoin with bitcoin's _long term
viability_ which is also not a convincing argument. bitcoin may have a viable
future, but there's no convincing reason why that viable future can't be at $1
per bitcoin.

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dobbsbob
I needed 0.5 coins last week to test something so I loaned and sold them to
test an auto exchange bot @$980. Just bought back 0.5 to repay the small IRC
loan @$460. Sweet thanks China

~~~
glomph
How did you have the trust for someone to lend you $500 without knowing them?

~~~
dobbsbob
IRC web of trust rating from #bitcoin-otc

------
aw3c2
aka "I just 'lost' a 'fortune' because Bitcoin's exchange rate dropped, please
buy Bitcoin for USD so I am 'rich' again!".

------
jusben1369
The only problem here is that _part_ of the run up was based on the sense that
China was allowing Bitcoin to flourish. That's pretty powerful in the world's
second largest economy with a suspect currency of it's own (highly manipulated
for political purposes) If that market opportunity is now closing then that
makes Bitcoin much less valuable (at least over the short term) Less demand =
smaller price.

~~~
CryptoJunky
You make a good point. If China shuts off entirely then the potential size of
Bitcoin's network could decrease significantly. That's not to say however that
Bitcoin doesn't still have a significant and increasing network of users.
There have been significant gains outside of China as well recently. A large
contributor to the high was resultant from the US Senate Hearings which seemed
to somewhat validate Bitcoin's legality in the U.S., the world's largest
economy.

~~~
jusben1369
Agreed. I added "Short term" to reflect this is more of a (significant) set
back than a downward march. I worry that some might deduce from the article
that this is a short term buying opportunity and it'll return to it's previous
highs soon. If China is in fact closed it could take a very long time to
return to those levels.

~~~
CryptoJunky
I had originally intended the article to be more of a suggestion to newcomers,
that it may be a good time to purchase a bit of Bitcoin if you're looking to
get started. It wasn't intended as advice for day traders, but rather for
people with long term outlooks trying to enter Bitcoin for the first time,
which is what constitutes much of my audience.

Rereading I do see how it comes across as short term trading advice though. I
suppose I'll have to be much clearer in future posts. Thanks!

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onebaddude
History is littered with the corpses of "investors" in various assets who
bought all the way down because "this is a great opportunity!"

The exponential rise is price is always accepted as "rational", but the
equally exponential fall is always explained as temporary or manipulation, or
something.

A lot of people made money in 2009 when the stock market was incredibly cheap.
But it was cheap because there was tangible value that could be calculated
based on revenues, earnings, profit margins, etc. If you can't tell me what a
Bitcoin should be worth, how do I know it's now cheap? That's speculation.

~~~
pyalot2
There's been no "investor" in the history of investment that made money by
buying high and selling low.

~~~
collyw
From my limited understanding of finance, is that not what short selling is?
(Followed by buying back at a reduced price).

~~~
bushido
Short selling is also buying low and selling high. You just do them in reverse
order. Or quite literally you borrow the instrument, sell it to someone and
then buy it lower (or higher if the position went against you) and give back
the borrowed quantity.

~~~
collyw
That sounds like conventional "good" investing.

------
Thiz
Tulips are withering.

------
n00b101
Now may be a good time to revisit an old adage of investing: never catch a
falling knife.

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kclay
I knew I should of withdrew one of my coins when the price reached 1k wouldn't
covered my buy in price for 3 coins plus some, o well.

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salient
If you buy it right this minute - yes, it should grow a little more, and you
can make a nice profit on it. But is $600+ the price it will stay at from now
on? I'm not so sure. I think it will drop to $350 soon, because there's still
a lot of uncertainty in the market right now, and there could be some more
European countries coming out with bad news for Bitcoin in the next few weeks.

------
poopsintub
Hahaha.

