Bitcoin crashes...

Yes. Since last post have 2 more. Suggests desperation.

Price update.

My intuition says it might be time to cash in your bitcoins...

Neil

Actually, I've just worked out that if Bitcoin keeps doubling in value every three months, in five years each on will be worth nearly six billion pounds.

Where's my piggy bank?

Having dealt in shares for the last 30 years, I would have bailed out a long time ago. Nothing increases in value that quickly without heading for a major crash!

There's been a pullback to ~ £5470 at the moment, but that's not surprising considering the price was ~ £4430 last Sunday morning (29/10/17).

I feel the reason for these gains is largely due to the strictly limited supply of bitcoins versus the increasing demand. Only 21 million can ever be created, so if demand continues, I don't see the price falling any time soon, except for relatively minor corrections over short periods or unless something many times more useful appears from nowhere.

I intend to keep what I already have and add more when the price dips.

Martin.

Tall trees don't grow forever.

I can't argue with that, although from little acorns mighty oaks do grow.

Bitcoins are divided into 100 million parts or eight decimal places (known as 1 satoshi), so if one bitcoin has a value of say £5000 then one hundred millionth of that is equivalent to £0.00005000 and is a reason why it's possible for much higher £/$ valuations. With 21 million bitcoins there's room for all to have at least a fraction of one.

Martin.

Let's say bitcoin does crash- What is left ? Any precious metals ? Any land or buildings ? What proportion of your investment would you hope to get back ?

For Bitcoin to crash in value would need an overwhelming number of its users to think utility was lost, but I don't know what set of circumstances would engender such thoughts.

If a crash did somehow happen, I would still have the bitcoins, they couldn't just disappear unlike what happens when a bank does a bail-in.

That said, once in profit, some people cash out the value of their initial bitcoin investment, leaving the residue in place to do what it will - many regret it though as the value continues to increase.

I don't own any precious metals because I can't imagine what I'd do with them.

Martin.

Is "Investing" sic, in Bitcoins a wise place to place your hard earned savings?

Well that is a matter of opinion and no doubt many have made a handsome profit. Will the trend continue forever! The current Bitcoin chart is trending up into hyperbolic, the price is being driven by herd mentality, sooner or later there will be a pull back, and it can be a hard one, a 50% retracement is quite common.

Have a look at the gold price history chart link below, notice the hard and prolonged pullbacks.

**LINK**

Gold is another good example of how markets are driven by animal spirits a phrase used by John Maynard Keynes and later Professor Robert Shiller at Yale University to describe how markets behave.

**LINK**

Is Bitcoin any different from any other market? I would argue no, but that is just a personal view, in the end every individual investor has to decide what sort of risk is acceptable to them.

As far as bitcoin is concerned I will pass. I don't like the chart.
And more importantly I do not understand it, and this is another personal golden rule, never invest in something you do not fully understand.

If you must invest in Bitcoin what percentage of your assets will you be prepared to risk?
For those that may be interested the following paper from the Tasmanian School of Economics may be of interest, It discusses diversification as a means of reducing the impact of drawdown (When an individual investment fails)

**LINK**

Another golden rule...... Diversify

Regards
John

Ignoring cryptocurrencies because of a lack of understanding could prove to be a bad move, so I do no more than suggest people do their own research on the matter.

As an individual, I consider it pretty dangerous to stay invested in Stocks & Shares, Precious Metals and Fiat currencies like the £ and $ as they are debt based, open to confiscation and totally manipulated.

Martin.

Over the years there have been many so called hot investment Ideas. Some have been very successful. Others have fallen by the wayside to languish in oblivion. Yes with the benefit if hindsight we can muse over fish that got away. A pointless exercise in my view.

On the other hand we can be proactive and manage our affairs in such a way that our investments are more likely to survive in a downturn overall and that the cost of individual failures is ameliorated. This is why I posted a link in my previous post to an internationally cited and applauded paper on diversification as a means of reducing portfolio risk.

A properly considered trading plan takes a fair amount of time and research, there are numerous books on the subject they all start off with making up a list of available resources and goals.

In the past people like Peter Lynch suggested that a portfolio should be divided into maybe 8 - 10 parts.
**LINK**

His work was done when markets were conducted by calling prices across a room. Now that markets are conducted electronically transactions are almost made instantly. New research indicates that Diversification needs to be much greater, maybe 50 or more holdings, see the paper I posted previously or google portfolio diversification. The cost of buying and selling is now a fraction of what it used to be making it possible to make small purchases.

Beginners tend to concentrate on individual investment ideas, and ignore the attached risk of capital loss for doing so if the price drops. even doubling up in a falling market. One must remember it is impossible to pick the top or the bottom of a market. Another golden rule, "the trend is your friend" until it fails!

Experienced investors look for a more balanced approach they spread their risk and diversify over many asset classes. They have a plan and they stick to it.

All the above is just my personal view, I have been Investing in the stock market since the mid 70's.

Regards
John

Edited By John McNamara on 06/11/2017 03:57:48

Edited By John McNamara on 06/11/2017 03:58:51

Lets put some rational arguments regarding circumstances of possible Bitcoin crash and when would that commence:

1. Current situation may resemble Dutch "tulip fewer" of XVII century. If so, then this giant bubble will certainly go pop! with many usually young and inexperienced investors bashed badly.

2. Regulatory environment could easily turn against Bitcoin, due to its utility for tax and capital control evasion, money laundering, financing criminal activities etc. International agreements can be reached to interrupt/stop processing bitcoin transactions. ISP could face heavey fines and other other troubles for merely allowing their infrastructure to be used for sending/receiving bitcoin payments. Online exchanges can be outlawed and closed. Users can be prosecuted etc. That would relegate bitcoin to criminal underground and its value there is uncertain. If tranferring of bitcoins over Internet is successfully interrupted/eradicated due to some sort of filters (which would only need to determine that particular stream of data is actually bitcoin, no need to decrypt the code to seize assets) bitcoin would lose its utility and collapse to zero.

3. Global banking cartels could pump up bitcoin to $1million and more each or to any other suitable level, cash in profits and dump it to teach the mob that it is not worth to invest in any sort of "alternative money".

4. Due to increasing global tensions Internet could be splitted into a number of "mininets" with very little if any communication between each other and such situation allowed to spend the same bitcoin several times. At this point bitcoin is dead like a dodo.

5. Quantum computers (which already exist) got better and factorizing large numbers became trivial task. At this point bitcoins could be intercepted and seized in transit and that would be it.

6. Something better was devised and current edition of cryptocurrencies became obsolete.

7. Ivanka Trump was kidnapped and ransom have been demanded in bitcoins. It could be even false flag operation. That would be it.

8. Alternatively, who knows, maybe bitcoin is not at all gaining its value only dollar and other mainstreem currencies are collapsing? Maybe within few years bitcoin will be worth $ trillion but box of matches too?

Welcome to discuss/refute this points or offer alternative vievs including those proposing that bitcoin will never collapse.

Martin

A currency is only valuable if you can exchange it for something you need. So far I have never come across a supplier of things I need who accepts bitcoins.

Maybe one day they will become the international currency we all use, or maybe the bubble will 'pop'. My modest savings are not sufficient to risk finding out for myself.

Ah, but exactly the same applies to most other recognised currencies too. My local shop won't accept Euros, US Dollars, or Scottish Banknotes. It accepts Credit Cards wherever they were issued, but not cheques even if when drawn on a British Bank in Pounds. Not sure if it's still the case, but for many years the US Dollar was easily forged well enough to fool non-Americans, and consequently treated with suspicion outside the USA.

There are plenty of examples of National currencies crashing, like the German Mark in 1918, the French Frank in the 1950s, the Italian Lire and the Zimbabwian Dollar which inflated by 79.6 billion percent one month in 2008.

I don't think Bitcoin is fundamentally different from any other currency: it's only worth anything while it's trusted, and trust is a delicate thing.

Dave

Edited By SillyOldDuffer on 06/11/2017 09:58:26

Agreed. Currency is just a promise to pay the value shown. If you don't trust the governor of the Bank of England, don't use Sterling.

Maybe simple bartering is the best way forward

Dave (aka SOD) how about the crash of the Pound Sterling in 1967 when overnight it lost 14% of its value, I remember it well as I was overseas serving in Trucial Oman at the time and paid in local currency. The Establishment looked out for us though, surprising as it seemed, and continued to pay us the same amount of local currency as though there had been no devaluation, so we didn't lose out, in fact we gained because the local British Forces Post Office charged the devalued rate for British Postal Orders which meant that we could exchange local currency for postal orders at the new rate and post them home to family to bank in the UK, meaning we gained 14% . Probably wasn't strictly legal but we all did it.

Dave

From now on, the pound abroad is worth 14 per cent or so less in terms of other currencies. That doesn't mean, of course, that the Pound here in Britain, in your pocket or purse or in your bank, has been devalued.
Harold Wilson

Mike I remember that piece of propaganda very clearly.

Dave