Topic: Bitcoin savings plan (Read 4634 times)

I'd say that 70 people responding to this poll so far shows how small the world of bitcoin users is.  Granted this is only one forum (and one subforum area), but we'll need many more people to get involved to keep it growing.  We'll see what 2012 brings!

I would not be so sure about that.

If you consider how much the dollar is losing value through inflation, because of impending economic european crisis and quantitative easing. And add to that the uncertainty of the safety of our dollars in financial institutions... witness the loss of client funds with the bankruptcy of MF Global (8th largest bankrupty ever).

It would seem to me that if BTC found a stable price point, it presents itself as a decent place to store wealth anonymously and in a very liquid manner.

This thread seems to be attracting a lot of bears. Bitcoin's fundamentals are good, and it is going to be worth a lot more than $3 in the short to medium term. When that does happen, I am going to laugh very hard at the cautious, timid types on here who relied on a graph to come to the conclusion that bitcoin is heading downwards

I'm considering just converting a bunch of my savings to bitcoin. Not monthly, but just use the buffer I have. Now seems like a good time.

you can call it a wish if you like, but for me it is a plan, an intention. i'm just not at that level yet.

but if i were making say $200,000 per month, i could definitely see myself putting half of it into bitcoins.

i'd like a lot of them please.

So does the suggestion that the dollar has the price of the dollar - it only makes sense in an abstract discussion. A form of money such as the dollar is not valued by its "intrinsic" value, but by its purchasing power; how much of X can I get with Y dollars? The same concept applies to gold or any other item used as money. Without that perspective, it can be difficult to value gold.

Elasticity of demand is an important factor in the stability of value. Low elasticity means that an item is consumed quickly and must have a ready source available at all times to supply the demand. Oil is very inelastic, so prices may fluctuate rapidly depending on available supply (it generally has a shelf-life of about a year, is destructively consumed and demand typically exceeds supply). Gold is among the most elastic of materials and exists in sufficiently large amounts of refined quantities that it just sits around without any other significant purpose than as money, in specific - a store of value. The same function could be filled by rocks or other metals, but they have numerous productive uses and are too common to be feasible. Artwork might have a high ratio, but the supply is too narrow to provide widespread utility and different pieces offer subjective value.

A stock-to-flow ratio is indicative of how much elasticity exists for a given item. At present, gold has a ratio of ~65:1 while silver's is about 15:1 - the amount of gold stock that can absorb demand being significantly greater than that of silver is a strong factor relating to the latter metal's higher volatility. Fiat currencies generally have a very low ratio in order to maintain price stability, as well as low elasticity, so their values vary by a great deal over long periods of time. The larger a resource pool, the more relative price volatility it can handle without exhibiting disruptive purchasing power variance.

Bitcoin is certainly a small wealth pool currently. With steady growth to about 10x its current size, it will start attracting a greater percentage of capital. That leads to a compounding effect or tipping point whereby capital flows are 'trained' to flow in a direction associated with preceding flows. Because Bitcoin has survived a relative bubble of extreme magnitude (it'd be like gold going to >USD$50k and coming back down to <$2,000) without collapsing to zero, I see a rapidly decreasing chance of that occurring - especially with global financial uncertainty that will drive capital into hiding wherever it can find shelter (artwork, Bitcoin, corporate bonds, gold, silver, rare gemstones, etc).

Gold is also a Giffen good. When it is in high demand, it not only becomes more valuable, but the available supply declines. This is due to its function as a safe haven resulting from its ideal combination of properties presenting the best physical form of wealth storage (density, durability, etc). Bitcoin has the potential to become a Giffen good as well, the only immediate comparative drawback being required existence of the network whereas gold requires existence of reality to be present (both only have value in the presence of at least two trading parties).

Hysteria is an overrated emotional state. At 10x ~= $25M, the bitcoin universe is still far too tiny and easily manipulated to be taken seriously as a savings vehicle.

What is your valuation/comparison metric for asserting "gold is stable compared to all other asset classes"? Saying that gold always has the price of gold is a useless tautology.

Perhaps it's a stretch with Bitcoin currently and until it matures further, but gold? So treasuries and other politically-controlled government bonds are "safe"? Food which decays is "safe"? Honey last a very long time, so maybe we should stock up on that. What other asset class has held consistent value for over a hundred years, let alone a thousand?

It doesn't take a gold bug to recognize the appropriate purpose for an item. The message doesn't need to change because gold is stable compared to all other asset classes. It is in US dollar and other fiat denominations that gold's "value" varies. Calling the earth (USD) the center of the solar system does not make it so. It's a perspective.

Would you save in lumber if the lumber yard were on fire? All fiat currencies are burning. Gold is as financially sound as granite bedrock. Bitcoin has the same potential within a decade if it can survive any further exogenous shocks until it's about 5-10x its current capacity (~USD$25mm); a probable tipping point.

Very well stated. I hadn't wanted to spend time describing the actual situation as I suspect these facts will just be ignored.

But then, even trying to keep things simple and ask the important question, its funny how no direct answer, however brief, seems forthcoming.

I sell what I mine almost immediately and I have no hardware investment allocated to the purpose of mining as I started only when I had to replace a failed video card anyway. I have never had a reason to actually purchase bitcoins, and expect I never will.

It's all lunch money anyway, it helps me pay attention to the curious world of Bitcoin which is very much involved in self-adulation lately, a characteristic that has led me to good shorts in the past. However, unlike common stocks where there's always another short around the corner and the practice of shorting is adequately funded, if bitcoin shrinks to a point Bitcoinica will go with it, and there will be losers in the race to cash out in time.

It feels great to not be someone who has any serious amount of asset exposure to Bitcoin, long or short. It's just too small and opaque to be taken that seriously.

Goldbugs will be so butthurt when UAC perfects alchemy on mars and uses it to chug out gold from their "mines".

Until the mathematical foundation Bitcoin has been built upon is proven to have failed, it will continue making progress as a safe haven comparable to gold.
[/quote]
I've followed the gold bugs since the 1970s, the message never changes, you couldn't have picked a better illustration of a stopped clock being occasionally correct. "Safe haven" is a bit of stretch when applied to gold or bitcoin.

I'm glad I focused my efforts elsewhere since then, notwithstanding the Hunt brothers silver pump and dump was a little fun. I stumbled across a crafts store that had pounds and pounds of little silver beads *that they thought were shiny coated plastic imitation silver beads and had priced accordingly*. I backed up the truck as they say and immediately turned them over before the silver market collapsed. I sure am glad I didn't makes those beads part of my savings plans.

Surely you must be very short then at this moment?

Understanding stock-to-flow ratios is important - the higher the ratio, the more stable the instrument. Bitcoin offers the same function as gold, but in a nearly pure abstract version. When comparing gold to Bitcoin, the market size is tremendously different, but the reasoning behind the stock-to-flow ratios of the two holds. However, sufficient wealth has been flowing into Bitcoin to make it clear the the system offers less of an investment opportunity and more a method of savings or protection for stored wealth: a safe haven.


This is a very western perspective. Gold jewelry in many regions is bought in order to store wealth. Also, what is visible in the paper and retail markets is disconnected from the high-capacity exchanges done privately at institutional levels. These trades are opaque to those at smaller scales.


Trading mining stocks is not trading physical metal - equities are a claim on future production, a form of speculative investment. As discussed, BTC & gold are primarily stores of wealth (representing past production) rather than investments. The COMEX actually represents a relatively small amount of physical metal trading, despite being one of the largest exchanges. The LBMA handles far more physical volume and others (e.g. Shanghai and soon the PAGE) are rapidly gaining.


Incorrect. There are an estimated ~170,000 metric tons of gold above ground as of 2010. Of that, about 2,500 tons are produced annually and accumulated - it doesn't go away, it sits in someone's vault (like a Bitcoin wallet). Gold is not consumed and the amount actually traded fits within that 2,500 tons, as it includes stored gold being reintroduced to market. This is why the gold stock-to-flow ratio is very high and stable relative to other forms of wealth storage.

The logistics involved with large-scale shipments preclude major movements, which gave rise to the paper markets. The paper markets simply extend credit to multiply the effective usefulness of the physical metal's property as a store of value. If 250 tons of paper gold trade in one day, that does not mean that the same amount of physical has been traded, especially if not delivered. Instead, the paper instruments simply create a second derivative used for day-to-day trade: fiat currencies.

Bitcoin and gold are both escapes from less reliable forms of wealth storage (especially from paper gold). With the looming danger of a global, systemic financial collapse, those type of assets will experience inflows no matter how nascent the platform. If even 1/10th of 1% (0.001) of the USD capital that exists in gold today were to flow into Bitcoin (the current ~8mm units), it's USD exchange rate would exceed $100/BTC. Do the same math with gold at $12k/oz and BTC easily reaches the low thousands in USD. Further QE efforts will boost the dollar-relative values for both gold and Bitcoin.

Awareness is the trigger. Whether the Bitcoin economy can handle such heavy inflows is another issue, but I suspect it will be able to. Until the mathematical foundation Bitcoin has been built upon is proven to have failed, it will continue making progress as a safe haven comparable to gold.

Zero. Zilch. Nada. None. Sell into all rallies.

That's exactly the point of cbeast. You can't invest Bitcoins right now. Sure, you could buy an VPN service and some mining equipment-dried strawberries for BTC, but that's not very likely to become a good investment. Right now you can invest dollars, but not Bitcoins. This is what cbeast suggests we spend time changing instead of saving up Bitcoins.

I think you don't understand the definition of a "plan."  A plan is something that you intend to do and have reasonable expectations that it will occur (you are able to do it). 

Otherwise, it's just a "wish."  I wasn't asking for people's wishes...

completely agree!  Which is why setting aside a reasonable amount monthly is a good way to get "invested" in bitcoins, but not put you in a crazy large position that imposes on your lifestyle.

Gavin Andresen, one of the "core developers", is explicitly advising people "not to make heavy investments in Bitcoins", as it is "kind of like a high risk investment"

Jered Kenna, CEO of TradeHill a major Bitcoin Exchange also cautions eager investors and stated to the The New York Observer that "Bitcoin is still an experiment and not to bet the house"

As long as people keep the above in mind then it's all good.  If bitcoin falling to $0 tomorrow would cause undue hardship on your life or your family, it's time to exit.  If not, speculate away.