Bitcoins

[portart]

As much as I don't like it, Bitcoins is gaining tread and going up. I expected it to die down by now but it's going up instead. My main worry is that is it currently suppressing gold and, if it really takes off, could put a major hit on my PP, if people start to view it as a substitute for gold as an alternate currency. I wonder how Harry Browne would view this.  Looking at how gold is performing now, not responding much to anything, with a downward trend, it's unsettling and I think Bitcoins is part of it, believe or not. So what do you do? Buy a small amount of Bitcoins to balance out the risk? If you did, you would have benefitted from it's rise. PP is getting harder for me to figure out as a wealth protector.

[Gumby]

The Bitcoin market is incredibly small compared to the gold market, so it's unlikely that there is much leakage out of gold right now. Of course, that could change, and recent events suggest that Bitcoins could one day become a safe haven currency. However, any change to the PP would be pure speculation at this point, so it is something for your Variable Portfolio at this stage.

Keep in mind that gold has a track record of thousands of years as a safe haven currency and asset. Bitcoins only have a few months under its belt. And Bitcoins have flaws that make it difficult to scale up to the level of transactions that credit cards offer. So, you have to consider that any money you put into Bitcoins might become worthless if people dump their Bitcoins. In other words, keep Bitcoins in your Variable Portfolio.

Finally, Harry Browne would not approve of Bitcoins in the Permanent Portfolio because the whole point of the PP is to provide safety and peace of mind during a collapse, disaster or massive power failure. Bitcoins are untradeable when the power is off and networks are down. You can't depend on Bitcoins in such a situation. So, again, Bitcoins are for your Variable Portfolio.

[Ad Orientem]

The Bitcoin market is incredibly small compared to the gold market, so it's unlikely that there is much leakage out of gold right now. Of course, that could change, and recent events suggest that Bitcoins could one day become a safe haven currency. However, any change to the PP would be pure speculation at this point, so it is something for your Variable Portfolio at this stage.

Keep in mind that gold has a track record of thousands of years as a safe haven currency and asset. Bitcoins only have a few months under its belt. And Bitcoins have flaws that make it difficult to scale up to the level of transactions that credit cards offer. So, you have to consider that any money you put into Bitcoins might become worthless if people dump their Bitcoins. In other words, keep Bitcoins in your Variable Portfolio.

Finally, Harry Browne would not approve of Bitcoins in the Permanent Portfolio because the whole point of the PP is to provide safety and peace of mind during a collapse, disaster or massive power failure. Bitcoins are untradeable when the power is off and networks are down. You can't depend on Bitcoins in such a situation. So, again, Bitcoins are for your Variable Portfolio.

+1

See also my shorter but same basic point comment here...
http://gyroscopicinvesting.com/forum/pe ... /#msg84550

[Pointedstick]

It's a little late, no?

[flyingpylon]

It seemed late when BTC was $200, so who knows?

Also, while I don't disagree about issues with bitcoin in the event of a massive power failure, I bet there would be a lot of safe deposit boxes that are inaccessible too.  Just something to think about.

[HB Reader]

The Bitcoin market is incredibly small compared to the gold market, so it's unlikely that there is much leakage out of gold right now. Of course, that could change, and recent events suggest that Bitcoins could one day become a safe haven currency. However, any change to the PP would be pure speculation at this point, so it is something for your Variable Portfolio at this stage.

Keep in mind that gold has a track record of thousands of years as a safe haven currency and asset. Bitcoins only have a few months under its belt. And Bitcoins have flaws that make it difficult to scale up to the level of transactions that credit cards offer. So, you have to consider that any money you put into Bitcoins might become worthless if people dump their Bitcoins. In other words, keep Bitcoins in your Variable Portfolio.

Finally, Harry Browne would not approve of Bitcoins in the Permanent Portfolio because the whole point of the PP is to provide safety and peace of mind during a collapse, disaster or massive power failure. Bitcoins are untradeable when the power is off and networks are down. You can't depend on Bitcoins in such a situation. So, again, Bitcoins are for your Variable Portfolio.

FWIW, I very much agree with this.  Bitcoin is a very interesting monetary experiment and potential speculative investment.  It has certainly gotten my attention.  But given the relative size of their worldwide markets and the historical and cultural acceptance of gold as a dependable and independent store of value for thousands of years it is hard to see it being seriously challenged for at least several decades, probably generations, by a crypto-currency.  And I say that while fully acknowledging the accelerating rate of change we are experiencing in today's world.     

[Pointedstick]

All this is to say that Bitcoin may well be an amazing speculative opportunity (I certainly think so), but that's precisely why it has no place in a portfolio whose primary appeals are stability and safety. When Bitcoin goes down 98%, you're going to be happy you've got physical pieces of metal instead.

[dualstow]

portart, you seem like a doer to me, the kind of person who finds it difficult to sit still. At least, that's the impression I got from your early posts. I remember that you had some very successful trades in the past. And, I think you were the one who was excited about the miners some months ago. GDX? For doers, it may be extra difficult to stick w/ the pp during lean years.

It's certainly possible that some new investors will be attracted to bitcoins as an alternative, but look how long gold has stood the test of time. The same gold bugs who wouldn't touch treasurys or stocks are certainly not a candidate for bitcoins. Chinese and Indians are not about to jump on the bitcoin bandwagon. Anyone who is afraid of computer hacking is going to think twice about replacing bullion with bitcoins.

What if another virtual currency comes along that replaces bitcoins, something that starts from scratch to neutralize all the early bitcoin hoarding by wise geeks?

I think there is room for both in this world, but bitcoins could never replace an element of the pp that is meant to be held largely in physical form.
As has been said, it's vp territory.

[Libertarian666]

I think in the long run bitcoins will turn out to be worth their weight in gold!

[dualstow]

Here's an interesting infographic from the always great Visual Capitalist.
I have no idea if the info is accurate, but it sure is pretty. Happy scrolling.

http://www.visualcapitalist.com/bitcoin ... n-standard

[dualstow]

I think in the long run bitcoins will turn out to be worth their weight in gold!

Of course their weight is zero. ;-)

[Libertarian666]

I think in the long run bitcoins will turn out to be worth their weight in gold!

Of course their weight is zero. ;-)

So someone noticed that! 

[Kshartle]

I think in the long run bitcoins will turn out to be worth their weight in gold!

Of course their weight is zero. ;-)

So someone noticed that! 

How about double their weight?

[Marc De Mesel]

Good question. I made a video series exploring it, in the last one I conclude why I think bitcoins do not belong in the permanent portfolio (yet):
http://www.youtube.com/watch?v=CnnbbOG2aFM

[Gumby]

Good question. I made a video series exploring it, in the last one I conclude why I think bitcoins do not belong in the permanent portfolio (yet):
http://www.youtube.com/watch?v=CnnbbOG2aFM

Marc, I actually thought that was a great video. Well done! And I applaud your ability to reevaluate your own strategies and recommendations (not everyone can do that). It shows that you are putting a lot of good thought into your work.

[portart]

I liked your Bitcoin video. I saw some negative press today on Bitcoin so it makes you wary of investing money in it, especially at today's prices. I think if your in it early, it's fun to watch. Any real money I ever made in a variable portfolio were things I got in early and got out (AOL, XM Radio). I am reading now a lot out the 3D printing technology as the next big thing.

[dualstow]

...
Any real money I ever made in a variable portfolio were things I got in early and got out (AOL, XM Radio). I am reading now a lot out the 3D printing technology as the next big thing.

You might like this brief thread.
http://gyroscopicinvesting.com/forum/va ... -printers/

[RuralEngineer]

Liked the video.  It was cool to put a voice and face with the name from the forum.

I agree with you, bitcoin seems great for the VP of somebody who is not risk adverse.  There seems to still be a fair bit of upside.  However, the history just isn't there for me to feel comfortable using it in a conservative portfolio like the PP.

EDIT:  Marc, if you're going to be posting links to your youtube videos on here you had to know we'd find this gem eventually.  Awesome.  "Party People!!!!"

https://www.youtube.com/watch?v=S497PGiRX3M

[dualstow]

...

EDIT:  Marc, if you're going to be posting links to your youtube videos on here you had to know we'd find this gem eventually.  Awesome.  "Party People!!!!"

https://www.youtube.com/watch?v=S497PGiRX3M

Whoo hoo!! Let's break out the gouda,  some Drum tobacco, and the fondue machine! ;-)

[smurff]

I'm ready to celebrate with some weed, myself.

[dualstow]

I'm ready to celebrate with some weed, myself.

Well, I suppose that item may also be associated with the Netherlands. ;-)