Cryptocurrencies

I spent some time reading posts on Boglehead regarding crypto, especially Bitcoin.

The main arguments against are:

  • It’s a no instrinsec value
  • Don’t produce income (unlike stocks)
  • For Bitcoin, it’s has failed as a mean of payment (cost and speed)
  • It’s a Ponzi scheme. People holding crypto need more people to use/buy them, so the price will increase.

The main arguments for are:

  • With more awareness and a limited supply, prices will continue to go up. (For example, Paypal sells crypto now)
  • Major banks and funds buy Bitcoin/crypto
  • Bitcoin could replace Gold (as a hedge against inflation)
  • Reduce transaction cost compared to bank

Ark-invest has published a white paper with interesting arguments and is bullish.:


Two years ago, I bought some unknown crypto which have lost value since. My opinion was Bitcoin will fail due to the speed of the transaction and high commission. I missed that it could be a replacement for Gold. Two years later, I see a lot of potential in Bitcoin and ETH, but few for other crypto.

Do you think ETH and Bitcoin will continue to be the major crypto in the future (currently around 70% of the market cap. A lot of Crypto has been launched but haven’t able to challenge these two)? Do you think it will replace gold? Any idea of the long term price/market cap?

Well, nobody knows. I am still unsure if we are not missing something huge here. What will happen to our little ETF friends VT, VWRL and so on when USD further weakens (crashes?) and everybody turns to bitcoin for protection?

So you want to protect against society collapsing (and somehow bitcoin not going down with it)?

Note that VT and friends are not tied to USD, but indeed a collapse of the US financial system would likely impact most economies. Just USD weakening shouldn’t matter (as long as it’s not a collapse, with hyperinflation, etc.), USD has weakened all the time compared to CHF without causing any issues.

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Just to add on top of what @nabalzbhf says, if USD weakens the price in USD of your shares mechanically increase. It should not matter. You are not holding USDs you are holding parts of companies that have an intrinsic value.

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And for reference, USDCHF was at 4.3 (1 USD = 4.3 CHF) in 1971 (vs. 0.9 now). If anything the past decades have been very stable compared to the historical norms.

No direct impact.
Some companies holds a lot of cash would which could be an issue, if the interest on this cash is lower than the inflation.


Data from last year.
https://www.cnbc.com/2019/11/07/microsoft-apple-and-alphabet-are-sitting-on-more-than-100-billion-in-cash.html

Some companies like Microstrategy convert most of their cash into Bitcoin. Their is some rumors that other companies will do the same. For sure, now it’s easier than ever to holding Bitcoin for companies through ETFs or fund. Maybe Bitcoin is really Gold 2.0.

Out of curiosity, I’ve listed the major USD-pegged stablecoins by market cap right now:

Total: $107 billion USD :slight_smile:

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