www.debtcrash.report

A Simple Guide to the Most Important Subject You Never Learned In School, What Our Money Is, Its History, and an Analysis of a Failing System.

The Case For Owning Bitcoin from a Crypto-Currency Skeptic

The Case For Owning Bitcoin from a Crypto-Currency Skeptic

So why am I, a self proclaimed bitcoin skeptic, putting up a post on why bitcoin has a place in a modern portfolio?  No I have not changed my mind on bitcoin.  There is still significant evidence that it was created by those who do not have economic freedom in mind.  That said researching and writing my last piece on the commonly held belief among financial commentators and advisers that the correct allocation to precious metals is 0% forced me to take a second look at bitcoin.  An absolute claim like, you should not own ANY precious metals, rubbed me the wrong way, but because of my research into bitcoin I had no exposure to the crypto-currency.  If there is anything I hate it’s a hypocrite, so lets take a look at the pro’s and cons, risks and rewards of putting some money into bitcoin. 

Among alternative financial commentators there are two very distinct groups, those who believe in and love bitcoin, and those who don’t, and never the twain shall meet.  I am part of the latter but humility and knowing that I don’t know or understand everything has pushed me into taking this second look. 

No matter how much evidence you put in front of a bitcoin believer their faith will not bend.  To one I laid out how it was very likely that the NSA had been involved in the creation of bitcoin which makes it very suspect.  He actually thought that the government had been involved in its creation but felt that they no longer had control of it.  Similar to the development of the internet by the department of defense, the government didn't know the implications of their crypto-currency creation and once society got a hold of that technology they had no control over it. He felt that like the internet, bitcoin would eventually change the world and take over commerce. 

I put the chances of a monetary takeover by bitcoin at slim to none, but as we have outlined, our monetary system is very sick and headed toward failure.  Something will have to replace it, and while that could be any number of options, bitcoin does have a lot of aspects going for it that could see it used at least in some capacity if there is a monetary meltdown.  The possibility of bitcoin being a fallback as a result of a crisis is evidenced by the statements made by the Greek finance minister Yanis Varoufakis who essentially said that Greece will resort to using bitcoin if they were forced out of the Euro.

There were clear upward reactions in bitcoin price during the most recent crisis in Greece as well as during the Russian Ruble crisis last year and the Cyprus bail-in before that. It would be foolish to ignore these recent trends and the reaction of people to gravitate to bitcoin during crisis.

The slight possibility of bitcoin being one of the fallback currencies in a crisis makes having some exposure to the crypto-currency logical.  The bitcoin market is relatively small. The total value of bitcoin at current price stands at around $3 billion, and even once all the bitcoin have been mined, at current prices, they would be valued at a little over $5 billion.  If bitcoin were ever adopted by even a small economy, let alone if it took over world commerce, the value of bitcoin would skyrocket, and this brings me to the risk side of the equation.  Even a very small allocation to bitcoin of say .05-.5% of a portfolio would be sufficient to make you very well off if it were ever adopted on a large scale.  So depending on the size of your portfolio the risk you would have to take to be protected by bitcoin would likely be measured in hundreds of dollars, not thousands.

Now for the risk of not getting some exposure to bitcoin.  Let’s say that you make all the right calls. You say that the monetary system is doomed and will fail, and it does.  In preparation for this failure you stock up on gold and cash.  In response to the crisis the government bans both cash and gold, and despite your best efforts the government manages to confiscate both.  Your preparations do little to protect your family.  Though the government sets up a new monetary system, bitcoin takes on a much larger role in the economy and increases in value significantly.  It is certainly possible, as I have outlined, that the government could effectively ban the use of bitcoin as well, but how would you feel if you made all the right predictions on the economy crashing, but did not buy the one thing that offered the most protection.  I would have difficult time dealing with making all the right calls except how to protect my wealth and family.  

I will not pretend that I have now become a bitcoin convert but I do believe a small exposure makes sense.  Bitcoin has gone through its first bubble phase and has dropped significantly, but it has stabilized nicely.  These prices seem reasonable for an entry point to start to get some exposure.   

 Full disclosure: I will be purchasing relatively small amounts of bitcoin using the Debtcrash Purchase Program and Coinbase. Click the links for more information. 

 

Rate this blog entry:
6
Central banks stash cash for unwind shock
Oil benchmark gap narrows to $3 a barrel

Related Posts

Comments 7

 
Guest - MikeWismer on Monday, 06 July 2015 13:12
Bitcoin for Everyday Usage

Many articles about Bitcoin (yours included) focus on Bitcoin as a possible investment, while ignoring its usefulness as a currency. There are already parts of the economy where using crypto-currencies is far superior than using fiat. As the services surrounding crypto expand, this superiority will expand with it.

It is my belief that fractional reserve banking, debt-based money, and all the infrastructure required to keep them functioning is now obsolete.. It is only a matter of time before this realization becomes widespread..







0
Many articles about Bitcoin (yours included) focus on Bitcoin as a possible investment, while ignoring its usefulness as a currency. There are already parts of the economy where using crypto-currencies is far superior than using fiat. As the services surrounding crypto expand, this superiority will expand with it. It is my belief that fractional reserve banking, debt-based money, and all the infrastructure required to keep them functioning is now obsolete.. It is only a matter of time before this realization becomes widespread..
CaptDebtCrash on Monday, 06 July 2015 14:00
Mike

First, thank you for your comment. I think you make a valid point, but I don’t want to get caught up on the semantics of what assets are investments, money, currencies, or stores of value. I am mainly concerned with what is going to protect and grow my wealth and fair the best in the next monetary transition, hopefully away from a debt based monetary system. I think it is great to try and determine the future of bitcoin, but I'm focused on what is in front of us, namely the failure of debt based money as you mentioned.

0
First, thank you for your comment. I think you make a valid point, but I don’t want to get caught up on the semantics of what assets are investments, money, currencies, or stores of value. I am mainly concerned with what is going to protect and grow my wealth and fair the best in the next monetary transition, hopefully away from a debt based monetary system. I think it is great to try and determine the future of bitcoin, but I'm focused on what is in front of us, namely the failure of debt based money as you mentioned.
Guest - MikeWismer on Monday, 06 July 2015 15:39
Capt

I agree that a discussion over what constitutes money, etc is pointless. Whether we agree or not is immaterial - I can store my excess labour in BTC, US dollars, or gold - and over the short term, I can be fairly confident that I will be able to extract that value and use it to buy food sometime in the future. I believe (as you seem to), that this may no longer be the case for US dollars, or other fiat currencies, as the world approaches unsustainable debt levels.

As a supporter of the BTC economy, I agree that one should consider allocating a small portion of their wealth into BTC, and I applaud your reluctant recommendation to do so. Your reservations aside, I think this shows considerable foresight.

I would like you to consider BTC as so much more than a simple asset class however. I would urge you and your readers to investigate some of the areas where BTC is excelling - and see if there are ways to adopt BTC usage into your lives to create value right now.

Here are areas where I have done so:

International remittance - I transfer money regularly between the US and Canada, and by using BTC I am now saving about US$210/month in fees and exchange rate skimming by the banks

Savings accounts - I currently have a BTC denominated savings account that is paying 5% interest that is paying interest daily

Investment - I have helped fund hundreds of p2p personal loans - and although some have defaulted or disappeared, I am making a consistent return of just over 10%. I split my loans between US linked and BTC linked to hedge exchange rate fluctuations - it is BTC that I am lending however.

Loans - I have taken out six separate BTC loans, and have been able to name my own interest rate. I've been able to achieve rates that do not beat bank rates - but are below credit card rates. None of these loans appear on my credit report. My last loan was for a car, and was taken out over 1 year at approx 7% apr. The payments were tied to BTC during the last drop in price - and I ended up paying only 2/3 of the cost of the car back in US dollar terms.

Gold Purchases - Using readily available BTC services, I now buy physical gold from anywhere in the world, and have it delivered to a Brinks vault of my choice. I currently hold gold in Toronto and Hong Kong. It is possible to take physical delivery at any time. Plans to issue bank cards linked to the Brinks vaults is underway. I will be able to buy things using my gold balance at any POS terminal. It is blockchain technology that allows this service to operate.

Payroll and other bank cards - I currently receive 15% of my employment income directly in BTC. I can have this deposited to the BTC wallet of my choice - or to a BTC wallet that is linked to a bank card similar to my gold vaults abve

Bill payments - I currently pay my cable, electricity, water & sewer, property tax, and income taxes with BTC. This service is only available to Canadian consumers (as far as I know) at this time.

As you can see, the BTC economy is very rapidly displacing the roles of regular banks - and there is no reason to think that it won't continue to do so in the future.


Mike

Disclosure: I currently work in the oil and gas industry, and have no ties to any BTC companies other than as a consumer of their services. I hold approx 5% of my (non house) assets in BTC. Most of my BTC is either used, or transferred back to fiat monthly..

P.S. I regularly donate BTC to blogs such as this one who provide a QR code where I can pay for content. BTC provides me a way to pay for the articles that I enjoy..







0
I agree that a discussion over what constitutes money, etc is pointless. Whether we agree or not is immaterial - I can store my excess labour in BTC, US dollars, or gold - and over the short term, I can be fairly confident that I will be able to extract that value and use it to buy food sometime in the future. I believe (as you seem to), that this may no longer be the case for US dollars, or other fiat currencies, as the world approaches unsustainable debt levels. As a supporter of the BTC economy, I agree that one should consider allocating a small portion of their wealth into BTC, and I applaud your reluctant recommendation to do so. Your reservations aside, I think this shows considerable foresight. I would like you to consider BTC as so much more than a simple asset class however. I would urge you and your readers to investigate some of the areas where BTC is excelling - and see if there are ways to adopt BTC usage into your lives to create value right now. Here are areas where I have done so: International remittance - I transfer money regularly between the US and Canada, and by using BTC I am now saving about US$210/month in fees and exchange rate skimming by the banks Savings accounts - I currently have a BTC denominated savings account that is paying 5% interest that is paying interest daily Investment - I have helped fund hundreds of p2p personal loans - and although some have defaulted or disappeared, I am making a consistent return of just over 10%. I split my loans between US linked and BTC linked to hedge exchange rate fluctuations - it is BTC that I am lending however. Loans - I have taken out six separate BTC loans, and have been able to name my own interest rate. I've been able to achieve rates that do not beat bank rates - but are below credit card rates. None of these loans appear on my credit report. My last loan was for a car, and was taken out over 1 year at approx 7% apr. The payments were tied to BTC during the last drop in price - and I ended up paying only 2/3 of the cost of the car back in US dollar terms. Gold Purchases - Using readily available BTC services, I now buy physical gold from anywhere in the world, and have it delivered to a Brinks vault of my choice. I currently hold gold in Toronto and Hong Kong. It is possible to take physical delivery at any time. Plans to issue bank cards linked to the Brinks vaults is underway. I will be able to buy things using my gold balance at any POS terminal. It is blockchain technology that allows this service to operate. Payroll and other bank cards - I currently receive 15% of my employment income directly in BTC. I can have this deposited to the BTC wallet of my choice - or to a BTC wallet that is linked to a bank card similar to my gold vaults abve Bill payments - I currently pay my cable, electricity, water & sewer, property tax, and income taxes with BTC. This service is only available to Canadian consumers (as far as I know) at this time. As you can see, the BTC economy is very rapidly displacing the roles of regular banks - and there is no reason to think that it won't continue to do so in the future. Mike Disclosure: I currently work in the oil and gas industry, and have no ties to any BTC companies other than as a consumer of their services. I hold approx 5% of my (non house) assets in BTC. Most of my BTC is either used, or transferred back to fiat monthly.. P.S. I regularly donate BTC to blogs such as this one who provide a QR code where I can pay for content. BTC provides me a way to pay for the articles that I enjoy..
CaptDebtCrash on Monday, 06 July 2015 16:44
Guest Post

Mike,

I work in the oil field as well. I'm off-shore right now and due to the security measures I have set up I will have to put up the QR code when I get back land side. Thanks for the suggestion though.

My reservations about bitcoin don't have anything to do with the technology which I think is amazing, more about the conditions and entities responsible for its development, as well as its current and future vulnerabilities and limitations. But again the technology is impressive, I think uses such as color coins hold much promise.

It seems like you are pretty knowledgeable, would you like to do a guest post addressing concerns of those interested but wary of bitcoin?

0
Mike, I work in the oil field as well. I'm off-shore right now and due to the security measures I have set up I will have to put up the QR code when I get back land side. Thanks for the suggestion though. My reservations about bitcoin don't have anything to do with the technology which I think is amazing, more about the conditions and entities responsible for its development, as well as its current and future vulnerabilities and limitations. But again the technology is impressive, I think uses such as color coins hold much promise. It seems like you are pretty knowledgeable, would you like to do a guest post addressing concerns of those interested but wary of bitcoin?
Guest - MikeWismer on Friday, 10 July 2015 16:47
Guest Post

I would love to take you up on your offer. As soon as I get some time to work on it, I will email you privately.

Thanks,

Mike

0
I would love to take you up on your offer. As soon as I get some time to work on it, I will email you privately. Thanks, Mike
CaptDebtCrash on Friday, 10 July 2015 17:16
Looking forward to it.

Mike,

Thanks and I'm looking forward to it. Take your time. I know we're all busy, and that's a good thing especially in our industry right now.

0
Mike, Thanks and I'm looking forward to it. Take your time. I know we're all busy, and that's a good thing especially in our industry right now.
Guest - James on Thursday, 16 July 2015 14:25
NXT is better!

investors beware. There are better choices than Bitcoin ... do your research. The greatest threat to price that Bitcoin faces is the wide adoption of other crypto-currencies which perform better at moving money around quickly. Also, truly dark and anonymous payment methods are being developed. While you may not ever use one, whichever currency succeeds as the go-to for black and grey markets will have a value appreciation advantage over BTC. http://nxt.org/

0
investors beware. There are better choices than Bitcoin ... do your research. The greatest threat to price that Bitcoin faces is the wide adoption of other crypto-currencies which perform better at moving money around quickly. Also, truly dark and anonymous payment methods are being developed. While you may not ever use one, whichever currency succeeds as the go-to for black and grey markets will have a value appreciation advantage over BTC. http://nxt.org/

Coinbase

Coinbase is an easy and secure way to buy and store Bitcoin. 

Follow this link for more information or to open an account.   

Enjoy The Debtcrash Report? Scan Below, Bitcoin Donations are Appreciated

Latest Posts

CaptDebtCrash
24 July 2015
DebtCrash.Report
Rate this blog entry:
1
CaptDebtCrash
08 July 2015
DebtCrash.Report
Rate this blog entry:
4
CaptDebtCrash
27 May 2015
DebtCrash.Report
Rate this blog entry:
9
CaptDebtCrash
07 March 2015
DebtCrash.Report
Rate this blog entry:
15
CaptDebtCrash
22 February 2015
DebtCrash.Report
Rate this blog entry:
22
CaptDebtCrash
19 February 2015
.
DebtCrash.Report
Rate this blog entry:
62