Peter Calver
May 27 (2 days ago)

to me
Sam, when I was your age I made a bit of money dabbling in the stockmarket - then I lost it
all and more, much much more. It took me three years to pay the money back, and it
required a lot of hard work and a lot of sacrifices. I didn't dare tell my parents.

You can repeat my mistake or you can learn from it - it's entirely up to you. But I wouldn't
invest a penny of my money in Bitcoin - because it wouldn't be an investment, it would be a
gamble. I don't gamble - I only ever take calculated risks, and I try to avoid those if I can.

The best way to make money is to use your talents to make something, or provide a service
that people want to buy - and to do it better, or faster, or more efficiently than anyone else.
That's how I succeeded - and it's the only way you're going to be successful.

Peter

> Hi Peter,
>
> I don't know if you keep track of Bitcoin prices, so I'll explain the
> situation. BTC peaked at $2700 a few days ago, after a rise of $500 in
> 2 days. As expected, the price has dropped because its recent growth
> was way about the average growth. You could call it self adjustment.
> See this comparison:  Inline image 1


SCalver <samcalverwow@gmail.com>
May 27 (2 days ago)

to pc
Peter,

You can reduce anything to a "gamble". A calculated risk is a gamble. I can see how the experience you had at a young age would influence your opinions now; however, I think that assuming everybody else would make the same mistake would be foolish. Sure, investing in forex is a higher risk than investing in real estate, or gold. But these things also carry risk, but you would happily class them as an investment, not a gamble. Bitcoin is not a stock, it acts differently to a stock. I assume that you haven't looked much into Bitcoin because of, forgive me if I'm wrong, your apparently prejudice against it. However, if you did look into with open eyes I think you would have a different opinion. But, we both know that will not happen, because you burnt your fingers with this type of investment before. I understand that, I wouldn't either. Making something is also a risk. It could easily turn out that nobody is interested, regardless of how good your idea is. If you had spent money in the process of making it, then you would be at a loss. Likewise, you will have lost time from doing so, and time is money. I wouldn't call it a calculated risk, I would call that gambling. I don't pretend to know more than you, as I clearly don't. However, I think that you are wrong in this case. You'll probably assume that I have been hypnotised by dollar signs and will make the same mistakes as you. I base my opinions on the information I have available to me, and the case for Bitcoin outweighs your personal anecdote. We live in a different time. There is far more easily accessible information about forex trading, and plenty of forums for market prediction. For instance, see: https://news.bitcoin.com/study-forum-comments-predict-bitcoins-price-80-accuracy/
Investing in forex or stocks is not a gamble if you know what you are doing, it is a calculated risk. I don't claim to know exactly what I am doing, but I have a general idea, and access to information from people who do know what they are doing. I am sorry you feel this way about stocks/forex.

Sam


Peter Calver
May 27 (2 days ago)

to me
Sam, I know all I need to know about Bitcoin, thank you very much.

Bitcoin is far more risky than any stock because it has no underlying intrinsic value. Read
"Extraordinary Popular Delusions and the Madness of Crowds" (published in 1841) for
accounts of other similar schemes.

My dissertation for my first degree was on Investment Analysis, so I did a lot of research into
the topic even before I worked as an analyst in the City. I only wish I had done that research
three years earlier!

Perhaps the biggest downside for you is that even if you made money out of Bitcoin, most
people would still think you a fool (at best). It's a no-win situation.

But find something useful to do with your talents and you will earn the respect you deserve.

Peter
> rice-80-accuracy/ Investing in forex or stocks is not a gamble if you


SCalver <samcalverwow@gmail.com>
May 28 (1 day ago)

to pc
Peter,

Utility is an intrinsic value. The technology behind bitcoin, which is being used by IBM, Microsoft, and others gives it intrinsic value. Furthermore, anything that gives the ability to store value, has intrinsic value. If Bitcoin did not have success as a medium of exchange, consequently meaning it would not be able to store value, then it would have no intrinsic value. But, so far, Bitcoin is successful in both of these objectives. I will outline a framework I created that defines the intrinsic value based on assumptions (some of those assumptions have already been fulfilled):

1st assumption: Bitcoin derives its value from its use as a medium of exchange and its store of value.
2nd assumption: The supply of Bitcoin will continue to approach its limited supply as defined by the current protocol of 21 million Bitcoin.
3rd assumption: Volatility will decrease as legitimacy, adoption and the number of large scale investors increases
4th assumption: The current value of Bitcoin is mostly driven by speculative interest caused by a craze of media attention. We have seen so far that Bitcoin has bubble characteristics. We assume that speculative interest will decrease as adoption increases.
5th assumption: The use of bitcoin will not involve fractional reserve banking, and that there will be means of storing bitcoin that are fully backed by the bitcoin-core itself.

To continue the framework evaluation, lets assume that market penetration will be around 20%. Now, we will compare Bitcoin to other mediums of exchange that are comparable to Bitcoin. From this we will calculate the value of Bitcoins projected market penetration. We will consider government backed money as this is the largest medium of exchange. Specifically, we will be interested in the M0 and M1 buckets as they are readily accessible for exchange, the M2 and M3 buckets will be seen as money being used as a store of value (see: http://lexicon.ft.com/Term?term=m0,-m1,-m2,-m3,-m4).
In 2010, M1 and M0 were worth 25 trillion dollars. This will act as our estimate for the current world wide value for mediums of exchange. M2 and M3, in 2010, account for 45 trillion US dollars, this will serve as our estimate for worldwide store of value. We will also add the worldwide value of gold to this, as this is a common store of value. This gives us a total, for store of value, of around 47 trillion US dollars. Therefore, our estimate for the total global value of mediums of exchange and stores of value is 72 trillion US dollars. Assume BTC achieved its 20% market penetration, its market cap would be 14.4 trillion US dollars. As this is a long term model, assume that all 21 million Bitcoin exist at this point, giving us a individual Bitcoin price of: 685,000 US dollars.



I think the most important assumption is adoption. Will people use Bitcoin? I think that they will, and we see it adopted more and more every day.

Some more reasons why Bitcoin will, and is, being adopted and thus has intrinsic value:
1. The decentralised nature means it transcends politics, cultures, regulations, religions and nations.
2. It requires no trust
3. If needed, it can be made transparent
4. Bitcoin is intrinsically multi-signature. Meaning to unlock Bitcoins, you need more than one signing key. Thieves will be have a very hard time dealing with this.
5. It can be spent without a bank account, identification, credit report, etc
6. Everything is recorded and irrevocable.
7. It allows movement of monies across borders
8. It can be used to resist corruption
9. It can't be used as surveillance (in its current state) whereas other forms of money can
10. It gives us democratisation of money.

In short, does bitcoin have intrinsic value itself? No. Do stocks have intrinsic value themselves? No. Does Bitcoin (notice the difference between bitcoin and Bitcoin) give bitcoin intrinsic value? Yes. Do the companies represented by stocks give intrinsic value to the stocks? Yes.

Sam

P.S Regarding: "Perhaps the biggest downside for you is that even if you made money out of Bitcoin, most
people would still think you a fool (at best)."

Perhaps the biggest downside for you is that even if you laughed at the people making money out of Bitcoin, you would have made no money from Bitcoin. And that would make you a fool.

Regarding: "But find something useful to do with your talents and you will earn the respect you deserve."

So you're telling me you worked as an analyst in the City, but regard investments as non-useful ventures? That doesn't quite make sense to me.


SCalver <samcalverwow@gmail.com>
May 28 (1 day ago)

to pc
Some examples of people who are clearly not fools but believe in Bitcoin:
http://money.cnn.com/2017/04/20/investing/mike-novogratz-bets-big-on-bitcoin-ether-blockchain/

http://uk.businessinsider.com/bitcoin-price-could-be-500000-by-2030-first-snapchat-investor-says-2017-3?r=US&IR=T

Barry Silbert
Blythe Masters, former managing director of JP Morgan
David Rutter, CEO of R3.
Marc Andreessen
Andreessen Horowitz
Balaji Srinivasan


The list goes on and on...


Peter Calver
May 28 (1 day ago)

to me
> I'd also like to add the following idea:
> Lets think about gold. Gold has intrinsic value because it is used in
> things, such as electronics and jewellery. However, its price is
> elevated because of its ability to store value, and the fact we choose
> to use it to store value. Compare this to Bitcoin. Bitcoin has
> intrinsic value because it offers technology that is so useful. US
> schools are already using the blockchain to store student data.
> Bitcoin's price is elevated because of its ability to store value.
> Exactly the same as gold. I don't know if you've heard of the velocity
> of money (https://en.wikipedia.org/wiki/Velocity_of_money), but this
> very much applies to Bitcoin.

Velocity of money? I studied economics at university - how about you?

Gold has some intrinsic value, but I still wouldn't buy gold.

Blockchain technology has some value, but you don't need Bitcoins to make use of it.
Bitcoin is simply one application of the technology.

Central banks might think the idea of a digital currency is a good one, but why would they
choose Bitcoin out of all the possible digital currencies?

The value of any investment is the discounted value of the future cashflow it is expected to
generate. Something that cannot produce an income and doesn't have an intrinsic value
isn't an investment, it's a gamble, because its value depends wholly on what someone else
MIGHT give you for it in the future.

Read up on the "Greater Fool Theory", one of the many concepts I referenced in my
dissertation.

Some investment managers invest in Bitcoin. But most investment managers lose their
clients money, so it's not much of a recommendation. Have you read the opening chapters
of "The Black Swan" by Nassim Nicholas Taleb?


SCalver <samcalverwow@gmail.com>
May 28 (1 day ago)

to pc
Peter,

You wouldn't buy gold as a store of value or as an investment? If the latter, I can understand that. Golds value is based on fear. If a currency is shaky? Buy gold. But as an investment? I don't think gold offers much. But, gold is a very good store of value - are we agreed on that?

My 1st email outlined how I was planning on making medium length investments because although I believe in Bitcoin, I agree with: "Central banks might think the idea of a digital currency is a good one, but why would they choose Bitcoin out of all the possible digital currencies?". I wanted to exploit the next media craze that is bound to happen when Bitcoin continues to grow. As for a long term investment, its too early to say if it would be viable.

Yes, GFT applies but it also applies to most other things. It only becomes a problem when you believe that things have an innately high intrinsic value and don't understand that irrational beliefs are actually giving value to it. If we both understand that, then why not exploit the people who don't?

You may have studied economics at university, but if you base your views on one personal experience (as shown in your 1st reply) then I don't think that degree counts for anything.

Sam


Peter Calver
9:53 AM (8 hours ago)

to me
> You wouldn't buy gold as a store of value or as an investment? If the
> latter, I can understand that. Golds value is based on fear. If a
> currency is shaky? Buy gold. But as an investment? I don't think gold
> offers much. But, gold is a very good store of value - are we agreed
> on that?

No - gold is not a good store of value, partly because the value fluctuates in response to
speculation, and because it produces no return (indeed, you have to pay the cost of storage
and insurance). I would not buy gold - if the United States decided to sell even a small
fraction of their holdings the price would collapse.

> My 1st email outlined how I was planning on making medium length
> investments because although I believe in Bitcoin, I agree with:
> "Central banks might think the idea of a digital currency is a good
> one, but why would they choose Bitcoin out of all the possible
> digital currencies?". I wanted to exploit the next media craze that is
> bound to happen when Bitcoin continues to grow. As for a long term
> investment, its too early to say if it would be viable.

If it isn't a long-term investment then.....

> Yes, GFT applies

> but it also applies to most other things. It only
> becomes a problem when you believe that things have an innately high
> intrinsic value and don't understand that irrational beliefs are
> actually giving value to it. If we both understand that, then why not
> exploit the people who don't?

The way you exploit people who over-value something is by selling whatever it is they want.
However this strategy only works in the long-term because it's very difficult to predict when
the price will fall of the cliff (think Roadrunner).

> You may have studied economics at university, but if you base your
> views on one personal experience  (as shown in your 1st reply) then
> I don't think that degree counts for anything.

I've studied economics ever since university - I book a bookshelf full of economics books. I
read The Economist regularly.

I have many, many experiences and a limited amount of time to share them with you (I have
work to do, even if you don't). I simply presented the one that was the closest to what you
are proposing.

When you run a business you are taking calculated risks all the time - but I started gambling
when I opened an account with William Hill at the age of 13. However I soon realised the
best way to make money was to act as a bookmaker, which is about taking calculated risks,
not gambling. Bookmakers aim to balance the books so that they make money whatever the
result.

When I was about 14 I ran a book on the school cross-country. Around the same time a boy
of my age was doing exactly the same at another minor public school - his name was
Richard Branson. I don't know how successful he was, but in my case nobody backed the
winner, so my winnings exceeded my expectations! But I didn't do it again because one of
the masters heard what had been going on and "had a word with me".

When I was 15 England won the World Cup and although I couldn't get hold of any of the
'England Winners' stamps because they sold out immediately, my cousin David managed to
get some in Southend, and I asked him to put them on envelopes and post them to me. A
few months later Jim Standen, the West Ham goalkeeper, came to speak at our church (he
lived locally) and I asked if he could arrange for my First Day covers to be signed by Booby
Moore, Geoff Hurst, and Martin Peters. It took a few months before he was able to get it
sorted, but he did. My investment in each was just 4 old pence - plus a bit of inspiration and
a lot of effort (I really had to keep chasing Jim Standen). When I sold them on eBay nearly
40 years later they fetched around £400 each, more than 20,000 times what they cost me.

Around 2003 I bought some Chinese bonds which were worthless (the Chinese government
was overthrown not long after they were issued in 1913). But they were attractive and in
very good condition, so I reckoned I could make a good profit selling them as interesting
objets d'art. People could frame them, use them as wallpaper, turn them into lampshades. In
other words they had an intrinsic value.

There was a chance that they might go up significantly in value, either because collectors
took a fancy to them, or because the Chinese government decided to pay them off. There
was even a very slight chance that speculators might drive the price to ridiculous levels
based on nothing but hot air. But whatever happened it was a safe investment because they
had an intrinsic value which equalled or exceeded what I paid for them.

That's the sort of 'gamble' I like - one where I can't lose. Or I might buy postage stamps at
below their face value in the hope of discovering a rarity - I knew I always had the option of
putting them on letters and parcels (when I was going a lot of selling on eBay).

Oppportunities like these don't come along every day - you have to be patient, and you
have to be observant. Opportunities to speculate, gamble, or be suckered into a scam come
along every day - that's why so many people get it wrong.

The trick is to find something productive to do while you're waiting for the real opportunities
to come along. Perhaps in your case you could be writing software or writing books about
Bitcoin?