Anyone moving their investments to Bitcoin?

186 Replies

After watching a YouTube video from Ken McElroy stating 2020 is a wash, 2021 is the time to save up, and 2022 is likely the time to buy (when properties shift from motivated sellers to foreclosures to REO) I decided to redirect some recent Real Estate proceeds out of a 1031 into BTC.

My question is how much Cryptocurency do you personally feel is the right percentage for your investment mix (that is, if you have crypto)?

The right allocation?  Zero.  But I do find it entertaining that Bitcoin's obituary appeared 380 times (Source: 99bitcoins.com) since 2010. For speculators, they can do better than Bitcoin; for wealth builders, it doesn't even hit the radar.  

Something for everyone...

@John Edwards hmmmm... thanks for the heads-up. I’m going to research a bit further. The platform I invest (gamble?) through offers a Cold Storage custody option that I was thinking of adding to my account.

@Patricia Steiner you make a good point. The key difference for me between REI and BTC is I have no control over the investment in BTC like I would in RE. Unlike Accredited Investor syndications where you're confident you can expect certain returns, anything could swing the BTC price wildly one way or another. So it DOES feel like speculation more than investing to me. I've been deploying a frequent dollar-cost-averaging hoping (note: "hoping") to not end up on the wrong end of an epic drop.

Having said that, I modeled out 7 investment options and used historical data to predict the future returns. (I know- we have new norms that reset most models). For BTC I then chopped the return WAY back from historical and it still kept up. So far in 2020 BTC is my best performing asset class, and I have been enjoying extraordinary returns from the stock market this year so for BTC to beat it, I’m cautiously optimistic. Plus it’s liquid and there is no debt (all assuming, of course, some mega government doesn’t come out and issue a new world Cryptocurency rendering my BTCs valueless!)

I’ve been involved/invested in cryptocurrency since 2013, longer than I’ve been in real estate investing. In fact, it was the rise of cryptocurrency that gave me the initial funds to invest in real estate. Needless to say, I’m a fan of cryptocurrency.

That being said, I’ve always advised people never to invest more in crypto than they are willing to completely lose. Although I’m a firm believe in the underlying tech and the long-term potential of crypto, it’s very risky. The biggest issue is that you can’t say today which cryptocurrencies (if any) will succeed. Although Bitcoin has the biggest name, there are many other cryptocurrencies competing for the market. So investing in Bitcoin now could be like investing in AltaVista in 1997. Sure the concept is good (search engines), but you backed the wrong horse. And if you are not really invested in researching and tracking the different crypto projects, you are just gambling, not investing. 

I still hold a number of cryptocurrencies, but if you are just speculating for a future payday, I’d recommend a very small percentage of your portfolio go to cryptocurrency, and instead stick with tried-and-true investments like real estate.

@Eric Sammons it's sound advice you offer, Eric. This money WAS going into three SFH but I believe these homes will drop in value in the next 24 mo. I was uncomfortable with the forced-timeline of the 1031 (even with the economic stimulus extensions.)

Bottom line: if Ken McElroy is right (and he is "righterer" than me on REI) then my best Real Estate play is to have ample cash to buy the REO in 2022. So, my extended thinking in service of that goal is to double down on BTC for 24 months and see how we're doing.

While I acknowledge things rarely go exactly as planned, if it did, I would have more cash in 2022 than I would if I bought RE now, and the REO prices will be better than they are now. So maybe instead of 3 SFH it becomes 5? 10? 20+ MF? Who knows. We'll see in 24 mo if my strategy plays out.

@Greg Moore florida is a judicial state so don’t expect foreclosures that soon or in big quantities. The last crash created ways for banks to help consumers and they are already offering help. Plus “foreclosure defense” which was created out of necessity in the last crash is very useful defense in a judicial state to delay delay delay then get a low interest rate modification.

I’m not saying we will not see a drop in values. Supply and demand will dictate. I do hope and anticipate that Florida again will be a big winner in migration from other states which Governors are acting like dictators. People who are able to work their business or job remotely will choose a vacation style locale to live like Florida where we have great weather, no state taxes, and a very low tax rate compared to other states.

With very low inventory levels due to covid-19, sellers have taken their homes off the market in large quantities. I’ve been in multiple bidding wars for clients. With rates dropping to under 3% now with extremely limited inventory any bump in demand will cause prices to increase not decrease but again it’s all economics that will determine value.

I also own some crypto and use cold storage. You can now even earn income on your crypto with cred, blockfi, and Celsius.

@Greg Moore

I watched that video the other day too, Precession and Lag, he explains it in the simplest of terms. I'm kind of shocked people are still ot there buying properties right now instead of putting some cash away. I was wondering if I was analyzing what is happening wrong, then I watched his video and was like wow, someone has the same thoughts I do. He's saying he is expecting the REOs to start appearing in 12-18 months, I was thinking 6-12. Either way, I'm not buying at the moment.

He released another video yesterday talking about raw materials, EFTs, stocks, physical gold, and mentioned a few other things. Basically, paper assets are the most risky during this time. I put Bitcoin into that category because of the swings it has, without being physically attached to anything. Yes, I understand the dollar isn't attached to anything either, and that it is also just fiat money, but it doesn't have the swings that Bitcoin has.

I could be completely wrong and maybe should be putting some into Bitcoin, but I'm just saving cash at the moment. If I were to buy anything once my reserves are where I want them, it would be gold to hedge against inflation, which we are already seeing in food.

But like I said, I could be analyzing it all wrong, and maybe a year from now wishing I had bought Bitcoin.

BTC and real estate are not alternatives for the same goals. BTC is highly volatile, has no cash flow, limited tax benefits, can't be leveraged, relatively passive, and is high risk/reward. Real estate is the polar opposite.

@Patricia Steiner what asset class presents better return than BTC over the past 12 months?

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People fear won’t they don’t understand, and in general the critical mass still does not understand BTC or blockchain. But that time is coming and I believe BTC will be a widely accepted asset class for even institutional money.

My personal opinion is that the return offered by BTC is commensurate with the risk. I also don’t advocate putting more than you are willing to lose on anything, but adding a little bit of BTC to your portfolio certainly isn’t a bad thing.

As far as security, BTC is very easy to own securely. Cold storage is one option but you can also look to use a hardware wallet such as the Ledger Nano S or X or even a trust service such as Gemini or Coinbase, which offer insurance on the funds held. Security is up to the user, not unlike how someone can store cash. Do you keep it on your windshield in plain site or locked away in a vault? The concepts are the same with BTC, you just need to educate and understand your options.

In summary I’m a huge advocate of owning BTC as long as you are looking to hold it, have the stomach to withstand the volatility, and have free cash flow to invest in it. Dollar cost average your way in and enjoy the ride!

one last note, owning BTC or any other crypto asset is not an “in lieu of” decision. It should simply be treated as a means to enhance the diversity of your portfolio. Take your risk tolerance, time horizon, and investment objectives into consideration before deciding what percentage of your portfolio to allocate to cryptocurrency. Always buyer beware, there are scam coins out there. Do your research and consider staying in the top 10 by market cap at first. Happy hunting and good luck.

Cheers!

BTC should be thought of as a call option on the reasonable chance that over the longer term the endless Fed QE/not-QE will debase fiat money including the almighty US Dollar.  Gold/silver falls into that category as well and is more stable, has a long history of value retention and can't be hacked or generated from a computer.  So if you are chicken little like me most of my investments outside of RE is in Gold, with a tiny % in BTC (< 1%).

Btc is the biggest ride on hopeium I have ever seen.

I don’t even know how you can begin to tell others to invest into btc. It’s just a volatile and speculative asset no has no grounds to stand on. It’s always the, you don’t understand btc/block chain OR using PAST DATA to be like look, super shiny and you missed out. Ever heard of FOMO? It was crazy, I used to live in SF and everyone and their mother was investing in btc. My friend came and said, you should invest in btc, my whole office is. Everyone from tech workers to high school students.

At least RE and stocks have a very, very long history of good returns not just 10 years. This is not to say bitcoin can’t go up. It sure can. But this is the first inning and I’m not going to place the best on which team is going to win right now. If, huge if, is around to stay, I’m sure there there will still be plenty of opportunities to make money in the metaphorical 3/4th inning. Being part of the first mover comes with its risks and rewards.

The idea of blockchain, the very little I know about it, i think is super great.

I dont know many retailers accepting bitcoin and the few that do, I wonder if the keep btc on the books or convert it to cash at the time of purchase.

The only major use of bitcoin I know is to buy drugs.

And question. Do you invest in stocks outside of maybe a 401k/ira?

@Steven Ko yes I have a very diversified portfolio with a mix commensurate to my risk profile. It's probably a little heavy in RE (according to my Financial Advisor), but annuities, insurance, 401k, gold, ESPP, and have a Day Trading account that is performing at 66% this year are all part of the mix. I didn't own Bitcoin until March. I snagged some at the drop and have been dollar-cost-averaging my way in to so that account is closer to 100% returns at the moment. I'm looking forward to getting back to REI, but I'm going to be patient and watch for the right deals — even if it's 2-3 years out.

I could understand most people here are into more conservative investments. I've been into crypto since about 2016. Look into holding your BTC in crypto.com (website & app) and you can "earn" BTC by holding, also called staking. That way your BTC is making you more BTC. And when is comes to crypto, you don't need much to reap huge rewards in the next few years or decades. Let me know if you have questions and I'd be happy to talk crypto (or real estate of course) anytime!

The "right" amount of Bitcoin in your portfolio is; whatever you can burn to ash and not mind losing it. Are bitcoin transactions even real anymore? Were they ever? Aren't they a completely manipulated investment with zero oversight? 

@Greg Moore honestly I haven't a clue what Bitcoin is. I have a hard enough time with stocks because there's so much potential for fraud, Bitcoin may as well be called Atari Bucks. "Give me $30,000 on Space Invaders, $20,000 on Pong, and $15,000 on Frogger."

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