Rental Property Investor · Tampa, FL · Member since 2019 · 128 posts · 166 votes
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)?
I've avoided bitcoin ever since Mt. Gox went under.
Before that I had been mining bitcoin, which in itself is almost like an arms race. As soon as you've recovered the costs of your mining equipment, it is practically obsolete and needs to be replaced.
I had been storing a large portion of my bitcoin at mt. gox, and had requested they wire a large portion of it to me about a month before they went under. They stalled around and kept telling me they were working on it, right up until they went bankrupt. I never got any of the cash or bitcoin back.
there was that whole bitcoin price manipulation thing that went along with them being hacked.
After that, I've avoided crypto and looked more to physical gold and silver instead.
Bitcoin is a payment technology and a store of value. To understand why it is an innovative payment technology, you have to understand what a ledger is--an easy example is your monthly bank account. When you transfer money between two parties such as between a merchant like Walmart and a customer like yourself, there are about 8-12 private ledgers that must be credited and debited as the funds move through the current financial system which was developed decades ago. All of these updates to ledgers require people technology etc. All of these add to costs. So, there's a minimum cost to doing a conventional transaction. Bitcoin eliminates private ledgers during transactions and instead replaces it with a public ledger that sits in the Internet. So, at the most basic level, Bitcoin is an innovation over how money gets moved. If none of this makes any sense to you, maybe watch a Youtube video on it or something. If you're still paying attention, lets look at store of value.
The reason why Bitcoin came to be primarily conceived of as a store of value was based on the premise that it was like a decentralized currency. That's a problem to start with because a currency is an inherently governmental instrument--always has been, always will be. The problem with government currencies is understanding what they are based on. In the USA, it used to be gold but 50 years ago that switched to the overall economy of the USA. Some have said it is based on oil or energy over the years--term petro-dollars came into existence....with the basic idea being our economy was based on the strategic use of fuel to do things like build buildings, roads, houses, cars, etc. When fuel prices rose, it wrecked the economy --hence the strong correlation between cheap fuel and dollar value. Anyway, the basic point is when governments aren't perceived by the international market as being substantial, currency values decline. If political regimes **** up their economy and try to solve the problem by printing money, the currency hugely devalues as it's done in lots of latin American countries like Argentina, etc. Greece, Puerto Rico also come to mind. China too...
When you understand that the value of any unit of currency is derived from the perceived underlying economic value in a particular country, you are at stage 1 of understanding why Bitcoin is an alternative. The basic idea is that government based currencies are inherently arbitrary. For example in the USA, 25% of the dollars in existence have come into existence in the last year. That doesn't just de-value the dollar at large but everything based on the dollar.
The belief is that Bitcoin is an alternative to these fluctuations in value of the dollar or other currencies. Imagine you lived in Argentina or Venezuela and hedged your bank account in Bitcoin. Pretty good chance you would have weathered those ongoing storms. Is that going to stand the test of time? Perhaps. Perhaps not. But what Bitcoin has at the moment is the network effect and the growing perception of being a permanent player in the arena.
What's the value of Bitcoin? Depends on if you value it similar to a publicly traded company of similar ilk (ie, PayPal, Visa, Western Union). Lots of metrics to draw on here for comparison purposes--number of accounts, users, wallets, transactions, etc. A whole host of transactions you can look up and compare. What about revenue? This is the key to understanding why people who say Bitcoin isn't based on anything are fundamentally incorrect. In order to complete a transaction, a third party called a miner processes it on behalf of the sender and receiver. For this service, they get a fee. For example, in November 2020, bitcoin miners earned $500Million. Does that sound to you like Bitcoin is based on nothing? I didn't think so. There's plenty of ways to use traditional valuations to peg what's going on with Bitcoin. People are too stupid to look beyond the sound bytes, which is fine because it makes it more lucrative for others--same as any venture--similar to real estate.
What's on the horizon? Take a close look at what's going on in Wyoming. They are putting regulatory framework in place that essentially bridges crypto currencies with traditional banking systems. Why is that important? It makes it possible to do things like purchase real estate with Bitcoin. You know all that stuff you do at closing with title companies? Imagine doing it with Bitcoin instead (not everything of course). There's another trend that's important to keep an eye on as well. Tokenization of securities. What does that mean? It means digitizing a security like a stock or a share in a business. The idea here is almost bigger than Bitcoin because it could lead to the enormous proliferation of what gets securitized. I can't underscore how important this is and maybe in a decade someone will dig up this post when researching the origins of wider awareness of what it means. If you can buy and sell a share of anything practically through a digital means, there will need to be a clearinghouse currency. That's where Bitcoin can again find a strategic footing in the future. Also these tokens will be trade-able 24/7. There will be tokens of every stock on every stock market that you will be able to trade 24/7.
What's left to solve? When I left the payments industry back in 2000, I kept watching the market for a method of performing a micro transaction. If your asset costs a nickel, but a credit card transaction costs at least a quarter, a micro transaction is not economically viable. But there are a gazillion things that could sell today for a nickel that can't absent a currency that delivers on this micro transaction need. Litecoin is a step ahead of Bitcoin. Other crypto currencies are also a step ahead. Hbar is one I bought recently. Nothing big--just a little $100 bet. In general, I don't trade in shitcoins. But I try to look at what's real and what's not. HTH someone out there.
I do not own any bit coin. I love what real estate can do for your net worth not a fan of managing property anymore and have moved most of my net worth into Whole life policy's infinite banking. Then this week I read one of Mutual company's I use is buying what BITCOIN it Makes me think.
169-Year-Old Insurer MassMutual Invests $100 Million In Bitcoin
Massachusetts Mutual Life Insurance Co. has purchased $100 million in Bitcoin for its general investment fund, the latest mainstream firm to dabble in digit assets.
The mutual insurer also acquired a $5 million minority equity stake in NYDIG, a subsidiary of Stone Ridge that provides cryptocurrency services to institutions, according to a statement. NYDIG, which already keeps more than $2.3 billion in crypto assets for clients, will provide custody services for MassMutual’s Bitcoins.
MassMutual, which has been around since 1851, is the latest company to invest in the largest cryptocurrency. MicroStrategy Inc. has expanded its investments into the coin, and Square Inc. has poured money into the world’s most popular cryptocurrency as well amid talk of growing institutional adoption and demand.
The investment in Bitcoin will represent 0.04% of the general investment account of nearly $235 billion as of Sept. 30, MassMutual said.
Bitcoin has more than doubled in price this year, and hit an all-time high earlier this month. Advocates say that Bitcoin is a kind of digital gold, likely to retain its value during times of turmoil and as a hedge against inflation despite the historical volatility of the cryptocurrency.
Ironically, I have seen most of my clients pulling their money out of numerous other investment sources with the intent of dipping into real estate. The RE market around the country is built to succeed, especially in the Rock County, Wisconsin market.
Bitcoin is 3 things, programmable money, store of value and yes a capital asset as you can earn interest on it and now get a loan on it.
Whether you want to own it has very little to do with real estate although some are getting loans on it to buy real estate now. Recent survey claimed 73% of millionaires either own it or wanted to own it. The train is officially leaving the station with new (old) institutional money pouring in (600 billion) according to JP Morgan. Good luck!
Whether you're a crypto expert or don't understand it at all, Bitcoin is a speculative investment. It's real value lies in it's use as a transaction medium, not a store of value. Any price fluctuations are solely the result of speculative trading activity.
Therefore, if you want to buy bitcoin, the amount you allocate to it should be the portion of your portfolio that you would normally allocate to speculative investments. Which for many people is zero.
I do own bitcoin but it's a very small portion of my portfolio
@Steven Ko I think the only major use of Fiat is to buy drugs now too. I cant even use cash at many places anymore due to Covid. Even before Covid, you cant go to small stores with large bills because they don't accept 50's and 100's anymore due to illegal counterfeiting. Also Fiat has no grounds to stand on either. There is no gold to back it up anymore... its just a crappy piece of cloth/paper that is built up on "hopeium" as you would say.
I had estimated before, that if 1% of pensions got in, we would see $500B flow into BTC. The Chase analyst estimating $600B globally, gives a broader snapshot, however, I believe this is coming. Let's see how it plays out.
To put things into perspective of how dominant Bitcoin is, if you had invested $1,000 into each of these 10 years ago, here is what you would have today:
Google $6k
Facebook $9k
Amazon $22k
Netflix $34k
Tesla $159k
Bitcoin $237 Million
Like I said, I have seen nothing like it. Let's see what happens
Whether you're a crypto expert or don't understand it at all, Bitcoin is a speculative investment. It's real value lies in it's use as a transaction medium, not a store of value. Any price fluctuations are solely the result of speculative trading activity.
Therefore, if you want to buy bitcoin, the amount you allocate to it should be the portion of your portfolio that you would normally allocate to speculative investments. Which for many people is zero.
I do own bitcoin but it's a very small portion of my portfolio
The insurance companies and insitutions buying 100 - 600 mil pops recently at 19k, are they making those moves as a store of value play or trading spec? Maybe both idk. Being that it also can earn interest and act as collateral also positions it beyond just the money transmission utilty it appears. It can be liquidated, traded and transferred very easily is still part of its value though I agree.
Have to admit to recently investing in BTC and ETH, only as a point of diversification between REI and traditional stock, etc. Only put 1% of my portfolio into it, so more of risk/reward approach.
I have issues with BTC in general. People claim it is a great hedge against inflation / fiat currency, but what about gold or silver which have been used as mediums of exchange and stores of value since ancient times.
Also, Bitcoin can't be "hacked" but the exchanges can and value can disappear or be stolen. There is no FDIC or SIPC for Bitcoin.
Moreover, what is Bitcoin really backed by? Trust - much like the US Dollar. However, we need to remember that the US Dollar is backed by the US economy and military! Bitcoin is basically just "internet points" .
Lastly, Bitcoin isn't even the "best" cryptocurrency available from a technology perspective - there are much better alternatives - it is just the "household" name.
We are real estate investor here at Bigger Pockets, not speculators. We invest in properties that YIELD. While real estate, companies, bonds, stocks, farmland, etc. all do Bitcoin, Gold, Silver, etc. do not! Something crucial to remember.
I have issues with BTC in general. People claim it is a great hedge against inflation / fiat currency, but what about gold or silver which have been used as mediums of exchange and stores of value since ancient times.
Also, Bitcoin can't be "hacked" but the exchanges can and value can disappear or be stolen. There is no FDIC or SIPC for Bitcoin.
Moreover, what is Bitcoin really backed by? Trust - much like the US Dollar. However, we need to remember that the US Dollar is backed by the US economy and military! Bitcoin is basically just "internet points" .
Lastly, Bitcoin isn't even the "best" cryptocurrency available from a technology perspective - there are much better alternatives - it is just the "household" name.
We are real estate investor here at Bigger Pockets, not speculators. We invest in properties that YIELD. While real estate, companies, bonds, stocks, farmland, etc. all do Bitcoin, Gold, Silver, etc. do not! Something crucial to remember.
I hear ya, although bitcoin currently yields 7% on deposits in US regulated KYC insured upto 100 mil. With over a billion deposited at this moment, it is an alternative 1 to 2% deal for institutions perhaps.
Bitcoin broke 20K and is currently closing in on 21K. History shows that we could see a 25% pullback in the short term, however, with all of the big money from strong hands coming in, volatility will stabilize. And as the market cap grows, volatility will stabilize.
A UK fund manager, Ruffer, reduced it's positions in gold in favor of Bitcoin in the amount of $675 Million.
Bitcoins market cap sits at $385 Billion at this moment.
Self custody is the best way still in my opinion. However, just like the early days of the internet or anything for that matter, things get better because improvements are made. BlockFi, Fidelity, and others, offer cold storage custody. Who would have given up on the internet when we had 14k dial up and it took 3 minutes to watch a 30 second "multi media" clip? Or when it took an hour to download 15mb from Napster.
Gold doesnt have the military behind is. And gold is being dumped in favor of BTC. And BTC may be the best for the simple fact that NO ONE owns it.
Gold doesnt have the military behind is. And gold is being dumped in favor of BTC. And BTC may be the best for the simple fact that NO ONE owns it.
That's true about gold, but it's worth pointing out that gold is still in a very strong fundamental position. It's just that Bitcoin's continued rise to the stage is forcing gold owners to consider it for an allocation. But they should both succeed for similar reasons. And you're right about the dollar. The dollar-oil-military triangle is the foundation upon which the entire global monetary system rests. It's, at the least, backed for now.
Wow - the Crypto Gods must have been following our thread! Bitcoin up to it's all-time high today ($20.8k at the time of this post... not to be confused with $6k per coin when this thread started in May).
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