All Forum Posts by: Jerry Shen

Brandon you have reached the exact crux of my question and why this situation is so frustrating. Everything you State is 100% true and a bit baffling

I have two definitions that I like personally...

My definition of wealth is that you can not work another day in your life and sustain your level of spending indefinitely. By that definition, I am wealthy. Financial freedom is another word for it. I think that this level of freedom is far more valuable than any exterior displays of "wealth" like cars and homes and jewelry. Time is the most valuable thing in the world. When you are financially free, you can spend your time on whatever you want and that's something no amount of money in the world can buy. It depends completely on one's ability to live on a subset of their net worth and to invest wisely (I generally agree with the 4% rule).

In the financial services world, there are firms that cater to what they call "ultra high net worth individuals". Typically, this is the level of wealth that not only gives you financial freedom but access to a level of services that most people are not even aware of. Things like 0.01% loans on your collateral to buy real estate with no money down. This is the level where wealth disparity really starts because things like tax planning and financing are so specialized that people at this level of wealth have a huge advantage over normal people in keeping and growing their wealth. I know quite a few people at this level and it's a different world. Typically, you need to have $50M in net worth to attain this level and some financial service providers will not talk to you unless you have $100M.

I'd love to be at this second level one day but if not that's fine by me. I don't think I would be any happier necessarily, people at this level of wealth really just see it as a video game.

Originally posted by @Jame V.:

Originally posted by @Jerry Shen:

1) There is a difficulty algorithm built into bitcoin so this scenario is impossible. Even after every bitcoin has been mined (in 2140) miners will still get transaction fees. The economic incentives to run bitcoin nodes are self-stabilizing.

2) Which government? Almost every developed nation has bitcoin regulations. It's impossible to regulate bitcoin itself but you can regulate at the exchanges when you convert to local currency. As far as the top few owning the majority of bitcoin, this is no more true than the top few in the world owning a high percentage of wealth. A lot of the analysis I've seen on this fails to point out that a lot of bitcoin addresses with a ton of bitcoin are actually owned by exchanges where they could potentially be shared among thousands of people. Volatility is also a function of total market size. On a percentage basis it has gotten way less volatile as it's gotten bigger, and the introduction of bitcoin futures has also significantly reduced its volatility

3) No retailers don't want to take bitcoin because no one will pay a $25 confirmation fee to buy $25 worth of stuff on amazon.

I'm talking about the electricity costs of mining and transactions.  If there is no change (in the efficiency of algorithms, or upgrade of hardware/tech), all these miners keeping bitcoin alive will pull out because it will cost too much to run.  In the long run it will stabilize, but energy cost to reward gap is getting closer, faster.

Good point about controlling the exchange rate, I'll look more into that

If by wealth you mean cash reserves, this is regulated by government. These top cash reserve holders can not greatly change, by any means, the value of the dollar.  

Bitcoin looks more volatile than ever IMO.

Ya...And also it'll take 2 days for a transaction  😂

The difficulty algorithm directly affects electricity costs. If value of bitcoin decreases, that means difficulty decreases, which means electricity costs also decrease.

I'm not comparing bitcoin to cash, hardly any wealthy individuals keep their net worth in cash. I'm talking about other assets and commodities. Do you think average people own a lot of corn futures? Of course not. Most of the world's wealth (assets) are owned by very few. My position is that bitcoin is not a currency, it is a commodity or security, which the SEC has also agreed with. Usually, when a security is owned by a few large players, there is a built in incentive to keep prices high. So centralized control of assets actually runs counter to what you are describing. It's common sense. Take an extreme example and say one person owned 50% of all bitcoin. If he wants to unload all at once, the price would tank so he would never be able to get the price he wants. 

You can see this play out in real estate as well. In tier 1 markets like NY and San Francisco the real estate is owned by a few wealthy individuals and institutions, most retail investors (like the majority of BP) are simply priced out. Yet, the prices are far higher (even relative to income and other factors) than places like the midwest where RE ownership is much more spread out.

Bitcoin's volatility is decreasing significantly over time, it's not debatable volatility is accurately measurable for any financial asset. See here: https://www.buybitcoinworldwide.com/volatility-ind...

My prediction is that CME futures trading which opens Dec 18 will reduce volatility even further. When you can arbitrage between futures and the underlying asset financial incentives basically serve to keep volatility down.

Originally posted by @Noel Challenger:

Most likely the lending institutions would not accept bitcoin as collateral for the loan due to the volatility of the asset. You would have better luck in negotiating directly with the seller of the property to see if they would accept bitcoin as consideration for their house. You would then weigh out a lower closing price due to the bitcoins and then you would use the lower price as the principal for the loan.

 See post above, they already do accept my bitcoin as collateral. Hasn't been an issue for any property I've purchased.

Originally posted by @Jame V.:

Some abstract things to think about:

When the cost of mining and transacting bitcoin surpasses its value...it’s over. All those expensive setups will go down.

It’s not regulated by government, which is a good and very bad thing. The top “very few” own the top “very high” percent of bitcoin. So instead of the market in the hands of the govnt (who is slowly devaluing he dollar), it’s in he hands of a few people, who can make this market as volatile as they want. When one sells, you can bet that the rest will sell.

Amazon and no other large retailer wants to hold bitcoin because they’ll hold a large chunk of the market

1) There is a difficulty algorithm built into bitcoin so this scenario is impossible. Even after every bitcoin has been mined (in 2140) miners will still get transaction fees. The economic incentives to run bitcoin nodes are self-stabilizing.

2) Which government? Almost every developed nation has bitcoin regulations. It's impossible to regulate bitcoin itself but you can regulate at the exchanges when you convert to local currency. As far as the top few owning the majority of bitcoin, this is no more true than the top few in the world owning a high percentage of wealth. A lot of the analysis I've seen on this fails to point out that a lot of bitcoin addresses with a ton of bitcoin are actually owned by exchanges where they could potentially be shared among thousands of people. Volatility is also a function of total market size. On a percentage basis it has gotten way less volatile as it's gotten bigger, and the introduction of bitcoin futures has also significantly reduced its volatility

3) No retailers don't want to take bitcoin because no one will pay a $25 confirmation fee to buy $25 worth of stuff on amazon.

@Matt R. interesting I didn't know that but I guess it makes sense.

@charles banks already recognize my bitcoin not just as collateral but as LIQUIDITY so that’s not an issue at all I’ve bought multiple large commercial properties this way. My goal is to use bitcoin as DOWNPAYMENT which I have not found a bank to do that. To answer your second question bitcoin is the first currency that does not require a central authority to keep everyone’s balance and insure funds are not double spent. It does this using a technology called the block chain which is pretty revolutionary. Any time you transact with a traditional currency it goes through a very complex series of checks that ultimately are centrally controlled by some government. Bitcoin has no such central authority. This means that it is impossible to confiscate, shut down or ban. Your example of separate banks just sounds like a bunch of different currencies not a single decentralized currency that you can transact across national borders.

@rick taxed at short term cap gains I intend on keeping till 1 year mark Your other questions I’ve answered elsewhere in the thread

Matt R. LTC isn’t accepted widely enough if it ever gets to bitcoin scale we will ser

Cary Plotkin great points all around you are one of the few who seems to actually understand my dilemma :-) FYI volatility is down considerably since CBOE futures started trading. Bitcoin prices and future prices seem to be linked now so it’s basically been at 16.5K for the 5 days or so since trading opened. Volumes are low so I think it may be due to the fact that people are arbitraging between futures and coins and there are mandatory trade shut offs if the future price changes 20% in a given day I use Coinbase curious where you got your 780K a year from. You need to contact support and ask for increased limits. They will look at your trade volume and/or holdings and give you a higher limit. I can transfer $5M in one day and as far as I know there is no yearly limit. Your exchange risk is definitely still there I have all of my coins in cold storage I only put them on an exchange when I want to liquidate that same day. It only takes one rogue employee to run off with private keys. That’s probably the suckiest thing about crypto and what will make it very difficult as a currency. Then again, it’s far harder to secure large amounts of gold and silver so there’s that.