Bitcoin as an investment - Revision history

AllEd01: grammar, spelling

2022-09-26T09:13:29Z

grammar, spelling

← Older revision		Revision as of 09:13, 26 September 2022
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	# There is a [[Controlled supply\|fixed supply]] of bitcoins. There will never be more than 21 million bitcoins.		# There is a [[Controlled supply\|fixed supply]] of bitcoins. There will never be more than 21 million bitcoins.
	# Because of bitcoin's [[Bitcoin as a medium of exchange\|useful properties as a medium of exchange]], demand is growing or at least staying the same.		# Because of bitcoin's [[Bitcoin as a medium of exchange\|useful properties as a medium of exchange]], demand is growing or at least staying the same.
	# Fixed supply and growing demand ~~implies~~ a growing price.		# Fixed supply and growing demand imply a growing price.

	==Store of value==		==Store of value==
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	* '''Cannot be debased.''' Limited to [[Controlled supply\|21 million coins]] only.		* '''Cannot be debased.''' Limited to [[Controlled supply\|21 million coins]] only.
	* '''No storage cost.''' Bitcoins take up no physical space, [[Storing bitcoins\|any amount can be stored]].		* '''No storage cost.''' Bitcoins take up no physical space, [[Storing bitcoins\|any amount can be stored]].
	* '''Easy to hide.''' Can be stored encrypted on a paper, on disk, or even [[Brainwallet\|memorized in your brain]].		* '''Easy to hide.''' Can be stored encrypted on paper, on disk, or even [[Brainwallet\|memorized in your brain]].
	* '''Can be made [[Anonymity\|anonymous]]''', meaning nobody would even know you own bitcoins or how many.		* '''Can be made [[Anonymity\|anonymous]]''', meaning nobody would even know you own bitcoins or how many.
	* '''Easy to protect.''' Can be made impossible to steal or seize by any thief, government or bank.		* '''Easy to protect.''' Can be made impossible to steal or seize by any thief, government or bank.
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	===Difficulty with storing and theft===		===Difficulty with storing and theft===

	Because bitcoin is a digital asset, it can be un-intuitive to store safely. Users should definitely [[Ways to store Bitcoins\|read the guides]] for correctly storing bitcoins. Historically many people have lost their coins but with proper understanding the risks can be eliminated. If your bitcoins do end up lost or stolen then there's almost certainly nothing that can be done to get them back.		Because bitcoin is a digital asset, it can be un-intuitive to store safely. Users should definitely [[Ways to store Bitcoins\|read the guides]] for correctly storing bitcoins. Historically many people have lost their coins but with proper understanding, the risks can be eliminated. If your bitcoins do end up lost or stolen then there's almost certainly nothing that can be done to get them back.

	===Preserving these properties===		===Preserving these properties===

	Bitcoin is a software project. There's an obvious question of how ~~it's~~ useful properties can be maintained. Couldn't some programmer simply edit the source code to create more than 21 million bitcoins? The answer turns out to be no. Bitcoin is secured by strong cryptography and game theory, and ~~it's~~ properties are very hard or impossible to change.		Bitcoin is a software project. There's an obvious question of how its useful properties can be maintained. Couldn't some programmer simply edit the source code to create more than 21 million bitcoins? The answer turns out to be no. Bitcoin is secured by strong cryptography and game theory, and its properties are very hard or impossible to change.

	See also:		See also:

	* [[Myths#Miners, developers or some other entity could change Bitcoin's properties to benefit themselves]]		* [[Myths#Miners, developers, or some other entity could change Bitcoin's properties to benefit themselves]]
	* [[Principles of Bitcoin]]		* [[Principles of Bitcoin]]
	* [[Economic majority]]		* [[Economic majority]]
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	===Volatility===		===Volatility===

	Bitcoin is much more volatile than most other assets, including most volatile commodities. This can be be good when the price is rising but may hurt the dollar value of your holdings when the price is falling. One way to deal with this is to only hold a certain percentage of your savings in bitcoin and the rest in more stable assets, but does not eliminate the risk altogether.		Bitcoin is much more volatile than most other assets, including the most volatile commodities. This can be good when the price is rising but may hurt the dollar value of your holdings when the price is falling. One way to deal with this is to only hold a certain percentage of your savings in bitcoin and the rest in more stable assets but does not eliminate the risk altogether.

	You could hedge yourself with Bitcoin futures or Bitcoin options, at the cost of accepting some counterparty risk. Most of the Bitcoin futures and options exchanges are centralized and you have to trust them with your coins. This however allows you to use your coins for payment and not worry about their dollar value. When using options, you also can enjoy the upside (at the cost of the option).		You could hedge yourself with Bitcoin futures or Bitcoin options, at the cost of accepting some counterparty risk. Most of the Bitcoin futures and options exchanges are centralized and you have to trust them with your coins. This however allows you to use your coins for payment and not worry about their dollar value. When using options, you also can enjoy the upside (at the cost of the option).

FilletMignon: /* Volatility */

2019-10-05T16:54:14Z

Volatility

← Older revision		Revision as of 16:54, 5 October 2019
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	===Volatility===		===Volatility===

	Bitcoin is much more volatile than ~~some~~ other assets. This can be good when the price is rising but ~~bad~~ when the price is falling. One way to deal with this is to only hold a certain percentage of your savings in bitcoin and the rest in more stable assets. You could also deal with it by studying bitcoin's fundamentals deeply so that temporary price drops do not scare you into selling low. Investing with a dollar-cost-averaging strategy can also reduce the effects of volatility<ref>https://breadwallet.com/blog/how-invest-bitcoin-without-getting-hurt-volatility/</ref>.		Bitcoin is much more volatile than most other assets, including most volatile commodities. This can be be good when the price is rising but may hurt the dollar value of your holdings when the price is falling. One way to deal with this is to only hold a certain percentage of your savings in bitcoin and the rest in more stable assets, but does not eliminate the risk altogether.

			You could hedge yourself with Bitcoin futures or Bitcoin options, at the cost of accepting some counterparty risk. Most of the Bitcoin futures and options exchanges are centralized and you have to trust them with your coins. This however allows you to use your coins for payment and not worry about their dollar value. When using options, you also can enjoy the upside (at the cost of the option).

			You could also deal with it by studying bitcoin's fundamentals deeply so that temporary price drops do not scare you into selling low. Investing with a dollar-cost-averaging strategy can also reduce the effects of volatility<ref>https://breadwallet.com/blog/how-invest-bitcoin-without-getting-hurt-volatility/</ref>. Also, over time, as your holdings grow, the impact of the new purchases is smaller and the volatility affects your increasing holdings.

	===Uncorrelated asset===		===Uncorrelated asset===

MeshCollider: Reverted edits by Amandaphiffer (talk) to last revision by Belcher

2018-03-11T00:07:57Z

Reverted edits by Amandaphiffer (talk) to last revision by Belcher

← Older revision		Revision as of 00:07, 11 March 2018
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	* [[Irreversible Transactions]]		* [[Irreversible Transactions]]
	* [[Controlled supply]]		* [[Controlled supply]]
	* [https://coinjolt.com/should-you-invest-in-bitcoin/ Should You Invest in Bitcoin?]

	==References==		==References==

Amandaphiffer: /* See also */

2018-03-10T21:17:00Z

Amandaphiffer: /* See also */

2018-03-10T21:16:49Z

Belcher: /* Preserving these properties */ added paragraph about altcoins not affecting the supply of bitcoin

2018-01-15T21:32:23Z

Preserving these properties: added paragraph about altcoins not affecting the supply of bitcoin

← Older revision		Revision as of 21:32, 15 January 2018
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	* [[Principles of Bitcoin]]		* [[Principles of Bitcoin]]
	* [[Economic majority]]		* [[Economic majority]]

			Some people say that although the supply of bitcoin is limited, an infinite amount of other cryptocurrencies (altcoins) can be created. This is fundamentally confused reasoning because bitcoin and altcoins are different currencies, as bitcoin wallets would reject altcoin payments and vis versa. Claiming altcoins dilute the supply of bitcoins is like saying hyperinflation of the Venezuelan currency dilutes the supply of US Dollars.

	===Volatility===		===Volatility===

Belcher: /* Store of value */ added link to storing bitcoins page

2017-11-13T22:07:41Z

Store of value: added link to storing bitcoins page

← Older revision		Revision as of 22:07, 13 November 2017
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	* '''Cannot be debased.''' Limited to [[Controlled supply\|21 million coins]] only.		* '''Cannot be debased.''' Limited to [[Controlled supply\|21 million coins]] only.
	* '''No storage cost.''' Bitcoins take up no physical space, any amount can be stored.		* '''No storage cost.''' Bitcoins take up no physical space, [[Storing bitcoins\|any amount can be stored]].
	* '''Easy to hide.''' Can be stored encrypted on a paper, on disk, or even [[Brainwallet\|memorized in your brain]].		* '''Easy to hide.''' Can be stored encrypted on a paper, on disk, or even [[Brainwallet\|memorized in your brain]].
	* '''Can be made [[Anonymity\|anonymous]]''', meaning nobody would even know you own bitcoins or how many.		* '''Can be made [[Anonymity\|anonymous]]''', meaning nobody would even know you own bitcoins or how many.

Belcher: /* Store of value */ rewrote the list of 'store of value' properties

2017-09-22T21:17:28Z

Store of value: rewrote the list of 'store of value' properties

← Older revision		Revision as of 21:17, 22 September 2017
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	Bitcoin has useful properties to make it a good store of value. It has been described as a "swiss bank account in your pocket"<ref>https://www.reddit.com/r/Bitcoin/comments/4a2l55/obama_meme_bitcoin_is_like_having_a_swissbank/</ref>.		Bitcoin has useful properties to make it a good store of value. It has been described as a "swiss bank account in your pocket"<ref>https://www.reddit.com/r/Bitcoin/comments/4a2l55/obama_meme_bitcoin_is_like_having_a_swissbank/</ref>.

	* ~~As mentioned before, the~~ [[~~controlled~~ supply]] ~~means your held bitcoins can't be debased~~.		* '''Cannot be debased.''' Limited to [[Controlled supply\|21 million coins]] only.
	* ~~They~~ take up no physical space so any amount can be stored.		* '''No storage cost.''' Bitcoins take up no physical space, any amount can be stored.
	* ~~You do not need to pay anything for [[Ways to store Bitcoins\|storing the Bitcoins]].~~		* '''Easy to hide.''' Can be stored encrypted on a paper, on disk, or even [[Brainwallet\|memorized in your brain]].
	* They are easy to hide. ~~They can~~ be stored encrypted ~~in your computer,~~ on a paper ~~backup~~ or even [[Brainwallet\|memorized in your brain]].		* '''Can be made [[Anonymity\|anonymous]]''', meaning nobody would even know you own bitcoins or how many.
	* ~~The transactions can~~ be made [[Anonymity\|anonymous]], meaning nobody would even know you own bitcoins or how many.		* '''Easy to protect.''' Can be made impossible to steal or seize by any thief, government or bank.
	* ~~Because of this they can~~ be made impossible to steal or seize by any thief, government or bank.		* '''Censorship resistant.''' The coins can be [[Bitcoin as a medium of exchange\|sent anywhere in the world through the internet without being blocked]].
	* The coins can be [[Bitcoin as a medium of exchange\|sent anywhere in the world without being blocked]].		* '''No counterparty risk.''' Coins are in your possession, if you keep the [[private key]] of a bitcoin secret and the transaction has enough [[Confirmation\|confirmations]], then nobody can take them from you no matter for what reason, no matter how good the excuse, no matter what.

	Even if these properties are not useful to you, they may be useful to others which would benefit you by increasing the value of your held bitcoins.		Even if these properties are not useful to you, they may be useful to others which would benefit you by increasing the value of your held bitcoins.

	It's important to realize that if you keep the [[private key]] of a bitcoin secret and your transaction has enough [[Confirmation\|confirmations]], then nobody can take the bitcoin from you no matter for what reason, no matter how good the excuse, no matter what.

	==Useful notes==		==Useful notes==

Belcher: /* Store of value */ typo with broken link

2017-07-28T14:13:08Z

Store of value: typo with broken link

← Older revision		Revision as of 14:13, 28 July 2017
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	* You do not need to pay anything for [[Ways to store Bitcoins\|storing the Bitcoins]].		* You do not need to pay anything for [[Ways to store Bitcoins\|storing the Bitcoins]].
	* They are easy to hide. They can be stored encrypted in your computer, on a paper backup or even [[Brainwallet\|memorized in your brain]].		* They are easy to hide. They can be stored encrypted in your computer, on a paper backup or even [[Brainwallet\|memorized in your brain]].
	* The transactions can be made [[anonymous]], meaning nobody would even know you own bitcoins or how many.		* The transactions can be made [[Anonymity\|anonymous]], meaning nobody would even know you own bitcoins or how many.
	* Because of this they can be made impossible to steal or seize by any thief, government or bank.		* Because of this they can be made impossible to steal or seize by any thief, government or bank.
	* The coins can be [[Bitcoin as a medium of exchange\|sent anywhere in the world without being blocked]].		* The coins can be [[Bitcoin as a medium of exchange\|sent anywhere in the world without being blocked]].

Belcher: created page

2017-07-28T14:12:24Z

created page

New page

This page discusses the case for owning bitcoin as an investment and store of value.

==The case for investing==

# There is a [[Controlled supply|fixed supply]] of bitcoins. There will never be more than 21 million bitcoins.
# Because of bitcoin's [[Bitcoin as a medium of exchange|useful properties as a medium of exchange]], demand is growing or at least staying the same.
# Fixed supply and growing demand implies a growing price.

==Store of value==

Bitcoin has useful properties to make it a good store of value. It has been described as a "swiss bank account in your pocket"<ref>https://www.reddit.com/r/Bitcoin/comments/4a2l55/obama_meme_bitcoin_is_like_having_a_swissbank/</ref>.

* As mentioned before, the [[controlled supply]] means your held bitcoins can't be debased.
* They take up no physical space so any amount can be stored.
* You do not need to pay anything for [[Ways to store Bitcoins|storing the Bitcoins]].
* They are easy to hide. They can be stored encrypted in your computer, on a paper backup or even [[Brainwallet|memorized in your brain]].
* The transactions can be made [[anonymous]], meaning nobody would even know you own bitcoins or how many.
* Because of this they can be made impossible to steal or seize by any thief, government or bank.
* The coins can be [[Bitcoin as a medium of exchange|sent anywhere in the world without being blocked]].

Even if these properties are not useful to you, they may be useful to others which would benefit you by increasing the value of your held bitcoins.

It's important to realize that if you keep the [[private key]] of a bitcoin secret and your transaction has enough [[Confirmation|confirmations]], then nobody can take the bitcoin from you no matter for what reason, no matter how good the excuse, no matter what.

==Useful notes==

===Difficulty with storing and theft===

Because bitcoin is a digital asset, it can be un-intuitive to store safely. Users should definitely [[Ways to store Bitcoins|read the guides]] for correctly storing bitcoins. Historically many people have lost their coins but with proper understanding the risks can be eliminated. If your bitcoins do end up lost or stolen then there's almost certainly nothing that can be done to get them back.

===Preserving these properties===

Bitcoin is a software project. There's an obvious question of how it's useful properties can be maintained. Couldn't some programmer simply edit the source code to create more than 21 million bitcoins? The answer turns out to be no. Bitcoin is secured by strong cryptography and game theory, and it's properties are very hard or impossible to change.

See also:

* [[Myths#Miners, developers or some other entity could change Bitcoin's properties to benefit themselves]]
* [[Principles of Bitcoin]]
* [[Economic majority]]

===Volatility===

Bitcoin is much more volatile than some other assets. This can be good when the price is rising but bad when the price is falling. One way to deal with this is to only hold a certain percentage of your savings in bitcoin and the rest in more stable assets. You could also deal with it by studying bitcoin's fundamentals deeply so that temporary price drops do not scare you into selling low. Investing with a dollar-cost-averaging strategy can also reduce the effects of volatility<ref>https://breadwallet.com/blog/how-invest-bitcoin-without-getting-hurt-volatility/</ref>.

===Uncorrelated asset===

Although bitcoin is volatile, it is mostly uncorrelated with any other asset classes<ref>http://www.signalplot.com/what-is-bitcoins-correlation-with-other-financial-assets/</ref>. This means bitcoin can reduce the overall volatility as part of a well-diversified portfolio.

==See also==
* [[Bitcoin as a medium of exchange]]
* [[Principles of Bitcoin]]
* [[Irreversible Transactions]]
* [[Controlled supply]]

==References==
<references />

[[Category:Economics]]

← Older revision		Revision as of 22:07, 13 November 2017
Line 12:		Line 12:

	* '''Cannot be debased.''' Limited to [[Controlled supply\|21 million coins]] only.		* '''Cannot be debased.''' Limited to [[Controlled supply\|21 million coins]] only.
	* '''No storage cost.''' Bitcoins take up no physical space, any amount can be stored.		* '''No storage cost.''' Bitcoins take up no physical space, [[Storing bitcoins\|any amount can be stored]].
	* '''Easy to hide.''' Can be stored encrypted on a paper, on disk, or even [[Brainwallet\|memorized in your brain]].		* '''Easy to hide.''' Can be stored encrypted on a paper, on disk, or even [[Brainwallet\|memorized in your brain]].
	* '''Can be made [[Anonymity\|anonymous]]''', meaning nobody would even know you own bitcoins or how many.		* '''Can be made [[Anonymity\|anonymous]]''', meaning nobody would even know you own bitcoins or how many.

← Older revision		Revision as of 21:17, 10 March 2018
Line 52:		Line 52:
	* [[Irreversible Transactions]]		* [[Irreversible Transactions]]
	* [[Controlled supply]]		* [[Controlled supply]]
	* [[https://coinjolt.com/should-you-invest-in-bitcoin/ Should You Invest in Bitcoin?]]		* [https://coinjolt.com/should-you-invest-in-bitcoin/ Should You Invest in Bitcoin?]

	==References==		==References==

← Older revision		Revision as of 21:16, 10 March 2018
Line 52:		Line 52:
	* [[Irreversible Transactions]]		* [[Irreversible Transactions]]
	* [[Controlled supply]]		* [[Controlled supply]]
			* [[https://coinjolt.com/should-you-invest-in-bitcoin/ Should You Invest in Bitcoin?]]

	==References==		==References==