The Perils of BTC Investment For Low Income Folks

[GreenBits]

Hey peeps, GB here.

Have we ever considered the risks of crypto investment for those that don't have alot/invest more than they should, esp in economically repressed nations?


The volatility really makes holding a danger unless you can afford a possible, prolonged down. And for truly economically depressed areas, even a rally can be potentially dangerous. Consider. Say you have a village that goes into bitcoin heavily. If the price rallies, the sudden value added to that economy would elevate demand for consumer goods/ necessities, as more people would have more disposable income to spend. This would price the folks out of the market that didnt invest (bread would be 10 bucks all of a sudden because the demand has risen and supply is still at the same level.

Inversely, if an investment goes really south; given the tendency for the less fortunate to go all in/mostly in on an investment, there is an actual potential for ruin, to a population that least can afford a huge financial drawdown. A 50% retraction (it has happened) would mean having 50% of the bills instead of 100%. This is even more daunting considering that bitcoin is often presented as "the solution to poverty". This volatility makes holding fiat a way better option; fiat will not devalue as suddenly, and as dramatically.

Thoughts?

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[iamTom123]

You are right with your precautionary concern...this is the reason why it is not good to promote Bitcoin only to a specific location or people because there would always be danger inherent when people would be part of a mania without first looking at that thing they are getting into. People should be educated first before they ride the Bitcoin bandwagon otherwise there can be some shocks later.

However, I still have to hear any news that Bitcoin became an agent for destruction as the scenario you are painting. When people do not have that much financially I don't think they would be thinking first of Bitcoin. When people are not wired to the internet there is a strong possibility they will not hearing that much with Bitcoin.

I still have to see a community mired in poverty that goes gaga over Bitcoin. What I am seeing right now is the opposite...most of those in Bitcoin really have the money to do so. So maybe we should just relax and not get concerned so much  in so many theoretical imaginings of what Bitcoin can do and can not do but I do appreciate your concern.

[Kunlejoe0]

The ideal of bitcoin is such that it open a new chapter in financial freedom where you have control over your income. Not only this, the ability of bitcoin to reach unbank people with inherent low fee and bits that could serve millions of people is becoming impossible to achieve right now.

The price of bitcoin had already priced out poor people and new user also

[Pearls Before Swine]

The volatility really makes holding a danger unless you can afford a possible, prolonged down.

I agree with this 100%.  I think a lot of bitcoin investors are very young and see something
that only increases in value, and if you've ever experienced a runaway bull market, i.e., a bubble,
you'll realize that nothing in the world does that.  Assets obey the laws of financial gravity, as
they say.  So bitcoin may go up quite a bit (it has already), but we're going to see a crash
sooner or later.

And yes, it's the average Joe on the street who piled in to bitcoin (or whatever the inflated asset
is that's in a bubble) who gets hosed in the end.  If it's poor people who are getting in now while
bitcoin is near $5000...whew.  I don't think that's a good idea.

[davis196]

Bitcoin has never been presented as a "solution for poverty".Who is presenting it like that?
Your model is wrong because there are no local currencies (crypto or fiat).Local currencies and local adoption will fail.We need nationwide or worldwide adoption,in order to be successfull.
The btc price volatility will be reduced as long as there is mass adoption.

[dothebeats]

Bitcoin is never posed as a "solution to poverty" just like what you're saying. It will never work as a local currency, seeing that its price is volatile given that it is a worldwide traded asset.

You are right with your precautionary concern...this is the reason why it is not good to promote Bitcoin only to a specific location or people because there would always be danger inherent when people would be part of a mania without first looking at that thing they are getting into. People should be educated first before they ride the Bitcoin bandwagon otherwise there can be some shocks later. 

That is one thing we cannot control in this type of environment. No matter how much we educate people with the risks of investing in crypto, they wouldn't mind and still be throwing down their prized money into something they don't fully understand. It's gaining value fast, what could possibly go wrong?

However, I still have to hear any news that Bitcoin became an agent for destruction as the scenario you are painting. When people do not have that much financially I don't think they would be thinking first of Bitcoin. When people are not wired to the internet there is a strong possibility they will not hearing that much with Bitcoin.

Exactly , but how many countries in the world left without sufficient internet access? There's still quite a few, but much of these poverty-stricken communities come from third-world countries that has internet access and heard about bitcoin as a one-way ticket to the moon. We cannot blame them for hoping to escape poverty through bitcoin.

I still have to see a community mired in poverty that goes gaga over Bitcoin. What I am seeing right now is the opposite...most of those in Bitcoin really have the money to do so. So maybe we should just relax and not get concerned so much  in so many theoretical imaginings of what Bitcoin can do and can not do but I do appreciate your concern.

I started with the smallest of paychecks back when bitcoin is floating around $200 and luckily for me, everything panned out well. If bitcoin is still priced @ $200, I think no one would get that interested to put their life savings on it in the first place. It's the ridiculous price of the coin that attracted rich and poor alike. If this is 2014-2015 only enthusiasts and scholars would be interested.

[hatshepsut93]

The volatility really makes holding a danger unless you can afford a possible, prolonged down. And for truly economically depressed areas, even a rally can be potentially dangerous. Consider. Say you have a village that goes into bitcoin heavily. If the price rallies, the sudden value added to that economy would elevate demand for consumer goods/ necessities, as more people would have more disposable income to spend. This would price the folks out of the market that didnt invest (bread would be 10 bucks all of a sudden because the demand has risen and supply is still at the same level.

The village from your example has to be economically isolated from outside world for this bad scenario to work, otherwise it won't cause any big price rise, the larger market will just soak new money. Also, if people are poor, than they won't be able to gather any big amounts to invest, so even if their wealth will have some impact on their local markets, it will be short lived as soon as their money run dry, because their incomes hasn't increased, unless they actually work for crypto. And overall social inequality rarely becomes devastating - usually even poor benefit from economic growth, just not as fast as the other.

[jonnybravo0411]

It is simple for all investors, regardless of their material level, to remember the investment risks - do not put all the funds in one basket and invest your last money. It is necessary to allocate a small part without sacrificing your habitual way of life.

[Fortify]

There are too many variables to calculate a blanket answer for everyone, the risk level will change between people. I would never advise any low earner to invest in bitcoin, they would be safer investing in a savings account or even buy into a stock market index. Bitcoin would have generated you massive returns with some clever timing, but you never want to invest at the top of a wave. It might be worth buying 0.10 or even 0.01 if you were tight for funds and could afford to lose it.

[orions.belt19]

You are right with your precautionary concern...this is the reason why it is not good to promote Bitcoin only to a specific location or people because there would always be danger inherent when people would be part of a mania without first looking at that thing they are getting into. People should be educated first before they ride the Bitcoin bandwagon otherwise there can be some shocks later.

However, I still have to hear any news that Bitcoin became an agent for destruction as the scenario you are painting. When people do not have that much financially I don't think they would be thinking first of Bitcoin. When people are not wired to the internet there is a strong possibility they will not hearing that much with Bitcoin.

I still have to see a community mired in poverty that goes gaga over Bitcoin. What I am seeing right now is the opposite...most of those in Bitcoin really have the money to do so. So maybe we should just relax and not get concerned so much  in so many theoretical imaginings of what Bitcoin can do and can not do but I do appreciate your concern.

I've never thought of it that way. Given a certain situation like and looking at it from that angle, Bitcoin could actually badly affect an economy and bring about chaos.

I agree that the a poor community won't go heavily reliant on Bitcoin. First of all, I think you'd need to have a device (laptop or mobile) and internet for you to have access to Bitcoin. Also, I don't think they'll invest in Bitcoin given their financial situation. For the scenario you've come up with to actually happen, I think the community would have to be very isolated.

It's possible for that to happen but I agree that the best way to go about it is to spread knowledge about Bitcoin and to provide better education for it.

[Mometaskers]

Hey peeps, GB here.

Have we ever considered the risks of crypto investment for those that don't have alot/invest more than they should, esp in economically repressed nations?


The volatility really makes holding a danger unless you can afford a possible, prolonged down. And for truly economically depressed areas, even a rally can be potentially dangerous. Consider. Say you have a village that goes into bitcoin heavily. If the price rallies, the sudden value added to that economy would elevate demand for consumer goods/ necessities, as more people would have more disposable income to spend. This would price the folks out of the market that didnt invest (bread would be 10 bucks all of a sudden because the demand has risen and supply is still at the same level.

Inversely, if an investment goes really south; given the tendency for the less fortunate to go all in/mostly in on an investment, there is an actual potential for ruin, to a population that least can afford a huge financial drawdown. A 50% retraction (it has happened) would mean having 50% of the bills instead of 100%. This is even more daunting considering that bitcoin is often presented as "the solution to poverty". This volatility makes holding fiat a way better option; fiat will not devalue as suddenly, and as dramatically.

Thoughts?

Not just bitcoin anyway. Investment favor those who have more than enough for their daily needs. But on the other hand, it is the poor the can make the most out of investments since their wages are low to begin with.

I don't really see the prices suddenly going all up in a village. The more pressing concern for the poor is if they put much of their money in an investment that went bad.