Why I think bitcoins are a bad investmen at these high prices.

[Edward50]

I think this should be common sense.  But maybe my logic is wrong somehow, well here goes.

When bitcoins were  $20 dollars each, and you bought $1000 dollars worth of bitcoins, you would own 50 bitcoins.

Bitcoins at $1000 each, you buy $1000 dollars worth, you have 1 bitcoin.

Now for you to double your investment to $2000. Bitcoins at $20 dollars each would have to rise to $40 dollars each.

To double your investment at $1000, 1 bitcoin would have to rise a whopping $1000 dollars more for you to double your investment.

Now you may think, well the price would have to double from $20 to $40 or from $1000 to $2000 and your $1000 would be worth $2000. Well....

This means, the market cap for $20 dollar bitcoins to increase to $40 dollars would have a market cap increase of $243 million.

For bitcoins to increase from $1000 to $2000, you would have to increase market cap a whopping $12 billion dollars.

Now think about this, if your new to investing in bitcoins, do you really want to risk $1000 when to double your money you would have to risk $1000 dollars and hope that the market cap has to increase 48x more than it would compared to $20 dollar bitcoins. Do you want to gamble on the market cap increasing 12 billion dollars or 243 million dollars, to double your money.

Maybe something is wrong with my logic, but to me buying bitcoins at $700 or $1000 is simply a very bad investment that I simply will not do. I just do not feel the returns are there for the risk you take of the price falling back down and also the risk of the market cap having to increase exponentially more!

Simply bitcoins have grown so astronomically in the last year that to continue this momentum is just a risky gamble at this point. The higher the price goes the less people want to buy bitcoins that are very expensive. The higher the price goes it also takes a much higher market cap increase to get the same returns.

Now think about this. I doubt that there are that many new buyers in the bitcoin market than there were at the beginning of this year when bitcoins were $13 dollars. When bitcoins were $13 dollars a rise form $13 dollars to $23 dollars would have been huge! But in actuality a bitcoin price rise from $700 to $710 seems small now, but it takes the same market cap increase as it did in January. Yet you would think a $700 to $710 increase is nothing now.

Something just does not add up to me with how the prices are and how high they have grown over such a short period of time. The bitcoin market seems like a house of cards and the only thing holding it together is that owners of bitcoins are wealthy enough to not need to cash out their bitcoins and just sit on them. If anything happened where even a small increase in bitcoin holders needed to cash out for what ever reason (like a downturn in the economy), the price would crash faster than you could imagine. Simply put again a house of cards.

My recommendation is that anyone thinking about investing their hard earned money in bitcoins should think about this and stay away. There are simply much better investments out there than investing in bitcoins. You are taking such extreme risk with your money at this point to get the gains you want.

Bitcoin holders who are predominately on this forum already own their bitcoins at much lower prices. They will not let you know these facts and they do not stand to lose nearly as much as you investing at $700 vs them investing at sub $100 prices. This is why I think bitcoin holders are simply crazy for not cashing out at these high prices and let someone else hold the bag for such a risky investment that to me looks like a house of cards waiting to tumble at these ridiculously higher prices that happened so quickly. Just look around for other investments and you can easily have exponential growth just like the current bitcoin holders now have. We have missed the boat entering in at $700 and it will take large increases for the prices to go higher and at any moment you have to hope that there is not a reason why people want to start cashing out as the price would easily fall back down at these high prices.

Please correct me if I am wrong here, or please let me know if I have a point here.

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[Peter R]

Yes, Edward50, I find your posts quite confusing too.  Yesterday you politely responded to my post with this: https://bitcointalk.org/index.php?topic=383776.msg4131603#msg4131603.  It seemed you had recently purchased bitcoin and were just hoping the volatility would subside and the price would slowly go up.  You seemed pretty sure that bitcoin was destined to hit $1000+ in short order.  

But now, one day later, it seems that you think bitcoin is a bad investment once again.  

Are you talking your book?  Or is it just difficult for you to decide whether or not you believe in the future prospects of bitcoin?

[seleme]

Nobody fucking cares what you think anymore.

[piramida]

Nobody fucking cares what you think anymore.

there's ignore button for that. just sayin'

[rebel24]

alt currencies like quark, nxt, MASSIVE room for boom, /thread

[Miz4r]

You missed the bottom again didn't you?

[seleme]

Nobody fucking cares what you think anymore.

there's ignore button for that. just sayin'

already activated but I am too pissed of right now and needed someone to say him to fuck off. Edward was good option 

[GigaCoin]

If you feel bitcoin is bad in terms of roi, I suggest you look at litecoin.there are also other altcoins with some promise.

[Edward50]

Just wanted to say, I still think bitcoins can hit $1000. I am not trying to say it can't go up higher.

My point in saying is that the whole price is a house of cards. The only reason it can sustain these price levels and move higher is because so many bitcoin holders do not sell, they do not need to. However, if anything happened which caused just a small increase in bitcoin holders cashing out the whole thing would come collapsing down.

I already have stated that the reason why the price would go higher is simply that bitcoin holders are not selling just holding for a higher price. I never said that bitcoin was a good investment, it is a highly risky one and the potential returns you would get are not worth the risk of paying $700 for a bitcoin. Actually, you would have to be a insanely stupid investor to buy bitcoins to speculate with at the ridiculously price level it is at now.

The price level it is priced in now was based largely on huge growth in china that is not turning out very good.

I do not buy bitcoins to speculate with them, I buy them only to quickly buy other investments with the bitcoins. However, these investments are somewhat tied to the bitcoin price. This is only why I hope that the price at least holds or stabilizes as if that happened I would do very well. I have done well with my non-bitcoin investments even with the price drops that bitcoin has had. This is only because I choose the proper investments.

Thanks guys for not trying to refute my point or support it. Instead you try and attack my reputation. You are obviously bitcoin holders who know that your betting on a house of cards and the last thing you want is it to collapse.

However, I think there are many other who will see my point and understand that what I write makes lots of sense and I wait for someone to counter what I wrote here.

My whole point was not that bitcoin price would go lower or higher, it was simply that the risk to reward ratio does not make it a good investment. It actually makes it a very bad investment. One in which you take on a ridiculous amount of risk for a potential return that will not be very high. This was my point, not what I wrote yesterday saying we could reach $1000. With the low volume and people just sitting back and waiting we could hit $1000. But it would be insanely stupid to buy bitcoins to take this risk of it rising higher with all the downside risk that you may have. 

[TeeBone]

Ed, at what point do you think the big holders will break, 5K ? 10k ? We know it's bound to happen, it's too tempting to not become an instant millionaire with a few mouse clicks.

[JekyllIsland]

Just wanted to say, I still think bitcoins can hit $1000. I am not trying to say it can't go up higher.

My point in saying is that the whole price is a house of cards. The only reason it can sustain these price levels and move higher is because so many bitcoin hodlers do not sell, they do not need to. However, if anything happened which caused just a small increase in bitcoin hodlers cashing out the whole thing would come collapsing down.

I already have stated that the reason why the price would go higher is simply that bitcoin hodlers are not selling just hodling for a higher price. I never said that bitcoin was a good investment, it is a highly risky one and the potential returns you would get are not worth the risk of paying $700 for a bitcoin. Actually, you would have to be a insanely stupid investor to buy bitcoins to speculate with at the ridiculously price level it is at now.

The price level it is priced in now was based largely on huge growth in china that is not turning out very good.

I do not buy bitcoins to speculate with them, I buy them only to quickly buy other investments with the bitcoins. However, these investments are somewhat tied to the bitcoin price. This is only why I hope that the price at least hodls or stabilizes as if that happened I would do very well. I have done well with my non-bitcoin investments even with the price drops that bitcoin has had. This is only because I choose the proper investments.

Thanks guys for not trying to refute my point or support it. Instead you try and attack my reputation. You are obviously bitcoin hodlers who know that your betting on a house of cards and the last thing you want is it to collapse.

However, I think there are many other who will see my point and understand that what I write makes lots of sense and I wait for someone to counter what I wrote here.

If you invest what you're willing to lose there shouldn't be a problem. I think the chances of 10,000 are better than 0. But honestly who cares about either of our opinions?
 
Time will tell, and many will most likely regret not buying. More and more people are getting interested in bitcoin, simply due to its superiority to other currencies. Just because it isn't as widely accepted/used doesn't mean it isn't a superior form of transacting. Fiat has been used by many generations before us so we are naturally accustomed to it. Bitcoin is still new and very bizarre to people when they're first introduced. These things take time, crypto is the future, that really isn't a question. The question is which one it will be and when. You should just be happy with however many coins you have and be grateful to be witnessing this. I'm certain looking back will be very interesting however this plays out.

People hodling bitcoins is good, when all the current hodlers decide it's time to "cash out" someone else will buy those coins and become a new hodler. What's wrong with saving bitcoin? Many people believe it will be successful in the future for one reason or another.  

[Miz4r]

So you're just trying to say that bitcoin is a risky investment, and yes I agree it still is. But no more risky (less even) than it was at $10, $100 or $300. There are also new bitcoin hodlers coming in each day which helps sustain higher prices and decrease the average volatility. The price swings were much larger when bitcoin was at lower prices so you actually had more to lose back then (but also more to win). If you wait until the risk is almost gone and bitcoin stands rock solid you will be too late.

[Edward50]

So you're just trying to say that bitcoin is a risky investment, and yes I agree it still is. But no more risky (less even) than it was at $10, $100 or $300. There are also new bitcoin hodlers coming in each day which helps sustain higher prices and decrease the average volatility. The price swings were much larger when bitcoin was at lower prices so you actually had more to lose back then (but also more to win). If you wait until the risk is almost gone and bitcoin stands rock solid you will be too late.

Wrong. What I am saying is that it is a much riskier investment now at $700 than it was at $10 or even $100. The marketcap has to increase so much more to get the same gains as you would at a lower bitcoin price.

Investing $1000 when bitcoins is a $1.00, will give you the same downside risk as investing in bitcoins when they are $1000. You both can lose your entire $1000. However, the potential gains are astronomically higher at $1.00 than they are at $1000. For bitcoins to go from say $1.00 to $20 dollars is so much higher than from bitcoins to go from $1000 to $20,000 dollars.

I think the problem here is many of you do not know how to calculate risk properly.

[TERA]

I think what you mean is "less reward" and not "more risk".

[Edward50]

I think what you mean is "less reward" and not "more risk".

Good point. You definitely have a lot less reward at the current prices. It will take such a large growth for prices to keep pace with the gains that were made this year.

That is a good question, do you have more risk at say $20 dollars or $700 dollars. I am going to say that you also have more risk at $700 as I do not think the marketcap supports the real current market right now. It has grown too fast and was priced up higher based on huge potential growth in china that has not panned out.
There is a lot more risk of bitcoin falling to $100-$300 levels and staying there than bitcoin at $20 falling to $3.00 to $8.00 in my opinion. Simply $700 dollar bitcoin price is highly unstable at this current time.

EDIT:

Basically, if you get less reward for a given investment, than the investment is more risky??

[Tzupy]

No, it is 'more risk' IMO, and the current 750$ price is sustained only by some late new fiat and low volume.

[Miz4r]

No, it is 'more risk' IMO, and the current 750$ price is sustained only by some late new fiat and low volume.

Now you're just assuming. And no the risk is not greater, two years ago the risk was far greater for you to lose your entire investment since bitcoin was newer and its future way more uncertain. So if you invest $1000 now you run a much smaller risk of losing that amount than if you had invested that same $1000 two years ago. The potential reward is at the same time also smaller, but that's the risk/reward trade-off.

[gurcani]

well if so you can buy at 700 and sell at 1000 in a few months. That's still better investment than anything else in the real world.

But then you may be back here whining about how it is too expensive to buy bitcoins at 4000 in a few months later.

It is true that you can more easily double/triple your investment in a new altcoin if you know the pump'n'dump drill, than the bitcoins. That is why we still continue to have new altcoins. I personally find the practice ethically questionable since in the end it's close to a zero sum game.

[kkaspar]

Something just does not add up to me with how the prices are and how high they have grown over such a short period of time.

I have been having doubts that the market is dirtier then it seemed first. Some points that I have been having doubts over:

1) 50%+ of bitcoins are actually held by a group of people who are communicating co-operating with eachother to get the most out of the market. I started having doubts when I saw that during certain times the bots seemed to work together in the same tune. All the bull and beartraps will go through without any solid opposition for some time periods. There are certain periods when the market actually looks like there is a rich vs poor competition, when actually the rich should stay in competition with eachother aswell.

2) The boom in China was simulated for the most part. The demand actually wasn't as big as the numbers show. This could have been done by rich players who bought and sold at the same time to simulate trade and demand to drive the price up. This could have been also done by simply giving out wrong market data.

Most of the community leaders and the dev team has no interest whatsoever to develop rules and regulations to protect the integrity of the market. But with this direction the market will get uglier and uglier every day and eventually it will cross a line when BTC will be called an overall scam. I think that Okcoin simulating the market data is just a tip of the iceberg and more scandals will come out regarding the dirty tricks that are used with the market. I have the biggest doubts about MtGox, since it is not just logical that they are so incompetent with the income they have with fees. It seems more likely that their incompetence is deliberate and a tool to manipulate the market for their own investment directions.

[proudhon]

EDIT:

Basically, if you get less reward for a given investment, than the investment is more risky??

If that's true, then pretty much every major stock investment in the world has been more risky than investing in bitcoin because all of those other investments have returned less reward.  Bitcoin:  The least risky investment.