Downsides to HODLing bitcoin as an investment

[larry_vw_1955]

#1) it doesn't pay any dividends like stocks
#2) risk of extended drawdowns which could cause loss of principal unlike in a real estate investment where the property only goes up in value
#3) unfavorable tax treatment since it cannot be depreciated like many types of assets can be when used for business purposes

the fact that it doesn't pay any type of periodic cash flow while it is owned is a serious issue. for these reasons i don't really like bitcoin as an investment.

[SquirrelJulietGarden]

#1) it doesn't pay any dividends like stocks

With time, I only can say about the past, Bitcoin value and price grew up more, and if it repeats like this in future, you don't need to get bitcoin dividend like stock dividend to grow up your portfolio value.

Holding your bitcoin, Bitcoin will help you richer.

Just read this reminder and practice it as advised
Do not keep your money in online accounts

#2) risk of extended drawdowns which could cause loss of principal unlike in a real estate investment where the property only goes up in value

Both Bitcoin and real estates grow up in price, it's harder to say about their values.

You missed important differences between Bitcoin and real estates. Your bitcoin is intact, undamaged with time while your real estates will be damaged with time, physical things like air, rain, sun, erosion and more. One more difference is, rate of new built real estates is higher than rate of new bitcoins will be released with future Bitcoin blocks.

#3) unfavorable tax treatment since it cannot be depreciated like many types of assets can be when used for business purposes

In many countries, you have clear guides on Income tax and Capital gain tax. The Capital gain tax is the same for stocks and Bitcoin as I know in countries that have rules on it.

[franky1]

#1) it doesn't pay any dividends like stocks
#2) risk of extended drawdowns which could cause loss of principal unlike in a real estate investment where the property only goes up in value
#3) unfavorable tax treatment since it cannot be depreciated like many types of assets can be when used for business purposes

the fact that it doesn't pay any type of periodic cash flow while it is owned is a serious issue. for these reasons i don't really like bitcoin as an investment.

#1 not all stocks do, plus although you have some portfolio saying you have a stock. its not actually really yours. its just an assignment registerd by the company and the company can dilute your shares without your consent

#2 property value does not always go up.. a house price is X. people pay X+Y+Z where Y+Z is the mortgage interest, state tax and maintenance and years later the market may not even be at XYZ when the person wants to sell. many people buy property but end up getting forclosed on and losing their investment and having to file bankruptcy

#3 there are many tax loopholes, its just education

[FinneysTrueVision]

Not all stocks pay out dividends. To me it isn’t a negative aspect about Bitcoin. Investing in cryptocurrency isn’t like investing in a company, in order to pay a yield to holders, altcoins need to inflate their supply. Having a fixed supply is one of Bitcoin’s core features. This creates scarcity, which in the long run will make it more valuable.

There are still some ways to earn yield on BTC, through lending or staking on a exchange, although there is the downside that it requires trust in centralized third parties.

[ranochigo]

#1) it doesn't pay any dividends like stocks

Berkshire Hathaway Class A doesn't pay dividends, Gold, Silver, Platinum doesn't pay dividends. If you are looking for dividends stocks, there are plenty and sure they do guarantee stable dividends income like REITs but they aren't as favourable due to their low potential for growth.

A fair comparison would be precious metals and Bitcoin. Not stocks, or bonds.

#2) risk of extended drawdowns which could cause loss of principal unlike in a real estate investment where the property only goes up in value

This is inaccurate. There were instances where property actually lost its value due to certain factors like market downturn, real estate policies, etc. There should not be any assumptions made about any form of investments, stocks, commodity alike.

I'll take the point of view that there is no guarantees that Bitcoin will rise infinitely. Definitely not using past performance as a predictor either. You should be able to make sound investment decisions accordingly however. If you're assuming that certain commodities only goes up in value, then you haven't done your research properly.

#3) unfavorable tax treatment since it cannot be depreciated like many types of assets can be when used for business purposes

the fact that it doesn't pay any type of periodic cash flow while it is owned is a serious issue. for these reasons i don't really like bitcoin as an investment.

That is not true. In certain places, capital gains doesn't incur tax burdens. In fact, there are ways to mitigate or reduce the tax that you're paying if you hold commodities. This is a point that is nitpicked; it differs for different jurisdiction and it is unfair to compare it that way.

[larry_vw_1955]

That is not true. In certain places, capital gains doesn't incur tax burdens.

who said anything about "capital gains" tax?  i was talking about the ability to depreciate your asset to offset any taxes you have to pay on it. you can't do that with bitcoin but you can do it with rental property.


Have you ever wondered how the wealthy rake in millions annually while avoiding taxes? It all boils down to one principle: property depreciation.
https://equifund.com/blog/rental-property-depreciation/

[Dave1]

#1) it doesn't pay any dividends like stocks

As others said, not all stocks pay dividends.

#2) risk of extended drawdowns which could cause loss of principal unlike in a real estate investment where the property only goes up in value

Not all property goes up in value as well. And if you are a bitcoin holder, this is what we call paper losses only.

#3) unfavorable tax treatment since it cannot be depreciated like many types of assets can be when used for business purposes

the fact that it doesn't pay any type of periodic cash flow while it is owned is a serious issue. for these reasons i don't really like bitcoin as an investment.

Oh well, there could be some people who don't like bitcoin as a investment. But  I guess there are way smarter individuals who knows how bitcoin is specially if you become a long term holder, no offense.

[vitya1982]

#1) it doesn't pay any dividends like stocks
#2) risk of extended drawdowns which could cause loss of principal unlike in a real estate investment where the property only goes up in value
#3) unfavorable tax treatment since it cannot be depreciated like many types of assets can be when used for business purposes

the fact that it doesn't pay any type of periodic cash flow while it is owned is a serious issue. for these reasons i don't really like bitcoin as an investment.

1. Well, yeah. It's decentralized, no one will pay you dividends. However, returns from BTC are much higher than those from stocks.
2. Everything is a risk, don't be a fool.
3. It depends on the country, actually. Some countries don't even tax it at all yet.

[larry_vw_1955]

As others said, not all stocks pay dividends.

but there are lists of stocks that do pay dividends so an investor can choose from stocks on that list. Apparently there's over 1000 of them.

Not all property goes up in value as well. And if you are a bitcoin holder, this is what we call paper losses only.

real estate investors don't necessarily care about what the value of their property is as long as it is "cash flowing".

another thing i notice is with real estate you can sell your property and buy another one and not have to pay any capital gains taxes if you do what is called a "1031 exchange".

A 1031 exchange is a tax break. You can sell a property held for business or investment purposes and swap it for a new one that you purchase for the same purpose, allowing you to defer capital gains tax on the sale.
https://www.investopedia.com/financial-edge/0110/10-things-to-know-about-1031-exchanges.aspx

try doing that with bitcoin. it will be impossible. so bitcoin is automatically at a disadvantage taxwise as an investment. compared with real estate.

with real estate you can use leverage but you can't do that with bitcoin. you have to put 100% down to control it.

[ranochigo]

who said anything about "capital gains" tax?  i was talking about the ability to depreciate your asset to offset any taxes you have to pay on it. you can't do that with bitcoin but you can do it with rental property.


Have you ever wondered how the wealthy rake in millions annually while avoiding taxes? It all boils down to one principle: property depreciation.
https://equifund.com/blog/rental-property-depreciation/

That's out of the question isn't it? You are talking about Bitcoin as an investment, not how to avoid and reduce taxes.

Not so sure how taxes works in the US but my understanding is that depreciation recapture is still paid upon the sale and that you can incur potential tax savings but it wouldn't be comparable to your returns from stocks and other investments. At least in where I live, this is hardly a good way to reduce tax and there are better ways to go about it.

By definition, depreciation is the loss of value of your assets. And I'm guessing you would have to sustain it with certain amount of running costs. I haven't heard of anyone using real estate as a comparison to stocks, and commodities.

[larry_vw_1955]

1. Well, yeah. It's decentralized, no one will pay you dividends.

yeah and i don't like that. 

However, returns from BTC are much higher than those from stocks.

Not anymore. Bitcoin might have a price change of up to 10% in any given day but I think we would all agree that a price swing of 10% is probably not the norm. It's probably more like between 1% and 2% which is kind of inline with your average stock in the stock market...

[larry_vw_1955]

Not so sure how taxes works in the US but my understanding is that depreciation recapture is still paid upon the sale...

ok yes, i didn't realize there was something called "depreciation recapture". that can be avoided though by doing a 1031 exchange. if you're still wanting to stay in the real estate game. not if you are just looking to cash out. but if you're looking to cash out, in real estate, you can pull  out cash tax free by refinancing. you can't do that with bitcoin. unless you turn over your bitcoin to a custodian. and then it's no longer under your control.

I haven't heard of anyone using real estate as a comparison to stocks, and commodities.

i never see real estate gurus and investors talking about how they want to invest in bitcoin...to me that must mean they think real estate is more profitable and sure thing. any money they get they're looking to buy another house not some bitcoin. 

[ranochigo]

ok yes, i didn't realize there was something called "depreciation recapture". that can be avoided though by doing a 1031 exchange. if you're still wanting to stay in the real estate game. not if you are just looking to cash out. but if you're looking to cash out, in real estate, you can pull  out cash tax free by refinancing. you can't do that with bitcoin. unless you turn over your bitcoin to a custodian. and then it's no longer under your control.

That sounds like a lot of middleman fees ain't it. Have you tried out real estate investments yourself? Larry, could you share how easy and practical is it for you to invest in real estate? Of course, include upfront capital costs, upkeep, bookkeeping expenses, taxes, etc. Websites that have a vested interest in having you invest in real estate doesn't count.

From what I'm hearing now is that it all seems to be a rather complicated process for very little gain. I would appreciate a little bit more clarity on this regard, not just hypothetical scenarios.

i never see real estate gurus and investors talking about how they want to invest in bitcoin...to me that must mean they think real estate is more profitable and sure thing. any money they get they're looking to buy another house not some bitcoin.  

I wouldn't think that someone that makes a living on hyping up real estate openly stating that something else is a better investment option .

1. Well, yeah. It's decentralized, no one will pay you dividends.

yeah and i don't like that.  

That's the end of the topic isn't it? You're chasing vastly different stuff. You should be comparing apples to apples, not trying to counter every decent point with something else. Seems like you have an opinion formed already.

Not anymore. Bitcoin might have a price change of up to 10% in any given day but I think we would all agree that a price swing of 10% is probably not the norm. It's probably more like between 1% and 2% which is kind of inline with your average stock in the stock market...

Have you seen the YoY performance of Bitcoin vs S&P?

[thecodebear]

#1) it doesn't pay any dividends like stocks
#2) risk of extended drawdowns which could cause loss of principal unlike in a real estate investment where the property only goes up in value
#3) unfavorable tax treatment since it cannot be depreciated like many types of assets can be when used for business purposes

the fact that it doesn't pay any type of periodic cash flow while it is owned is a serious issue. for these reasons i don't really like bitcoin as an investment.

1. It doesn't pay dividends but it appreciates a lot quicker than stocks even with their dividends included. Also not all stocks even pay dividends.

2. ummmm I'm not sure where you got the idea that real estate only goes up in value lol, you must be quite young and inexperienced if you think that. And you are supposed to be listing downsides of HODLing, but a temporary crash in Bitcoin price doesn't effect long term holders at all (other than allowing them to buy more).

3. Bitcoin doesn't have "unfavorable tax treatment". Not sure where you got that idea. It is taxed the exact same as other assets. You sell it: you pay capital gains taxes.


Bitcoin isn't an "investment". It's a currency. Currencies don't pay a cash flow because they ARE cash, Bitcoin isn't a business. You don't "invest" in Bitcoin, you save in Bitcoin. Bitcoin is the best long term savings instrument in history.

[reagansimms]

#1) it doesn't pay any dividends like stocks
#2) risk of extended drawdowns which could cause loss of principal unlike in a real estate investment where the property only goes up in value
#3) unfavorable tax treatment since it cannot be depreciated like many types of assets can be when used for business purposes

the fact that it doesn't pay any type of periodic cash flow while it is owned is a serious issue. for these reasons i don't really like bitcoin as an investment.

It seems like you have to look further back in time when Bitcoin was traded at a low price, now Bitcoin is trending in the investment world because it has helped many investors increase their wealth. It is difficult to explain what an elephant looks like to someone who has been blind since childhood, but currently Bitcoin is increasingly popular with various levels of society because it is considered a very promising investment. The profits generated in Bitcoin have changed people's perspective in choosing investment media, Real Estate and other stock investors have started to shift investment flows to Bitcoin because of the huge returns.

Politicians like Trump are also starting to open their eyes to the power of Bitcoin, he is very aware of how valuable Bitcoin is and the growing Bitcoin community, he brought up the theme of Bitcoin in his speech because he started to see the great power of Bitcoin. If you don't like Bitcoin as an investment, that's your right, but without your involvement in Bitcoin investment it will not have any impact on the Bitcoin market.

[thecodebear]

1. Well, yeah. It's decentralized, no one will pay you dividends.

yeah and i don't like that.  

However, returns from BTC are much higher than those from stocks.

Not anymore. Bitcoin might have a price change of up to 10% in any given day but I think we would all agree that a price swing of 10% is probably not the norm. It's probably more like between 1% and 2% which is kind of inline with your average stock in the stock market...

Bitcoin is up 95% in the past year (despite have just dropped a bunch this past week). How many stocks have had that sort of performance?

Don't know where you got the idea that Bitcoin doesn't grow faster than stocks anymore. Of course it does, and it isn't even close. For comparison, S&P500 and the nasdaq are up 17% in the past year while the Dow Jones is up 11%. Stocks still don't come close to comparing to Bitcoin in price appreciation.

To outdo Bitcoin with stocks you'd have to know the future and pick the absolute best stocks each year.

[Apocollapse]

Nothing perfect in this world.

Bitcoin, stock, gold, etc have their own advantages and disadvantages.

Remember Bitcoin is an experiment and it develop from time to time, Bitcoin is never been a perfect currency or investment.

Saying that Bitcoin doesn't give dividend like stock, I can just counter the same thing I don't like to invest in stock because it's centralized and has zero privacy.

This will be endless discussion since you're looking something that impossible to happen.

[avikz]

#1) it doesn't pay any dividends like stocks

It pays in capital gain which outperforms most other asset classes.

#2) risk of extended drawdowns which could cause loss of principal unlike in a real estate investment where the property only goes up in value

Real estate goes down in value as well. Real estate might not get you any capital gain also. The you pay registration charges and stamp duty and mutation charges (for land) etc. for each real estate transactions. Real estate has lost its charm as an investment in urban areas.

#3) unfavorable tax treatment since it cannot be depreciated like many types of assets can be when used for business purposes

That's a true challenge! In many countries, tax rates on crypto currency is very high. Also there's no way offset the loss as well. Which is surely discouraging a lot of people to use Bitcoin as an investment. I personally have not sold any Bitcoins since last 2 years due to a 30% tax treatment in my country. That needs to be addressed by the industry stakeholders.

These reasons do not really make Bitcoin a bad investment choice. Rather, it compensates us through capital gain. But different countries have different tax treatments which makes this investment either favorable or unfavorable for their citizens.

[OcTradism]

Nothing perfect in this world.

Nothing is perfect, it's true.

Bitcoin, stock, gold, etc have their own advantages and disadvantages.

Each of them have strength and weakness but Bitcoin has more advantages against stocks, gold, real estates but sure, Bitcoin is not perfect.

The bullish case for Bitcoin

Remember Bitcoin is an experiment and it develop from time to time, Bitcoin is never been a perfect currency or investment.

Since 2009 till this year 2024, it's already 15 years and Bitcoin is no longer an experiment. It has a long time of development, experiment and test in the world and the market. It is no longer in experimental phase in 2024.

[Free Market Capitalist]

Hey guys, you don't have to try too hard with this guy. He's on a Bitcoin forum and those questions are aimed at saying that Bitcoin investing sucks compared to Real Estate investing.

Go to a Real Estate investment forum. What are you doing here?

I'll give you #4), which you forgot: banks do not finance Bitcoin investment unlike Real Estate.