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Author Topic: Bitcoin ~ junk bonds  (Read 1265 times)
ripper234
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March 27, 2012, 01:30:44 PM
 #1

A friend of mine just called Bitcoin "monopoly money".
After a comeback from me, he admitted that the comparison isn't really fair, and a better comparison is junk bonds.

I think that's a somewhat decent comparison. Obviously they're not really the same thing, and are very different technically and capabilities wise, but putting technical differences aside, both are investment instruments that are traded at relatively "low valuations", with high risk of "defaulting" and in contrast high yields.

Of course with Bitcoin nobody can "default" on you, because a Bitcoin is not an obligation to pay, but it can crash to zero tomorrow.


...

Maybe we should pitch Bitcoin as an alternative investment for junk bond traders? Wink

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March 27, 2012, 01:50:22 PM
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Your friend is a blonde.
Well, they are not technically the same, but both are encline to make shallow and unfounded judgments.
So they are kind of the same...

Maybe you should pitch him as an alternative investment for junk blondes traders?
ripper234
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Ron Gross


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March 27, 2012, 02:05:40 PM
 #3

Your friend is a blonde.
Well, they are not technically the same, but both are encline to make shallow and unfounded judgments.
So they are kind of the same...

Maybe you should pitch him as an alternative investment for junk blondes traders?

LOI

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Stephen Gornick
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March 28, 2012, 09:21:00 AM
 #4

Of course with Bitcoin nobody can "default" on you, because a Bitcoin is not an obligation to pay,

And that is why there's really no comparison between the two.

but it can crash to zero tomorrow.

If there were a change in the law or somehow the use of bitcoin was declared to be illegal in certain parts of the world, there could be a fantastic drop in value.  Barring that, any move would be telegraphed in advance.  For instance here:
 - http://blockchain.info/charts/n-transactions

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March 28, 2012, 10:57:48 AM
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Of course with Bitcoin nobody can "default" on you, because a Bitcoin is not an obligation to pay,

And that is why there's really no comparison between the two.

but it can crash to zero tomorrow.

If there were a change in the law or somehow the use of bitcoin was declared to be illegal in certain parts of the world, there could be a fantastic drop in value.  Barring that, any move would be telegraphed in advance.  For instance here:
 - http://blockchain.info/charts/n-transactions

I think we would have an astonishing rise in value..(preceded by a drop) like with alle things illegal..

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March 28, 2012, 12:24:48 PM
 #6

Your friend is a blonde.
Well, they are not technically the same, but both are encline to make shallow and unfounded judgments.
So they are kind of the same...

Maybe you should pitch him as an alternative investment for junk blondes traders?

LOI
I would have also said I am laughing on the inside =)

Any significantly advanced cryptocurrency is indistinguishable from Ponzi Tulips.
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Let's talk governance, lipstick, and pigs.


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March 28, 2012, 12:30:15 PM
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With m-of-n and time dependent transactions, I can imagine that junk bonds can be created with Bitcoin. There must be some wizardry that can concoct a document signed with Bitcoin that gambles on futures.

Any significantly advanced cryptocurrency is indistinguishable from Ponzi Tulips.
evoorhees
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March 28, 2012, 03:49:09 PM
 #8

Bitcoin is not at all like bonds, junk or otherwise.

Bitcoin is a commodity with no counter-party risk.
Bonds are debt-obligations with counter-party risk.

If one must compare Bitcoin to something already in existence, the best comparison is to gold or silver, with the primary difference being that Bitcoin is far more volatile, and has nowhere near the long proven track record of the others.

A Bitcoin is an asset - it is a thing which one possesses. It has value due to its properties which make it useful. Every Bitcoin is uniform to every other, and thus it is a commodity (call it a digital commodity if you wish) just like gold, silver, oil and rice.
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March 28, 2012, 07:49:13 PM
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Bitcoin is not at all like bonds, junk or otherwise.

Bitcoin is a commodity with no counter-party risk.
Bonds are debt-obligations with counter-party risk.

If one must compare Bitcoin to something already in existence, the best comparison is to gold or silver, with the primary difference being that Bitcoin is far more volatile, and has nowhere near the long proven track record of the others.

A Bitcoin is an asset - it is a thing which one possesses. It has value due to its properties which make it useful. Every Bitcoin is uniform to every other, and thus it is a commodity (call it a digital commodity if you wish) just like gold, silver, oil and rice.
That is an excellent short answer. TY bro!

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March 28, 2012, 08:43:01 PM
 #10

No no no. Bitcoin is like iron ore at the end of the stone age. Or how about Uranium in the 19th century?

Or like that nuisance deemed to be "unripe gold" -- Platina   (or, as we know it, Platinum):
 - http://dailyreckoning.com/the-other-precious-metal/

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