The Simple Reason One Fund Manager Likes Bitcoin

Via Rangeley Capital’s Chris DeMuth Jr.

Through the years, I have held most of my cash in US dollars, but also have held some accounts in Canadian dollars and Chinese renminbi.

However, diversification among the various flavors of state-sponsored fiat currency offers little protection from the fiscal and monetary profligacy that could eventually threaten each of these currencies.

Over the past half-decade, part of my solution to this problem has been to diversify my cash holding into cryptocurrencies such as bitcoin, litecoin, dash, ether, zcash, and monero. While bitcoin is my favorite currency for 2017, it has been far from the best performer among cryptocurrencies. How am I comfortable with substantial exposure to BTC?

In part, because I am a miner.

My experience mining Bitcoin and other cryptocurrencies gives me confidence in how hard it is to increase their supply. It is very hard to mine profitably. It has worked out well only due to their subsequent price increase as opposed to the profitability of mining itself. It is much easier for governments to print currency than for miners to make BTC. As President Trump says, “believe me”.

If you really must join me as a miner, do so only with access to cheap electricity. Venezuela would be particularly good were it not for social unrest and legal complications. Iceland is among the best locales that avoids such problems – it is a beautiful country populated by beautiful people and no social unrest. For the most part, if you want BTC, just buy it..

********

Advertisements

4 thoughts on “The Simple Reason One Fund Manager Likes Bitcoin

  1. You do understand that a major fiat currency failure (US dollar or Yuan), if not immediately – will soon enough disrupt the internet it not take it down completely. The internet is essentially a network of various service businesses – all subject to basic economics and valuations. Thinking that the internet will survive a global economic collapse is extremely erroneous thinking. Thinking that crypto-currencies provide any safe haven from any thing other than minor garden variety market valuation adjustments – is silly. Thinking that the internet will survive major economic disruptions is equally or even more erroneous. So fine – trade the crypto-currency market fascinations, but don’t for a moment consider crypto-currencies as serious economic risk hedges. Even gold is of dubious value in a major economic collapse.

    • I beg to differ about gold not being a protection, assuming we don’t go ‘back to the caves’. (that’s very unlikely as TPTB know what is coming and have the reset ready) Be that as it may here is a great article on why digital currencies are all ‘ponzie’ schemes doomed to fail: https://market-ticker.org/akcs-www?post=232141
      I for one trust physical Gold completely and have all my eggs there, lol

    • Actually, I think that the internet would survive such an economic collapse reasonably intact. One story that I like to refer to when I think about the robustness of the TCP/IP stack (which is the network architecture that underpins the ‘net) is that during the U.S. / Coalition attack on Iraq, much of the Iraqi network traffic remained intact due to the ability of traffic to find alternate routes, which is a feature built into the framework of the internet. If one node or router is down, then traffic will just be routed around it. This is where I pull out my IT badge and say ‘Trust me, I’m an engineer.’ /wink

      One other point on the language of ‘collapse’. An economic collapse to me means that we cease to trade goods and services for currency, because nothing is a stable store of value. Now, we know that any currency can collapse in value, just look at Zimbabwe. I think the important thing to keep in mind is that cryptocurrency is just another store of value. It is another asset that we can trade, which has a value attached to it which humans give it. Block-chain currency like bitcoin relies on the internet, which as I have pointed out remains resilient even in the event of physical destruction. I have diversified into this asset class and will see where it takes me. I don’t have all my eggs in it, but I think this tech has a place in the future of commerce. Those are just my 2 cents.

  2. Crypto-commodities are by design Ponzi schemes with a semi illusory 2nd market, profitably traded by those with an information advantage. Zero sum with money to be made by a very few subsidized by the rest.

Speak On It