Bitcoin, the greater fool, yet I’m making a buying plan.


As the leading Bitcoin skeptic among my friends, I find it amusing that I am the only one of us that has any. As mentioned in a previous post, I actually have more interest in several of the alt coins (Litecoin, Primecoin and  Peercoin / PPCoin, specifically), but a few weeks ago I consolidated/sold my holdings of those and bought Bitcoin with it. A tiny amount. So, with Bitcoin at $390 or so (well, $330-390), I’m selling whatever coins I have.

At the same time, I am also setting up a recurring purchase of them going forward, via Bitstamp.

I’m horrible at calling tops… well, no, i take that back. Back in April, after not having paid attention to it at all, a friend asked me out of the blue what I thought of it… I was like what do you mean? And he pointed out it’s tremendous run-up (to $240 or so at the time) and that he was thinking of investing. I don’t think I’ve ever been so emphatic in my life telling him not to, and if there were reliable counter parties available, I would be shorting the shit out of it. And it did crumble then, so i did manage to call the top back then. Of course, the rebound since is mystifying. When people are posting stories to Reddit that they have convinced their non-internet using, non-text message using mothers buy buy into Bitcoin, you know it’s reaching an absurd point.

Let me repeat. People with no access to the internet buying an internet-only currency.

This is not right, and is not going to end well.

The signs are everywhere. The current justification for the price rise is that people in China are getting into it. This is the country that is experiencing its own real estate bubble, just as we did. Except for them, it’s 2005 or 2006, not 2008 or 2009. That a nation gripped in a real estate bubble mentality is starting to leap in to Bitcoin should not be something that adds to the fundamentals of the currency, commodity, or whatever it is. That fact SHOULD make people start looking over their shoulders to make sure they’re at least close to an exit, not cheer and say “see! this proves the fundamentals are there”.

Does that mean that BTC is plummeting from here? No, I can’t promise that. But what I can tell you is that in the 1990′s, the sane crowd, the people saying “um… companies aren’t valued based on the number of eyeballs they generate” or asked “yes, but where is the revenue?” continually were wrong until that one day when they were proven correct. Same with housing – as long as the data showed residential home prices were climbing month after month, anyone that suggested things were out of whack was dismissed if not shunned.

So, I’m saying this: I think Bitcoin has nowhere to go but down from here, but I could be wrong. I’m selling whatever meager holdings I have at the moment, but at the same time, in order to hedge myself, I am also setting up a new recurring buy in order to average back in to it. I’m being SANE, and more importably, I’m staying diversified – on a cost basis, Biitcoin will only be a small percentage of my overall portfolio, and even going forward, my recurring purchases will be less than 20% of what I shift to retirement and investment accounts on a monthly basis.

If it goes up from here unendingly, then yes, i’ll have lost out a little bit. And if it corrects or crashes and burns? Damage will be minimal. Is this even an investment strategy? Hardly. To me it’s saying “okay, that game of hot potato looks like fun, let me try and see if I can not get burned as well”

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