After years of not understanding Bitcoin at all I finally bought one — as insurcance
I’ve heard about Bitcoin for years now. Like everyone else who lives in the 21st Century. But I never really looked into it. This also means: I missed out on a lot of potential gains. Anyway with the FED making the money printer go full brrrrr mode this last couple of months I thought to myself: Maybe it’s a good idea to own some assets in my portfolio which quantity can’t be inflated. So a few months ago I opened up a Coinbase account and bought one bitcoin for roughly 6k.
I’ve given a lot of thought into buying this. When researching I could still hear the words of Warren Buffett in my head: “Cryptocurrencies basically have no value,” he said. “You can’t do anything with it except sell it to somebody else.”
Videos of posers with sports cars and villas, promises of fast money and many experts who were critical of the currency have also not created more confidence in this currency. At least not for me. Bitcoin had a rather moderate reputation from the beginning.
Has that changed?
These guys are still exist, trying to sell you courses and what not. But the voices of really successful investors getting louder. One of them is Chamath Palihapitiya, explaining over, over and over again, why it makes sense to put 1 percent of your net worth in Bitcoin. I found a piece back from 2013 written by him on Bloomberg, explaining very good why he bought.
„Bitcoin was launched in 2008 during the depths of the financial crisis. It is a growing phenomenon that you can find out more about here, here and here. In short, it’s a crypto-currency that is completely electronic, peer-to-peer, unregulated (or unregulate-able) and uncontrolled (or uncontrollable) by any government or agency. Each Bitcoin is simply a long string of numbers and letters that can identify itself within the Bitcoin economy to be unique and legitimate. Bitcoins can’t be copied or tampered with; they don’t exist in the real world — only on your phone, computer or tablet — but they have the same value as physical currency.“
He goes on to explain that there can be a maximum of 21 million Bitcoins.
Of course I thought about the question: How much can Bitcoin possibly be worth?
Chamath Palihapitiya draws a comparison to gold:
„Well, the value of all of the gold in the world is roughly $8 trillion. Assuming that Bitcoin can replace gold as a more useful store of value, then the upper bound of each Bitcoin would be almost $400,000 ($8 trillion/21 million bitcoins).“
That would be roughly 40x from here.
„I’ve told my friends that it is entirely rational to allocate one percent of your assets to Bitcoin — as I have. Call it schmuck insurance. As the 2008 crisis proved, schmucks can cause a world of damage.“
That’s pretty much what I did and what got me sold on this idea at the end of the day. Theres not so much I can loose. I bought one Bitcoin. It’s a good bit more than one percent of my assets as of right now (thanks to the Bitcoin bull run in the last months…).
Worst case scenario: Bitcoin goes to zero. I loose some of my equity. But if everything else goes to zero — who knows?
I am planning to add more in the future.