Bitcoin - steer clear or not?

[letitroll]

how anyone could describe its price essentially flat for five years plus?

+50%, essentially flat?

Seriously? I'm going to have to explain inflation to bitcoin people?

I really thought bitcoin people (of all people) would understand inflation and erosion of purchasing power? How nominal numbers fool people into thinking things have gone up in value when they havent in purchasing power terms? This stuff is meant to be your bread and butter?!?!

March 2021 BTC was $61,190.87

Today its $70,972

Its gone up you say? But has it >

I was wrong to say flat.....BTC is actually DOWN ( inflation adjusted for purchasing power) over the last five years. If you want to look at nominal numbers go ahead....but like I said you guys are the debasement guys.....lets use debasement thinking here, right?

 

[patfert1]

I made a c8,000% gain on the BTC I bought, but it still wasn't a good idea.

ff you cashed in, it was a good investment (and if you didn't cash in, I give up ). Betting on the 15:20 at Navan is certainly never a good idea, but fun and also might give a return sometimes.

There is a difference between good advice and bad advice which turned out right.

IMO what made his advice "good" and still is, is to invest just 1% of my wealth. Fundamentally not much different than having a small bet in the 15:20 on a nag you fancy.

I would argue that currency and monetary systems are backed by nothing other than market confidence.

I would agree, that's why the dollar is historically stronger than the peso, for example.
But the dollar is backed by market confidence in one of the world's strongest economies, whereas BTC is backed by just market confidence and very little (or nothing?) else.

If the figures somehow existed (I presume they do not), it would be interesting to see what quantity of BTC transactions are for purposes of transactions such as payments, moving from unstable currency into BTC, etc... versus speculative investment. I hazard a guess the vast majority is investment. The FOMO factor is very much at play too (or at least, was).

 

[Sister Sara]

I'm going to have to explain inflation to bitcoin people?

Thanks @letitroll no need to explain inflation.

The feature you may need to hone in on yourself, and I cannot keep emphasising it enough for the Bitcoin-to-zero crew, is time.

08 Feb 2021 (five yrs plus)- $44089

The price of BTC today is $70,434.35

In addition, over the 5yr period the price of bitcoin has fallen to $16,567 in Dec 2019 and risen to $120,781 in July 2025. By any reasonable analysis you could not label that price as "essentially flat".

You have a compulsion to revert to selective timeframes to suit your narrative. Your interprepation of

BTC for five plus years

has conveniently morphed into less last 5yrs.

Time, is a critical factor I keep emphasising for any investment strategy. I think you may need to work on it.

 

[Fortune]

and if you didn't cash in, I give up

Don't worry, all cashed in and CGT paid. It's not free money from fools until it's in your bank account.

 

[letitroll]

08 Feb 2021 (five yrs plus)- $44089

The price of BTC today is $70,434.35

Ok lets play your game....$44,089 from 2021 is really $54,321.13 in todays dollars......BTC went up 28..86% in five years.

Thats a 5.28% annualized return or CAGR.

Do you realize how poor an absolute return that is? When you factor in the extreme volatility of the underlying asset (BTC) on which that return was made its truly abysmal. If you we're in a hedge fund and you put on that position with that level of volitailty and made that return over five years your Portfolio Manager would fire you.

In contrast and to take the most mundane thing you can think. Look at the performance of Bank of Ireland over the same period:

The 414.71% return is not even inclusive of dividends....when you add those in its something like 450%.

The Bank of Ireland five year CAGR is 40.9%!!!! - thats a 40.9% annualized return.....and look at the chart notice anything?.....the volatility is way way lower, like not even close to the vol in BTC.

 

[Corola]

+29% after inflation isn't flat either.

 

[letitroll]

+29% after inflation isn't flat either.

I don't think you fully get how poor an investment BTC has been over the last five years in both absolute terms, inflation adjusted terms and most importantly of all volatility/risk adjusted terms relative to alternative investments. I mean I picked Bank of Ireland as lower vol, lower risk alternative staring people in the face in Ireland (up 450% over the period) but I could have picked SPY, QQQ etc.

This is an asset with the volatility of a scammy penny stock (4 times the vol of SPY/QQQ) and returns substantially below that of the S&P and QQQ over the last five years.

In investing the more risk you take on (measured by vol) the higher your return should be.......BTC in the last five years has failed to deliver returns commensurate with its underlying volatility when you consider the raft of easy to reach alternatives (SPY, QQQ). BTC holders have statistically underrewarded for the risk they took.

 

[Sister Sara]

Well, @letitroll I wasn't playing games I was dealing with the information you were putting forward.

And no, a high volatility means high risk meaning prices could adjust negatively very quickly so an average 5.28% annualised return on a highly risky asset (over 5yrs) is quite impressive in my opinion - particularly an asset that has recent fallen by 50% or so. It could easily have been on average -5.28%, given the risk.

Clearly you are playing games, with dates, interpretations of what is/is not a good return (wholly subjective) but to push out Bank of Ireland shares!!

Tell me, what impact did the buyback and cancelling of 50m or so BoI shares in that period have on the price?
Once you have factored that in then come back with the 5yr graph.

 

[Corola]

most importantly of all volatility/risk adjusted terms relative to alternative investments.

If you only look at that exact five year period from Feb-21 sure. But look at the investor from 6 months earlier or 6 months later and it's a different story.

 

[Duke of Marmalade]

BTC in the last five years has failed to deliver returns commensurate with its underlying volatility

One way to look at this is that if you had, say, a 300% geared position on S&P you would have similar roller-coaster jitters as you get from BTC but three and a half times the compensation.
Of course gamblers don't get the jitters; they get a buzz so for them BTC is perfect.

 

[letitroll]

Tell me, what impact did the buyback and cancelling of 50m or so BoI shares in that period have on the price?
Once you have factored that in then come back with the 5yr graph.

Whats the problem with BOI buying back shares with shareholders money increasing their proportional ownership of the underlying company? This is smart capital allocation and exactly what I want the companies I hold to do if the shares are undervalued or even fairly valued. This is smart capital allocation and basically shareholder remuneration 101. Yet you speak about it like they cheated somehow. Nope this is normal - much of SPY's returns over the last decade has been dervied by companies shrinking their shares outstanding.

BTC'ers are in love in with the 21m coins outstanding narrative.....wouldn't it be better (for an existing holder) if the BTC agreed to alter the final supply total to 20, 18 or 16 million....wouldnt it increase the scarcity. Well with companies shrinking the share count drives up underlying earnings per share (EPS). You hold stocks in the hope that the business over time delivers higher EPS either organically via growing the business franchise or inorganically by smart M&A or simply shrinking the sharecount at prices that are accretive.

The fact you seem to have an issue with BOI shrinking its sharecount over this period tells me alot about what you dont know about financial markets.

 

[Corola]

Do those figures need an AI Disclaimer @Duke of Marmalade?

 

[letitroll]

Cheers yeah exactly

x4 times the risk/volatility to underperform SPY & Gold.

If you worked in a hedge fund in London and BTC was your 'pick' in 2021.......you'd have been fired by now......5yr sharpe ratio of 0.22!!!!!!!!!!! Oh my goodness.

 

[Duke of Marmalade]

Do those figures need an AI Disclaimer @Duke of Marmalade?

If you mean should I distance myself from them because I sourced them on Gemini rather than Investopedia I don't accept that. They look reasonable to me but anything along these lines that is posted on this site does not originate with the poster; it originates from some source.

 

[Corola]

If you worked in a hedge fund in London and BTC was your 'pick' in 2021.......you'd have been fired by now......5yr sharpe ratio of 0.22!!!!!!!!!!! Oh my goodness.

Now compare that to the 3yr and 6yr Sharpe ratios.

 

[Duke of Marmalade]

Now compare that to the 3yr and 6yr Sharpe ratios.

I'm on the case, with the help of my advisor Gemini of course.

 

[Duke of Marmalade]

@Corola
Of course that Table was influenced by the recent market "corrections" so I asked Gemini (I am not disclaiming her ) to give me the same table for a year ago. Here is what she produced.

 

[Corola]

Thanks Duke, so the 3yr manager is fired and the 6yr manager is promoted.

 

[Duke of Marmalade]

Thanks Duke, so the 3yr manager is fired and the 6yr manager is promoted.

I was never a great believer in the Sharpe Ratio.

 

[letitroll]

never a great believer in the Sharpe Ratio.

Not perfect of course......but volatility adjusted returns are very important especially when one thinks about the prototypical BTC investor which is a retail novice......such volatility makes even the most blue sky return period you can find in the chart purely theoretical......because homoeconmicus or the median holder of BTC would not be able to hold across the various drawdowns and even upward voltiality......BTC's violent volatility is a recipe for buying high and selling low which is what the majority of BTC speculators end up doing enmasse and the research shows.....if anything the BTC 'market' with its very high transaction costs (Coinbase etc.) exists to transfer wealth not to retail but away from retail. In fact you couldn't design a much better mouse trap to do that than BTC.....well you can I should say that is BTC imitiators which are the intial token offering (ITO's) which have even worse insider outsider dynamics than even BTC.