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lsparrish comments on Open Thread, April 15-30, 2013 - Less Wrong
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I wonder if many people are putting off buying a bitcoin to hang onto, due more to trivial inconvenience than calculation of expected value. There's a bit of work involved in buying bitcoins, either getting your funds into mtgox or finding someone willing to accept paypal/other convenient internet money sources.
What if we're putting off buying a bitcoin because we, uh, don't want to?
Ok... Well... If that's the case, and if you can tell me why you feel that way, I might have a response that would modify your preference. Then again, your reasoning might modify my own preference. Cryptic non-argument isn't particularly interesting, or helpful for coming to an Aumann Agreement.
Edit: Here is my response.
1) I am not at all convinced that investing in bitcoins is positive expected value, 2) they seem high-variance and I'm wary about increasing the variance of my money too much, 3) I am not a domain expert in finance and would strongly prefer to learn more about finance in general before making investment decisions of any kind, and 4) your initial comment rubbed me the wrong way because it took as a standing assumption that bitcoins are obviously a sensible investment and didn't take into account the possibility that this isn't a universally shared opinion. (Your initial follow-up comment read to me like "okay, then you're obviously an idiot," and that also rubbed me the wrong way.)
If the bitcoin situation is so clear to you, I would appreciate a Discussion post making the case for bitcoin investment in more detail.
regulatory uncertainty swamps any quantitative analysis I think.
The standard advice is that normal people should never try to beat the market by picking any single investment, but rather put their money in index funds. The best publicly available information is already considered to be reflected in the current prices: if you recommend in buying a particular investment, that implies that you have knowledge that the best traders currently on the market do not have. As a friend commented:
So if you think that people should be buying Bitcoins, it's up to you to explain why the standard wisdom on investment is wrong in this case.
(For what it's worth, personally I do own Bitcoins, but I view it as a form of geek gambling, not investment. It's fun watching your coins lose 60% in value and go up 40% from that, all within a matter of a few days.)
Bitcoins are more like investing in a startup. The plausible scenarios to bitcoins netting you a return commensurate with the risk involve it disrupting several 100 billion+ markets (paypal, western union). I think investing in startups that have plausible paths towards such disruptions are worthy of a small portion of your portfolio.
It should be significantly better on may 6th presuming the coinlab/silicon valley bank/mtgox stuff goes live.
At the level of buying just one bitcoin the convenience is more than trivial. Even just in the financial burden of the bank transfers changes the expected value calculation quite a bit (allthough the cost seems to be reducing somewhat).