Bitcoin Alternatives and the Market

About 6 months ago, I was beginning to understand what Bitcoin was. At the time, I didn't know a lot about it and ended up not investing in the $150 per coin online currency. In the past recent days, it seems Bitcoin has reached a point where it has gone through a crash, and re-stabilized itself. It is now around $1100 to $1200 depending on the website. Boy' do I regret missing out on buying it at an incredibly low rate. But not only has Bitcoin increased in value, so have other cryptocurrencies. Lightcoin has also increased from $4, to around $39.

I just wanted to raise a few questions for Wendell, Logan, Pistol and other members of Tek Syndicate. These currencies have what I think is an big risk, and great reward. Do you think this currency is still worth investing in given its high volatile value as a first time investor? Or, if Bitcoin continues to do well, should one invest in smaller cryptocurrencies such as Lightcoin? Would investing in a stock such as Intel (INTC) be a better and safer alternative to cryptocurrencies in the long run? Ex: dividends/potential gain of Intel stock rising (around a dollar a year).

I'd love to hear what everyone has to say about this, and possibly see this as a topic in one of Tek Syndicate's YouTube channel, considering their frequently accurate and also funny assumptions on every subject brought up.

Kyle

In order to answer your question as completely as possible, we need to understand a few things.

Firstly, the highly volitile nature of electronic currencies can be attributed to many factors, but here are the 2 major ones (IMO):

1) Scale. It's not used by enough people in enough markets. The community is too small and people don't fully trust it so market fluctuates a lot.

2) Large-scale external forces. Obscenely rich market forces can disrupt volitile markets and make lots of $$ in the process. These methods are illegal in the stock market, but Bitcoin isn't a stock, so it's a grey area legally and I'm sure people are doing it.

Now on to the next topic: Big risk = big reward. This law holds true and steadfast in almost every market on the planet. The greater the risk, the less people want to invest, and so that drives prices down. You (the risk-taker) buy, and if your judgment proves true and the investment pays off, you will get a greater reward than you would have investing in something more secure. Thus, the big risk = big reward phenomenon.

Is the currency still worth investing? That depends almost entirely on adoption of the currency. Not going to get too into economic and political issues here, but basically the US government would suffer greatly if it moved away from the dollar. In fact, the US government and economy at-large would suffer greatly if ANY current dollar-based country moved away from the dollar. Having said that, the logical conclusion is that the US will pose serious hindrances to anything that threatens the dollar, and this is definitely one of them.

How about other countries? Well moving away from the dollar and towards other global-scale currencies hugely benefits countries other than the US. Again, not going to go into why that is, but trust me, it does. Having said that, the logical conclusion is that current dollar-based countries will try to advocate for a currency such at Bitcoins.

So now here's the risk vs reward scenario that is investing in Bitcoins:

Scenario #1) if the US gets it's way and Bitcoins is not used large-scale, it may continue to be used by us nerdy niche people, and continue to be what it is today (perhaps go up, perhaps down). More than likely though this would be the end of Bitcoin. It might not be the end up attempts to overthrow the dollar, but it'll probably be the end of Bitcoin.

Scenario #2) the US doesn't get it's way and Bitcoin is ultimately accepted by multiple countries as a replacement for the dollar. You think the price of Bitcoins is high now? You have No. Frekkin. Idea. If it is accepted large-scale the price would absolutely skyrocket. This may not happen overnight but it would definitely happen. I don't know by how much, but probably more than you even dare to think. As a by-product of scenario #2 the US government would have some major issues and I'm not quite sure how they would deal with things. They would essentially be faced with coming up with something quick, or shutting down. Not going to go into too much, but this is basically because they can't just print dollars anymore to pay for things.

So what do I think? I think it's incredibly high risk, and the chances of Bitcoin making it as a dollar-substitute are close to nill. However, the payoff would be so great that it justifies investment anyways. The reason why I think it isn't going to happen? Because the greatest military superpower of the world... the country that spends more on military than the next 9 countries on the list combined... the country that has a history of supporting the dollar by military means... is threatened by Bitcoin. Even if other countries want to adopt Bitcoin, the US government is not going to let the dollar go down without a fight. You back them into a corner and they'll find a way to beat the problem. The old way that the dollar was supported was by only selling oil in dollars. Perhaps the US will decide to take strategic control of another global natural resource and do the same thing? Even if they don't they still have control over oil.

To sum it up: it's risky. More than likely you'll make some $ in the long-run, there is a significant chance you'll lose everything, and there's a sliver of a chance you'll strike gold.

Sorry if that was too long.