# So... how does one best invest in Bitcoins?
**URL:** https://boards.straightdope.com/t/so-how-does-one-best-invest-in-bitcoins/655494
**Category:** Factual Questions
**Created:** [April 12, 2013, 12:42pm UTC](https://boards.straightdope.com/t/so-how-does-one-best-invest-in-bitcoins/655494 "2013-04-12T12:42:51Z")
**Posts on this page:** 20
**Page:** 1
### Author:  [@Nanoda](https://boards.straightdope.com/u/Nanoda)
#### Post date: [April 12, 2013, 12:42pm UTC](https://boards.straightdope.com/t/so-how-does-one-best-invest-in-bitcoins/655494/1 "2013-04-12T12:42:51Z")
And what should I know about it?
I have no interest in actually mining bitcoins (just like my friend invests in silver but doesn’t mine it) - but I’m not sure how that happens. Apparently I can open an account at mtgox, but is that the safest? Cheapest? My friend doesn’t trust banks, so he has physical silver - can I “download” my bitcoins? Is that actually safer?
I’m in Canada, if that makes a difference.
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### Author:  [@Simplicio](https://boards.straightdope.com/u/Simplicio)
#### Post date: [April 12, 2013, 12:57pm UTC](https://boards.straightdope.com/t/so-how-does-one-best-invest-in-bitcoins/655494/2 "2013-04-12T12:57:52Z")
Six months ago.
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### Author:  [@XT](https://boards.straightdope.com/u/XT)
#### Post date: [April 12, 2013, 1:22pm UTC](https://boards.straightdope.com/t/so-how-does-one-best-invest-in-bitcoins/655494/3 "2013-04-12T13:22:30Z")
[You don’t want to.](http://www.cnn.com/2013/04/11/opinion/angel-bitcoin-currency/index.html?hpt=hp_t3)
> [@](#):
>
> (CNN) – In recent days, Bitcoins have enjoyed a media buzz as the value of one Bitcoin jumped on several Bitcoin exchanges to more than $200 per Bitcoin. But by Wednesday, it fell to $105.
>
> Bitcoins are an attempt at creating an electronic currency that is beyond the control of any government. They are created through a digital mining system, in which digital “miners” are granted Bitcoins by using their computers to do computations that verify Bitcoin transactions. Pretty clever.
>
> With allegedly strict rules on the creation of Bitcoins, the money supply is limited. Theoretically, no government can water down the Bitcoin with any type of quantitative easing. As a result, Bitcoins seem to present the best of all possible worlds – the convenience of modern digital payment technology and the stability of a fixed money supply.
> [@](#):
>
> The near anonymity built into the Bitcoin system keeps funds away from the prying eyes of tax collectors, who are getting ever better at shutting down tax havens. This potential for anonymity makes the currency ideal for drug smugglers, terrorists and money launderers, as well as the merely paranoid.
>
> So are Bitcoins the currency of the future? I think not.
>
> No one really knows who is really behind Bitcoins, as the creator is just a pseudonym Satoshi Nakamoto. That in itself should be a huge red flag. I would certainly not trust my life savings to some mysterious computer algorithm created by shadowy anonymous characters in a system that attracts underworld types.
>
> One of the self-proclaimed largest Bitcoin exchanges is Mt. Gox. The name originally stood for Magic: The Gathering Exchange, an online site designed to trade cards used in playing the card game popular with the younger set. An exchange based on trading kiddy cards does not seem like a sound foundation for a monetary system.
>
> There is no government regulating participants in the system to prevent fraud and abuse. I would not be surprised if the Bitcoin mining software becomes a magnet for computer viruses. After all, the tax evaders, drug dealers and terrorists attracted to Bitcoin would not be likely to cooperate with authorities when they have been hacked and robbed.
But if you insist on throwing your money away, [here](https://en.bitcoin.it/wiki/Buying_Bitcoins_%28the_newbie_version%29) is a link on buying the things.
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### Author:  [@Colophon](https://boards.straightdope.com/u/Colophon)
#### Post date: [April 12, 2013, 3:14pm UTC](https://boards.straightdope.com/t/so-how-does-one-best-invest-in-bitcoins/655494/4 "2013-04-12T15:14:22Z")
Coiuld I just hijack this to ask about the “mining” process? As I understand it, users can “earn”, or at least “create” bitcoins by running computer programs, but I have also read that the rate of creation of Bitcoins is fixed, with the rate at which they are issued gradually tapering off until the last one is issued some time next century.
So what happens as more people start “mining”? Presumably you get fewer bitcoins for the same amount of work, right?
I’m sure I must be missing something but I really don’t see the point in bitcoins…
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### Author:  [@Duckster](https://boards.straightdope.com/u/Duckster)
#### Post date: [April 12, 2013, 3:52pm UTC](https://boards.straightdope.com/t/so-how-does-one-best-invest-in-bitcoins/655494/5 "2013-04-12T15:52:23Z")
[Bitcoin has crashed hard this week](http://money.cnn.com/2013/04/12/investing/bitcoin-bubble/index.html?iid=Lead).
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### Author:  [@Procrustus](https://boards.straightdope.com/u/Procrustus)
#### Post date: [April 12, 2013, 4:04pm UTC](https://boards.straightdope.com/t/so-how-does-one-best-invest-in-bitcoins/655494/6 "2013-04-12T16:04:22Z")
> [@Duckster](#):
>
> [Bitcoin has crashed hard this week](http://money.cnn.com/2013/04/12/investing/bitcoin-bubble/index.html?iid=Lead).
Isn’t that usually the time to buy?
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### Author:  [@HMS\_Irruncible](https://boards.straightdope.com/u/HMS_Irruncible)
#### Post date: [April 12, 2013, 4:12pm UTC](https://boards.straightdope.com/t/so-how-does-one-best-invest-in-bitcoins/655494/7 "2013-04-12T16:12:08Z")
> [@XT](#):
>
> [URL=“[http://www.cnn.com/2013/04/11/opinion/angel-bitcoin-currency/index.html?hpt=hp\_t3](http://www.cnn.com/2013/04/11/opinion/angel-bitcoin-currency/index.html?hpt=hp_t3)”]No one really knows who is really behind Bitcoins, as the creator is just a pseudonym Satoshi Nakamoto. That in itself should be a huge red flag. I would certainly not trust my life savings to some mysterious computer algorithm created by shadowy anonymous characters in a system that attracts underworld types.
Oh for Pete’s sake. If Jack the Ripper had invented long division, it would still be long division. There are a number of reasons to be wary of bitcoin, but one journalist’s fear of math is not one of them.
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### Author:  [@Cheesesteak](https://boards.straightdope.com/u/Cheesesteak)
#### Post date: [April 12, 2013, 4:16pm UTC](https://boards.straightdope.com/t/so-how-does-one-best-invest-in-bitcoins/655494/8 "2013-04-12T16:16:13Z")
If something has an inherent value, like a metal or shares of a company with assets, buying after a crash makes some sense, there is a floor of sorts for the value. For an item with no inherent value, you may just enter partway through the decline to zero.
My father invested in a couple of failing companies, based on “How much lower can it go?” Welcome to the land of $0 per share.
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### Author:  [@gazpacho](https://boards.straightdope.com/u/gazpacho)
#### Post date: [April 12, 2013, 4:32pm UTC](https://boards.straightdope.com/t/so-how-does-one-best-invest-in-bitcoins/655494/9 "2013-04-12T16:32:11Z")
> [@HMS\_Irruncible](#):
>
> Oh for Pete’s sake. If Jack the Ripper had invented long division, it would still be long division. There are a number of reasons to be wary of bitcoin, but one journalist’s fear of math is not one of them.
You do have a point but the thrust of this journalist’s fear is a big problem with bitcoin. All money even gold is based on trust. The trust that a large enough number of people will believe in its value. You have to trust that this complicated algorithm for ensuring the scarcity and uniqueness is sound. Very few people have the knowledge of math and computer security to make that evaluation. So it is hard to see bitcoins growing to be used by enough people to give it some stability.
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### Author:  [@Absolute](https://boards.straightdope.com/u/Absolute)
#### Post date: [April 12, 2013, 9:37pm UTC](https://boards.straightdope.com/t/so-how-does-one-best-invest-in-bitcoins/655494/10 "2013-04-12T21:37:28Z")
Well, you guys are really missing the point.
> [@Cheesesteak](#):
>
> If something has an inherent value, like a metal or shares of a company with assets, buying after a crash makes some sense, there is a floor of sorts for the value. For an item with no inherent value, you may just enter partway through the decline to zero.
>
> My father invested in a couple of failing companies, based on “How much lower can it go?” Welcome to the land of $0 per share.
Like most currencies, Bitcoin does not have an inherent value. That is not the point. You might as well say “It doesn’t make any sense to buy Euros, they’re just pieces of paper.”
What is the inherent value in the US dollar, or the Euro? None. The only value is that it is widely accepted and widely used. Bitcoin is a currency that is untraceable and totally electronic and instantaneous - it is like cash without the difficulty of having to carry around, hide, securely store or transport large volumes actual cash. That is valuable in itself. Additionally, unlike the USD and EUR, the supply of Bitcoins is limited, and the rate at which new Bitcoins will be added to the economy is known in advance - it is impossible for a government to “print Bitcoins”.
Yes, if you buy some bitcoins, you are taking the risk that the currency will lose popularity and they will end up worthless and not tradeable for anything. But as long as the currency remains popular - and I see no reason why it won’t - they will have value, and if it grows in popularity, their value will increase because the supply is strictly limited.
> [@](#):
>
> You do have a point but the thrust of this journalist’s fear is a big problem with bitcoin. All money even gold is based on trust. The trust that a large enough number of people will believe in its value. You have to trust that this complicated algorithm for ensuring the scarcity and uniqueness is sound. Very few people have the knowledge of math and computer security to make that evaluation. So it is hard to see bitcoins growing to be used by enough people to give it some stability.
How much of the technology that you use every day do you understand personally? Presumably you have in the past been willing to be flown on airplanes even though you don’t have the personal knowledge of aerodynamics, structural engineering, computer programming, maintenance, etc. to verify that it won’t crash. You trust other people to take care of that for you. BitCoin has been around for a few years already, and I’m sure it’s recent popularity has drawn tons of security researchers who are now studying it. If, in another few years, they have not found any fundamental vulnerabilities, won’t that be enough for most people?
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### Author:  [@XT](https://boards.straightdope.com/u/XT)
#### Post date: [April 12, 2013, 9:44pm UTC](https://boards.straightdope.com/t/so-how-does-one-best-invest-in-bitcoins/655494/11 "2013-04-12T21:44:32Z")
> [@HMS\_Irruncible](#):
>
> Oh for Pete’s sake. If Jack the Ripper had invented long division, it would still be long division. There are a number of reasons to be wary of bitcoin, but one journalist’s fear of math is not one of them.
I don’t think his fear of math was the main concern there. 😛
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### Author:  [@Deeg](https://boards.straightdope.com/u/Deeg)
#### Post date: [April 12, 2013, 9:59pm UTC](https://boards.straightdope.com/t/so-how-does-one-best-invest-in-bitcoins/655494/12 "2013-04-12T21:59:32Z")
I’m trying to start a conspiracy theory that Satoshi Nakamoto is just a front for the UN and that Bitcoin is an attempt by the UN to move us to a a one-world currency. It makes more sense then most whacky CS.
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### Author:  [@mr.jp](https://boards.straightdope.com/u/mr.jp)
#### Post date: [April 12, 2013, 10:29pm UTC](https://boards.straightdope.com/t/so-how-does-one-best-invest-in-bitcoins/655494/13 "2013-04-12T22:29:52Z")
So, first of all, according to the efficient market hypothesis, you can’t predict where the market for bitcoins is going to go using the rules you are mentioning (or any rule, really.) If you could, then other people could too, and they would have already bought / sold them, and thus the value would already reflect this knowledge.
Second, I think bitcoin are a really bad idea, and I don’t want to support the early adaptors for that reason. They cost about as much to mine as they are worth. A lot of people mine them, using actual resources taken away from the world, only to gain bitcoins. It’s a huge waste of processing power that could’ve been spent solving protein folding or a lot of other things. This could be acceptable if bitcoins had potential use that would make a valuable contribution to the world by existing. But I don’t think they do. A great thing would be if they could facilitate easy microtrading, which I think would be of benefit to the internet. But the transactions are not that simple, and they are relatively costly, so this is not something bitcoin can do. Although potentially a different virtual monetary system could.
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### Author:  [@gazpacho](https://boards.straightdope.com/u/gazpacho)
#### Post date: [April 12, 2013, 11:26pm UTC](https://boards.straightdope.com/t/so-how-does-one-best-invest-in-bitcoins/655494/14 "2013-04-12T23:26:53Z")
> [@Absolute](#):
>
> Bitcoin is a currency that is untraceable and totally electronic and instantaneous - it is like cash without the difficulty of having to carry around, hide, securely store or transport large volumes actual cash. That is valuable in itself. Additionally, unlike the USD and EUR, the supply of Bitcoins is limited, and the rate at which new Bitcoins will be added to the economy is known in advance - it is impossible for a government to “print Bitcoins”.
Bitcoins are not really untraceable in order for the currency to work the transactions are public and you can determine what accounts are trading with other accounts and come up with a pretty decent idea of how accounts map to real people.
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### Author:  [@njtt](https://boards.straightdope.com/u/njtt)
#### Post date: [April 12, 2013, 11:53pm UTC](https://boards.straightdope.com/t/so-how-does-one-best-invest-in-bitcoins/655494/16 "2013-04-12T23:53:21Z")
> [@Absolute](#):
>
> What is the inherent value in the US dollar, or the Euro? None. The only value is that it is widely accepted and widely used.
And the fact that they are issued by powerful governments, with police forces, armies, and taxation systems, governments mostly answerable (to a considerable extent) to the population they rule over, and with a very strong interest (shared by most other powerful institutions, including other governments, even most that are otherwise relatively hostile to them) in keeping their currencies stable and valuable. Bitcoin has none of that. Regular fiat currencies may not be backed by gold any more, but they are still backed by _power_. Bitcoin is not. Its value is completely imaginary, sustained only by people’s belief in it (and, again unlike the dollar, euro etc., most people don’t believe in the bitcoin, and have no reason to).
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### Author:  [@morgensd](https://boards.straightdope.com/u/morgensd)
#### Post date: [April 13, 2013, 12:06am UTC](https://boards.straightdope.com/t/so-how-does-one-best-invest-in-bitcoins/655494/17 "2013-04-13T00:06:33Z")
The algorithm for bitcoin has been published for several years so there has been plenty of opportunity for peer-review to point out flaws. I can’t claim to understand the math but the basic concept seems sound. Maybe a quantum computer would be able to replicate the block chain within the lifetime of the universe but short of that bitcoin seems rather resistant to forgery. The Fed can basically “print” more money anytime it wants by purchasing securities with funds created electronically (quantitative easing). It’s seems far more insecure to me than bitcoin. If some mope at the Fed had the right access could he create a few billion dollars, buy Treasury bonds with it and transfer to an off- shore account?
morgensd
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### Author:  [@eltro102](https://boards.straightdope.com/u/eltro102)
#### Post date: [April 13, 2013, 1:08am UTC](https://boards.straightdope.com/t/so-how-does-one-best-invest-in-bitcoins/655494/18 "2013-04-13T01:08:17Z")
[http://preev.com/](http://preev.com/) is my fav bitcoin price tracker
if you feel like you must, use mtgox - they are the safest (and the most accused of market manipulation by lag and fake volume).
For your wallet, use blockchain.info, or if you are investing large amounts, use the bitcoin wallet storage that comes from the bitcoin website, put it on a memory stick and encrypt it (bear in mind you’ll have to download a few gbs to update your wallet and catch up to the blockchain)
Bear in mind that the whole market is based on speculation and confidence, and mtgox hasn’t really been inspiring that in anyone but the most ardent bitcoin-ers recently.
Bitcoin has value because people believe it does. It’s use on silkroad and other websites doesn’t matter because the value of items on them is pegged to the dollar, bitcoin just being a go-between laundering stage. The value of bitcoin is due to speculation. Not actual use, but speculation. This speculation is deeply entwined with the precived trade volume, depth and fluidy of the market.
Magic the Gathering online exchange (MtGox) is accused of atleast manipulation volume, but nothing solid has come up yet (aside from mountains and mounains of lag).
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### Author:  [@Billdo](https://boards.straightdope.com/u/Billdo)
#### Post date: [April 13, 2013, 1:13am UTC](https://boards.straightdope.com/t/so-how-does-one-best-invest-in-bitcoins/655494/19 "2013-04-13T01:13:04Z")
> [@morgensd](#):
>
> . . . but short of that bitcoin seems rather resistant to forgery.
This seems to me to be the biggest problem with the whole idea. Although the supply of legitimate bitcoin is supposed to be limited by the terms of the protocol, once someone figures out how to forge them, the whole currency is kaput. As an initial matter, forged bitcoin will expand the money supply and reduce the value. More significantly, once word that forgery is possible gets out, people will lose confidence in the currency, start selling it off, and the value will quickly decline, most likely to near zero.
For government issued money, the issuing government can take steps to prevent forgery, such as changing the currency features and prosecuting the forgers. In the unregulated world of bitcoin, there is no agency that can act to protect the currency, either legally or practically.
In essence, virtually all of the value of the currency is tied into its being “rather resistant to forgery.” Once the resistance is breached, it becomes worthless.
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### Author:  [@njtt](https://boards.straightdope.com/u/njtt)
#### Post date: [April 13, 2013, 1:18am UTC](https://boards.straightdope.com/t/so-how-does-one-best-invest-in-bitcoins/655494/20 "2013-04-13T01:18:35Z")
> [@morgensd](#):
>
> The Fed can basically “print” more money anytime it wants by purchasing securities with funds created electronically (quantitative easing).
Yes, and that is one of the things that makes government issued currencies _much_ better than scrips like bitcoin. Governments have mechanisms by which they can control and stabilize both the value and the supply of their currencies, unlike bitcoins whose value is totally at the mercy of (not to say totally created by) speculation, and whose supply is inelastic and outside anyone’s control.
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### Author:  [@HMS\_Irruncible](https://boards.straightdope.com/u/HMS_Irruncible)
#### Post date: [April 13, 2013, 1:24am UTC](https://boards.straightdope.com/t/so-how-does-one-best-invest-in-bitcoins/655494/21 "2013-04-13T01:24:02Z")
> [@XT](#):
>
> I don’t think his fear of math was the main concern there. 😛
You’re right, ‘ignorance’ is really a much more apt term than fear, unless of course he’s being deliberately deceptive.
Seriously, a “mysterious algorithm?” Yes, it’s so mysterious that it has [its own Wikipedia entry explaining exactly how it is computed,](http://en.wikipedia.org/wiki/Bitcoin#Bitcoins). Of course, in order to learn that, one would have to go to a shadowy anonymous location where one can search some of the most scary things on the internet. All the criminals call it “Google.”
Of course, even though he didn’t feel like it was important to do even minimal fact-checking of his central criticism, I’m sure he’s got his i’s dotted and t’s crossed on his peripheral points as well.
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