One of our most popular recent podcasts on the Precious Metals Investing Podcast has been Bitcoin – What You Need to Know. Well many subscribers have asked for a transcript of that podcast. I certainly want to meet the needs of my viewers here at PreciousMetlalsInvesting.com. I didn’t know anything about producing a transcript from audio, especially one with several voices. So I went to the top authority – Watson. No I don’t mean Dr. Watson of Sherlock Holmes fame. I mean Watson of IBM fame. So after learning how it is supposed to be done I let Watson attack the task of transcribing the podcast. I though I would just upload the audio file and a text version ready for posting would pop out the other side. Well unfortunately that’s not reality at this stage in development. I think Watson is about 90-95% accurate but it still does take considerable time proofreading and correcting before posting. So if you have particular Precious Metals investing Podcasts or even videos here at Precious Metals Investing.con that you would like transcribed let me know. If I get enough requests I will make transcripts of the desired episodes.
Here’s a Link to the original Podcast if you would rather listen:
Bitcoin – What You Need to Know – Precious Metals Investing Podcast
Welcome to precious metals investing dot com my name is Ted Sudol I have the pleasure of having as my guests today Paul Mladjenovic, the author of Precious Metals Investing for Dummies
Good to be back on the program Ted it’s been awhile. Today we will talk about some topics all the rage right now – bit coin and related topics.
Tell me what your thoughts on it because on this issue I have my side of it and you have your side of it. So let’s hear it.
As you said there’s a lot of interest and speculation in bitcoin and when you talk about speculation there have been some wild swings in prices. I think that represents lot of speculation and there are some dangers I think people should be aware of when they invest in bitcoin. Most people have this impression of safety and security with bitcoin. They feel their investments in bitcoin are safe. Yet the records over the history of bitcoin show that there have been thousands of bit coins lost and there have been about a dozen hacks, the most famous of which is the Mount Goth hack. These hacks lead to investor losses of thousands of bitcoins and millions of dollars. It is not unusual for one bitcoin hack to lead to a loss of 50 to 100 million dollars. Once someone gains control of your bitcoin its gone – you’ve lost it. Since there is no centralized control or regulation there is no one you can go to to recover the lost bitcoins. Bitcoin enthusiasts say that the technology is more secure today but I’m sure the hackers are also more sophisticated. Several of the hacks and large scale hundred million dollar bitcoin losses have happened in 2016 and 2017 so obviously not all the problems are fixed.
Let’s put out a golden rule or two that I’d like to impress upon the audience. Okay I think golden rule number one is just to keep it simple. Don’t consider bitcoin, at this point anyway, an investment please consider it a speculation. I think this is an important distinction. I’m always worried when I see tons of people plowing into something and they don’t understand the full breath. I mean there’s a lot of mature venues that we’ve known about for decades obviously things like stocks and bonds and exchange traded funds and so forth with that’s great – but bitcoin is a different animal.
Some people might consider it potentially a diversification away from things like currencies such as the dollar, the yen, the euro, and so forth. I think that’s a that’s a valid way of looking at bitcoin. But the point is that there are no guarantees here I think bitcoin does share some pitfalls and some of the same limitations as fiat currencies.
Gold, silver and the physical precious metals have been a good diversification away from paper assets that have stood the test of time for thousands of years. I also think that those of you in the precious metals should also be aware of bitcoin and related cryptocurrencies. Diversity is the right way to invest.
Right exactly because let me tell you something if all have is bitcoin as part of your investment portfolio that’s dangerous.
If the power goes out or a clever hacker comes by the point is you still have your gold and silver hopefully in safe keeping elsewhere.
What do you think are the biggest problems or threats to bitcoin?
There are several things that concern me. I wonder if a technological development for instance, the development of quantum computers will reduce the time needed to create a bitcoin to such a point where the equation doesn’t work anymore. Part of the value of bitcoin is based on the computer effort and time it takes to “mine” a bitcoin. If quantum computers reduce that time to minutes rather than days what will that mean for the value of bitcoin? The value of bitcoin is based on its supposed scarcity. By design the blockchain is limited to only producing 22 million bitcoins.
However bitcoin also allows an unlimited number of forks each of which is limited to the same 22 million coin limit. What will that do to the value of bitcoin or the perception of scarcity? Another concern is the inefficiency of bitcoin creation and bitcoin transactions. Today the electric consumption used in creating bitcoins exceeds that of some nations. The cost of a single bitcoin transaction is measured in dollars whereas the cost of a credit card transaction is measured in tenths of a cent.
Part the reason why any particular asset be a paper, hard assets, or in this case a digital asset goes up, it is when the demand for it increases. And it has not been over produced. Many currencies in human history have failed because the great flaw in currencies produced by governments is that they tend to often to be over produced. If a government needs an extra trillion dollars the politicians just vote to start up the printing presses. The ability to produce a billion dollars or a trillion or whatever of a given means of exchange or currency is a very powerful flaw that human nature has fallen victim to.
But you could run the risk possibly.
Bitcoin does have an ultimate cap on the number of bitcoins that can be created At least in this generation of the bitcoin scheme of things. But things can change. You know I think a truism in investing is you should have an understanding of what you’re investing and if you don’t understand it don’t invest in it. We are not saying that we are dinosaurs with our heads stuck in the sand. What we’re saying is we’re looking at this with our eyes wide open you should do your research and of course have a diversification into the precious metals
The track record for the precious metals as a source of value has survived through thousands of years. Bitcoins is a speculation – so you get better understand what you are getting into.
Thank you Paul for being with us today on PreciousMetalsnvesting.com
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