Oddbean new post about login | logout When you buy the best asset in the world why buy anything else? It’s not a maxi thing it’s more a logical decision to buy the hardest asset on the planet..
I agree that Bitcoin is likely the best asset in the world, but what if it proves not to be? Bitcoin is just software created and run by fallible humans after all (not too dissimilar to stocks which are claims to businesses run by humans). Going 100% into any one asset or asset class is risky. Diversification is one of the most important lessons we can take from investing. Buying 100% bitcoin may make you incredibly rich, but it may also make you incredibly poor. We can have faith and conviction that it will go up (like I do), but that doesn't change reality.
It is risky but the reward is immense if we are right. If you know something depreciates in value over time, you want to do everything you can to protect your purchasing power. Stocks might be a decent option but having the ability self-custody is a huge utility that is hard to ignore at least for me. Can’t really self-custody stocks. I don’t trust the state not to take people’s wealth in a crisis.
Great points. Thanks for your response. Obviously everyone is going to come to a different conclusion about what the correct asset allocation is for them and that will change over time. Self-custody is a really powerful tool. My grandfather actually had to flee his country to escape genocide when he was 10 years old and his family smuggled gold out of the country by hiding it in his clothes. So I get the value of self-custody and the benefits it provides. Your point about "not trusting the state" is an interesting one. I'm lucky to live in the USA who I think is more trustworthy than most governments (at least for now). I'm willing to let reputable custodians hold stocks for me, but feel empowered knowing how to move stocks asset to btc self custody if needed in a time of crisis.
Appreciate you sharing your story about your grandfather. Thank God he could self custody his gold at the time as I’m sure was crucial to starting a new life. I see Bitcoin in the same light. God forbid something bad happens like what happens to your grandfather I want the ability to take my wealth with me. 9-11 really changed my perspective on the US government. I don’t trust the people running the government at all as they will do anything to keep power.. Custodians are ok at least you have legal recourse if something goes wrong
In times of crisis, unless you were early, you may find that you cannot do anything with your stocks, they are frozen and then they go down with the ship. If we're not thinking systemic crisis, then the stock can just become next to worthless before you can get it sold. Here's a crazy story: Celcius was a crypto exchange that had in its terms that your crypto was your crypto. Then they started to go bankrupt and a lot of people withdrew (bank run) and then it froze. Many could not withdraw. The courts ruled that the crypto belonged to Celcius and that it should be used to pay investors before customers. If it stopped there, that would be a complete story, but then they recently started suing anyone who withdrew a few months before they could freeze assets... people who took their funds into self custody are being sued so that the company can claw back more of their customer's money after the customers felt like they got out safe. These customers did nothing wrong. Banks and trading platforms can behave the same. They just have insurances and other systemic assurances that stop them from doing such drastic things... in many cases, that stop them from going bankrupt. Those assurances are not free, it steals from the poor (and maybe a bit from your left hand) because it fuels inflation.