Cryptocurrencies - Your Key to Financial Freedom AMA

I've been tracking the crypto space since Bitcoin was invented and bought my first Bitcoin in 2013 and has been using every cent of my savings to buy cryptocurrencies ever since.

I can now comfortably retire. Which other investment allows you to do that in less than 10 years.

Ask me anything about the cryptocurrency space, there's no such thing as a "silly" question. I think this goes without being said, but I'm going to say it anyway. None of what I say here is financial advice, I do not hold an AFS license, you should seek advice from a licensed professional before making any investment decisions. If you are making investment decisions from some random guy on the internet without doing your own research and due diligence, you should stop immediately!

There's all these controversy about property prices "surging" or becoming unaffordable, not for me, if you invest in the right asset, property is actually getting cheaper and cheaper. Property prices in Bitcoin terms has been decreasing and will continue to as Bitcoin increases in price at a faster pace. So to me, property is progressively getting cheaper and cheaper.

Update:

For those who would like to find out more about cryptocurrencies and why I think Bitcoin is here to stay and will be more valuable in the future, head over to hope.com and watch some of the videos. This site was set up by the CEO of MicroStrategy, Michael Saylor who's company bought an aggregate of approximately 90,531 bitcoins, which were acquired at an aggregate purchase price of approximately $USD2.171 billion and an average purchase price of approximately $USD23,985 per bitcoin, inclusive of fees and expenses as of 24th Feb 2021.

To those who think that I "got lucky" and was "fortunate", that's very far from the truth. I saw this coming, I knew that with rampant money printing by central banks, fiat currency is going to zero and it has been doing so for centuries. All fiat currencies have gone to the zero, in history, there has not been any fiat currency that didn't go to zero. So Bitcoin's rise is inevitable to me, hence I bought it. I didn't go as far as that family who sold everything to buy Bitcoin, but I did use nearly all of my savings to buy cryptos.

Common criticisms of Bitcoin

  • Its just like Tulip mania
    Bitcoin is nothing like Tulips, Bitcoin is a decentalised and censorship resistant network which enables values to be transferred across the internet at very low cost. The value of Bitcoin is the strength of its network and the fact that it has never been breach or hacked, which means unless someone steals your private key, your coins are safe.
    Tulips has none of these qualities. The only thing which Bitcoin and Tulips have in common is the fact they both went up in value very quickly. Even then there are differences, Tulips went up and crashed all within 3 years. Bitcoin has gone through at least 3 cycles where it has smashed its previous all time highs and never dipped below the starting point of the cycle.
    Bitcoin has recorded a higher year on year low every single year since its existence except for 2015.

  • The Bitcoin network uses too much energy
    This is just market supply and demand. People mine Bitcoin because it is profitable to do so. The Bitcoin network do not require so many miners, in fact it started with just one miner. The network can continue with just one miner, it adjusts as more miners enter and leave, this is built into the network. The high energy used by Bitcoin is a sign that it is valuable and people are willing to make the effort in participating in the effort in securing the network and be rewarded for it.
    Due to the profit motive, the energy sources used by Bitcoin miner are increasingly from green energy sources reducing its impact on the environment.

  • It is used for criminal activity
    Fiat currencies are used on a much much larger scale by criminals. Banks launder money for criminal, there's been so many scandals, and those are just the ones which make it to the media, I'm sure a lot goes undetected.
    Bitcoin is actually very bad for criminal activity, this is why they quickly moved onto privacy coins like Monero and Zcash. The Bitcoin blockchain is public and all transactions remain there forever. If a drug deal is done with cash, unless there's a recording device there at the time of the transaction, that drug transaction is untraceable. If you do a drug transaction with Bitcoin, that transaction will always be on the blockchain, all it takes is for law enforcement to tie one address to a real person, and the entire web unravels, so its not very smart using Bitcoin for criminal activity.

My Crypto mistakes and other pitfalls

I want to go over some of the ways I lost money in crypto over the years so maybe you can learn from my mistake

  • Scam websites
    In 2014, there was a website called Bitcoin savings bank, which promises 9%pa interest if I transferred my Bitcoin there. Very similar to what Crypto.com, Blockfi etc offer today, except they are scammers. Unfortunately, I didn't do my research and I believed them. I transferred 2BTC to their "savings account". Never saw it again.
    Nowadays, these sites are very obvious, they promise hourly returns, like 10% every 2 hours. This is impossible to consistently do, they are all scams, don't fall for them.

  • Double your coins scam
    This is quite famous, there are many variants, but essential it just entails you sending your coins and double or some very good return percentage will return. Its a scam, you will get nothing. Fortunately, I have never fallen for these.

  • Pump and dump groups
    These are almost always scams, there are more losers than winners. Yes you may win one time, take it and walk away, but most likely you will lose. I lost more than 1BTC in this. I'm still part of the groups to monitor, but I never participate anymore. Neither should you. They also have these VIP or "inner circle" groups, where they promise you early notification of the coin to pump for a fee. Don't fall for this. They might also have an inner inner circle group or VIP+, where they promise to take your Bitcoin and buy the coins for you, to maximize your returns. These are definitely scams, they will take your Bitcoin and then block you on telegram.

  • Fake wallet apps
    These apps emulate popular wallet apps and asks you for your seed phrases and private keys so they can steal your crypto. Treat your seed phrases and private keys as private. NO ONE should know, not even staff members of the hardware wallet company. Its like your online banking password, no bank employee should ask for that. If any app do, delete it IMMEDIATELY.

  • Leveraged trading
    I lost around 1 BTC (worth around $5-6k USD at the time). I tried to pick the bottom during the 2018 bear market, the Bitcoin price was quite stable and stagnant around the $5500-$6000k mark, so around Nov 2018, I thought that was the bottom and went in with a leverage long. The market went off a cliff dropping down to $3500. I got liquidated, lost the 1 BTC I deposited. I never touched leverage trading again. Its very hard to pick tops and bottoms, so now I just dollar cost average and periodically buy and hold. You don't need to worry about being liquidated if you do this, it will help you sleep better at night haha.


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Comments

  • +9 votes

    Have you cashed out of crypto?

    • +39 votes

      No and don't plan to. The CGT on my portfolio will be enough to buy multiple houses outright. I'm just going to hodl forever and borrow against it when I need the cash.

      There are companies like Celsius which will allow me to cash out 25% as a loan and pay 1% interest, which is a great alternative to paying CGT.

      In addition, I'm earning 4-6% interest on my Bitcoin depending on the platform. My SMSF only holds crypto.

      •  

        brilliant. fair play

      • +5 votes

        Quick questions:

        • Is there a bank or lender that allows you to borrow against the value of crypto?

        • Do you ever consider whether it is too risky "putting all your eggs in one basket" where all your savings and super is going into cryptocurrency

        • How did you feel when the Bitcoin crash happened a few years ago, were you worried?

        • +3 votes
          • Is there a bank or lender that allows you to borrow against the value of crypto?
            Yes, there are many, the best at the moment is Celsius, but there are heaps of others and more coming online now due to the bull run. It does come with risk though, because you are handing over your Bitcoin and other crypto as collateral, so need to do your research.

          • Do you ever consider whether it is too risky "putting all your eggs in one basket" where all your savings and super is going into cryptocurrency
            This has crossed my mind and I was thinking this from 2013 to 2016, but I decided to go all in, in 2016, why diversify when you know something is a sure thing. CEO's of companies are starting to realise this now. Have a watch of Michael Saylor, CEO of MicroStrategy's interviews. He used an example of Argentina. This is why Tesla and MicroStrategy are putting Bitcoin on their balance sheets instead of gold and fiat currencies.

          • How did you feel when the Bitcoin crash happened a few years ago, were you worried?
            My first Bitcoin transaction was for $800USD each in 2013 a few months later it dropped to $500USD. When it went back up to $800USD, I had a very strong urge to sell and just break even. I forgot my exchange password and was too lazy to reset it so I didn't end up selling. At the time, I was very scared, but I invested a small amount of my portfolio, so I was prepared to lose it.
            Now, knowing the macroeconomic landscape, if Bitcoin fell, I'd just buy more. I have fiat currency ready just for that eventuality. This time last year, during the famous "flash crash" where Bitcoin went from $7800 to around $3800, I was furiously transferring fiat onto exchanges to buy. I was trying to buy as much as I can. If Bitcoin "crashed", I will just buy more. With the number of players in this space and what they plan to do with Bitcoin, it is beyond doubt that Bitcoin is a sure thing. Tesla will never sell their $1.5 Billion worth of Bitcoin plus whoever is dumb enough to hand over their valuable Bitcoins for a Tesla haha (I will pay cash for a Tesla if I do decide to buy one, not my valuable Bitcoin) and neither will MicroStrategy, both have said they aren't going to sell, they are using Bitcoin as a reserve asset.
            So no, I'm not worried, in fact I want it to crash, so I can get more cheap Bitcoin. There's only 21 million that can ever exist, there will not be enough to go around.

          • +2 votes

            @techlead: "So no, I'm not worried, in fact I want it to crash, so I can get more cheap Bitcoin. There's only 21 million that can ever exist, there will not be enough to go around."

            They can just keep adding zeros after the decimal right? Or is there a hard limit due to binary systems?

            Someone school me!

            •  

              @dbmitch: I believe you are right, you can buy a half and a quarter and so on of a bit coin. If it reaches $1,000,000 you can simply buy 0.000001 BTC for $1. It is by no means supply limited.

              • -4 votes

                @t-money: Sounds like scam

                • +1 vote

                  @djmm: don't tell this to any crypto trader/invester. they will not take it lightly. it may reach 100k+ but one day it will return to it's fair value ($0 )

                  • +3 votes

                    @mohan76: Why do you think it has a fair value of $0? Why can't its fair value be its current market price? There's a free market at the moment where the participants are free to buy and sell.

                    Its not about taking it lightly or not, if you say something that's untrue, of course they will correct you.

              •  

                @t-money: There is a limited amount of bitcoins.

                Just because the price to own one increases does not mean that the total amount of bitcoin is somehow suddenly not a fixed amount.

            • +1 vote

              @dbmitch:

              They can just keep adding zeros after the decimal right? Or is there a hard limit due to binary systems?

              The smallest division is one hundred millionth of a Bitcoin. This is nicknamed as one satoshi, after the inventor of bitcoin.

              https://en.wikipedia.org/wiki/Bitcoin#Units_and_divisibility

              Splitting to smaller increments would require a new version. This happens from time to time, so if there was sufficient demand for it, it's likely to happen.

            • -1 vote

              @dbmitch: There's not really a "hard limit" - it's a single variable just set to 21 million in the code base. It's also been breached once - there was an incident where 184M bitcoins were accidentally generated due to a bug. Oops.

              • +1 vote

                @Tyrx: Yep, the limit can also be extended. The point is though, its transparent and people can easily see what has happened.

                The incident you referred to occurred in August 2010, where someone exploited a bug and sent 92 billion Bitcoins to two addresses. This bug was patched in 5 hours.

                If a similar incident happened and it wasn't fixed, then it would create a massive deflation of the value of Bitcoin.

                Bugs in the code is one of the risks of Bitcoin, investors should be aware of this. There's risks in every investment, for example in property, it would be undetected structure damage. Look at Mascot towers, those units are worthless, no informed person would touch those units.

                • +3 votes

                  @techlead: In its existence of over a decade, I'm sure a lot of people have attempted to hack the system, but it still stands strong. That's enough reason for me to trust this over any banks.

      •  

        "There are companies like Celsius which will allow me to cash out 25% as a loan…"

        Is 25% the highest loan / asset ratio you could find?

        • +2 votes

          You can do a 65% LVR loan if you want, but the interest rate would be higher, and I wouldn't recommend it as Bitcoin is still volatile, you can be margin called very easily.

          I'm only comfortable with a 25% LVR loan. Of course, your risk appetite may differ.

          • +1 vote

            @techlead: If the absolute best ratio is 65%, that would indicate to me that there is a high risk element in bitcoins.

            • +4 votes

              @GG57: when an asset increases 500% in 12 months, yes that is high risk, it often corrects 30-50% so a 65% LVR would wipe you out

      • +2 votes

        There are companies like Celsius which will allow me to cash out 25% as a loan and pay 1% interest, which is a great alternative to paying CGT.

        That is like borrowing against your house and buying a car and calling it a tax deduction.

        I think you'll find that you'll pay tax on sell price $50k less entry price say $1k regardless of what loans you have against it and the 1% interest isn't a tax deduction because you are using it for living expenses.

        • +1 vote

          Yes, the 1% interest cannot be used to deduct tax as no CGT event occurred.

          Just like in a reverse mortgage situation, no CGT is payable when you take it out. You can't deduct your tax with the interest payments.

        • +7 votes

          It's actually significantly worse than that. By choosing to live off a private loan [rather than crystallize a small CGT event say, annually, and living off that cash] they're letting years pass by where they're (presumably) not using up all their tax rates. Unless you're on the top tax rate right now, your CGT gains when you draw them out annually will be on a lower rate. Avoid that and take it all out as one big hit at the 'end' and the entire thing's on the top rate.

          Yeah yeah, "but what if CGT is abolished in X years time or what if the top tax rates shifts down?" - that would be a boon to the loan strategy, but you might as well add 'but what i I find a suitcase full of money' to the list for all the 'strategizing' you are doing.

          • +2 votes

            @CrowReally: If anything they will wind back CGT just as the UK is going to do post COVID. Government wants to find someone to pay and they already got the hit list, it is just not showing us.

            I didn't want to point out the detail. Obviously that would just deflate the party balloon.

          • +2 votes

            @CrowReally: ^^This. if you have a significant enough amount to retire cashing out an amount equivalent to your living expenses wouldn't detriment your portfolio and you'd get the advantage of lower tax rates at lower marginal income (this is boosted 2x as 50% CGT discount comes into play).
            You're going to die someday and then beneficiaries (if you have any) will be incurring significant CGT liabilities as I'd expect them to cash out in significant amounts (either to splurge or diversify).

            Say you live extravagantly and spend 100k p.a.. You'd be taxed on 50k (based on no other income and having a 50% CGT discount), which would be a total of $6,717 based off current tax rates. You'd even stilll be eligible for tax offsets. Either way you'd be paying a tax rate of 6.7% on your profits which is surely better than the risks of private loans. Of course this 6.7% would move based on what you'd consider a liveable allowance. (E.g. 180k = 10.9%)

            • +3 votes

              @JDMcarfan:

              Either way you'd be paying a tax rate of 6.7% on your profits which is surely better than the risks of private loans.

              I am just not sure about crypto crowd, they are smart enough to buy crypto and make a massive profit but not quite smart enough to work out simple math (taxes).

              We just reaching peak mass intelligence and I'm just at the end of the normal distribution curve that is for stupid people.

              • +6 votes

                @netjock: Tax is not a simple thing. There are many interpretations, this is why there are no many court cases around the tax code, most of which in the expenses section.

                Most people don't know all the ins and outs of tax, that's why tax professionals exist. Are you saying people who don't know the ins and outs of tax are stupid? That makes all the rich people stupid then, because they usually rely on tax professionals to manage their tax affairs. Tax is not "simple math".

          •  

            @CrowReally: This is assuming the crypto investor has no other assets. Fair to say they will use the remainder of their tax free threshold and lower tax brackets on dividends/rental income/business income/employment income, etc, etc.

            •  

              @drfuzzy: You'll note my one point is whether they're on the top tax bracket or not. It's possible they have other income [of all the types you mentioned] and still haven't hit the top tax bracket. [Let's not forget taxable income is after deductions as well, it's not just the total income].

              If they're already on $180,000 taxable income then it's neither here nor there whether they draw it annually or in one sum at the end (tax-wise, anyway). Earning any amount less than this [say $160,000] will still give them a better tax result with annual CGT events.

          •  

            @CrowReally: The strategy is to never paid the loan back and keep paying the interest by taking new loans, until you are not in this world anymore, means that no CGT ever happens. Definitely a loophole.

            • +1 vote

              @leiiv: That 'strategy' only works if your investment only ever goes up in value and the increases in value are four times your cost of living [e.g. if you have a $40,000 cost of living, you need your investment to increase by $160,000 each and every year for the rest of your life to continue to draw the 25% loans out to live on].

              If you're assuming that will happen, you might as well assume you're going to find a suitcase of money as well.

      •  

        If it is in your SMSF how is the CGT a big issue? Super pays a 15% tax rate and with the cgt halfing rules you would only pay 7.5% on the gain.

        • +1 vote

          Close, but I think your numbers are wrong. I think it is 15% short term CGT and 10% long term (the discount is only 33% within super)

          • +1 vote

            @drfuzzy: And the numbers are 0% when in pension mode, of course. [So there would be a tax advantage to holding until eligible for that and converting to pension and not having a CGT problem at all]

            • +1 vote

              @CrowReally: Maximum for pension mode is $1.7m (adjusted for inflation). Does that mean balance above this is not eligible for CGT exemption?

      •  

        How do you earn interest? Do you lend your bitcoin? Or is there some sort of proof of stake where you can earn fee income?

        •  

          I think OP said they had it in Celsius Network who pay interest on deposited crypto. They use deposited crypto to lend to hedge funds and institutions.

        • +3 votes

          I wouldn't worry about how you earn interest on bitcoin. The question is why would someone pay you interest for you to lending them your BTC. What are they doing with the BTC that allows them to make enough profit to pay you X% and keep something for themselves.

          If you can't answer that, which I haven't found many plausible answers yet, I'd be concerned.

          The best answer so far, is people borrow your BTC to short it (sell in hope BTC crashes for profit). Given BTC hasn't fallen (in fact its gone up), the person you lent the BTC will be losing lots of money and might not return your BTC. Ofcourse the person can borrow more to pay past "investors". But that would be ponzi like.

          But, to be fair, if there was a ponzi scheme within the greater cyrpto circles it'll be funny. Kinda Ponzi within a ponzi. That would be incredibly funny for my grandchild to hear one day.

          •  

            @cloudy: People can use the BTC they borrow for trading. It can be very profitable to trade such a volatile asset.

            •  

              @Leeroy Jenkins:

              People can use the BTC they borrow for trading

              I am familiar with trading and trading strategies, are you? what you write leads me think you have no idea

      •  

        To have SMSF that holds crypto, could you point me in the appropriate direction:
        Particular Firm/accountant, questions to confirm with them, accreditation.

        Also, have you taken a loan utilising Celsius? do you buy back stable coins and transfer into Celsius when due? Is the Celsius team quick and easy to communicate/deal with?

        Appreciate your post

        •  

          I'd like to know which SMSF firm the OP uses as well. I'm having a terrible time with mine who I chose because they promote to crypto investors.

      •  

        Would you plan on cashing out at graduated steps (even though you have to pay tax) to minimize your risk? I think people do that with stonks and whatnot.

        If the sum is high enough, how about moving to a more tax friendly jurisdiction?

      • +13 votes

        You'll regret this so much. Don't borrow against it - its gambling - the early adopters (like you) will do well until it crashes again. Then it will go up again, and down again etc.
        Then you'll go from having a great asset that could have bought real tangible things like a nice house to a crippling debt worth more than your bitcoin. Unfortunately you can't ride out a debt (like you can if you don't borrow against it) - they will foreclose on you before the next upswing.
        As they say "Past performance, is not a reliable indicator of future performance".

        As for your criticisms rebuttals:

        • Bitcoin is kind of like Tulipmania mixed with a digital version of Art or gold - i.e. it is irrational exuberance, textbook definition - but used more of a store of currency like Masters Artworks or perhaps precious metals that don't really do much for you other than you can sell them again regardless of what happens with government fiat currency markets… not really a practical transaction currency (bitcoin anyway)
        • Bitcoin does use too much energy - as I know people who do it, I toured and inspected multiple mining rigs worth hundreds of thousands in the last month - and it all runs off brown power. Most are interested in maximising profits which means cheapest power - which remains brown. A lot is in China with bad environmental record. Just because you say it doesn't 'have to' use all the energy - doesn't mean it isn't by nature creating this problem - It is. That's like Donald Trump trying to disassociate himself with the Capitol roits!
        • The gross value of transactions in Fiat currency are irrelevant - As a percentage of total transactions, bitcoin would be more greatly used in criminal activities than fiat currencies by a factor of many times.

        I don't think you "got lucky" - early adopters often make good money out of such things. I've also never denied there's good money to be made from crypto for early adopters and on upswings. However it's highly volatile, will crash again, there's plenty of money to be lost for people buying in at certain points of the cycle - and there is risk when you consider the inefficiencies in Bitcoin's inability to handle bulk transactions at speed/volume, and the environmental impact, such that it can become unpopular and/or regulated against as a result - and therefore has as much chance to 'go to zero' than any one of the mainstream fiat currencies.

        Just because you made good money doesn't mean others will buying in at a peak. However you spreading the good word is part of your long-term hold story, because you need others to believe it will be worth more, so they go buy it for higher and higher amounts… the more that buy in, the better for you - a bit like a ponzi…! (Shhh.. don't tell them, oops - too late!)

        Like all things, be smart and diversify your portfolio a bit now you've had a win… even just a bit of it rather than borrowing against it in 'fiat currency'

        • +2 votes

          The loan is a non-recourse loan. If the value of my collateral falls, they take my collateral, I get to keep the loan proceeds.

          • Bitcoin is like Tulipmania - it is irrational exuberance, textbook definition.
            Is the mania around property at the moment, "irrational exuberance"?

          • Bitcoin does use too much energy
            Yes, majority of the energy used for mining is brown, but its just supply and demand incentivizing people to do it. How is it any worse than say someone who leave the air con all the time?

          • The gross value of transactions in Fiat currency are irrelevant - As a percentage of total transactions, bitcoin would be more greatly used in criminal activities than fiat currencies by a factor of many times.
            Where are you getting your figures from? https://www.forbes.com/sites/haileylennon/2021/01/19/the-fal...

            The majority of cryptocurrency is not used for criminal activity. According to an excerpt from Chainalysis’ 2021 report, in 2019, criminal activity represented 2.1% of all cryptocurrency transaction volume (roughly $21.4 billion worth of transfers). In 2020, the criminal share of all cryptocurrency activity fell to just 0.34% ($10.0 billion in transaction volume).
            According to the UN, it is estimated that between 2% and 5% of global GDP ($1.6 to $4 trillion) annually is connected with money laundering and illicit activity. This means that criminal activity using cryptocurrency transactions is much smaller than fiat currency and its use is going down year by year.

          What do you mean it will "crash again"? My definition of crashing is that it goes to zero or it does a full retracement. Bitcoin has never done that. Bitcoin pumps and it falls, but the trough is never back to the starting point at the beginning of the cycle. For example, the most recent cycle in 2017, Bitcoin started at $1000, went to $19900, then fell to $3400, it never went to $1000 again. So in my books, that's not a "crash".

          • +6 votes

            @techlead:

            • Most likely what is happening with property at the moment is a bit irrational. It's certainly FOMO. At least it is tangible when fiat and/or cryptos go to zero.

            • I don't understand the relevance of your aircon comparison. Bitcoin is causing more energy use than New Zealand or Argentina. All going up in smoke so people can chase down an artificial digital concept more and more in line with higher value. It needs to be made more efficient (like some of the other cryptos) - its so wasteful by design as the value goes up. Hence for the sake of the world I sincerely hope it goes down (sorry). Regardless of how it is produced, solar isn't free - there's still plenty of embodied energy and waste going into manufacturing components.

            • I simplified my original comment regarding value of transactions - what I mean to say is gross value of transactions used for barter outside of just the administration of bitcoin. Seen as though most bitcoin transactions are actually just the admin of trading bitcoin I see that as irrelevant when considering what bitcoin is used for as a 'currency' for barter.

            Crash again mean if you buy in now with your $100,000 and next year it is worth $30,000 - if you borrowed half - you are up sh!te creek. Less likely to impact early adopters like you playing the long game, but a lot of people jump on it to earn a quick buck, stretch themselves, and then do their @rse

            • +2 votes

              @MrFrugalSpend:

              • Most likely what is happening with property at the moment is a bit irrational. It's certainly FOMO. At least it is tangible when fiat and/or cryptos go to zero.
                What's being tangible got anything to do with the value of something? Something which is intangible can also hold value as well. Sometimes being tangible is a downside, ever tried to carry around a 10kg gold bar?

              • You may want it to go down, so do I, so I can buy some more cheap Bitcoins. Unfortunately, its a free market and I'm not big enough to influence it. There are many things which I see as damaging to the environment. It is very unlikely that governments will ban Bitcoin mining in any meaningful way. Are they going to prevent people from having a computer turned on 24/7? Not even China is that draconian. That's the beauty of the Bitcoin network, they can target the ASICs, the network will still survive, people will mine with graphics cards and CPUs again.

              • You are just manipulating the numbers to suit your pre-conceived narrative. Fact is, Bitcoin is not very useful to the criminals, there are much better coins to use or means of transfer, eg fiat cash.

              Crash again mean if you buy in now with your $100,000 and next year it is worth $30,000 - if you borrowed half - you are up sh!te creek.

              What are you saying in your hypothetical scenario? You are saying, someone buy Bitcoin at $100k each and then borrow against it? I would definitely not recommend that. I've never suggested that. If you buy in this cycle, you shouldn't be borrowing against it. If you used $100k of your own money to buy Bitcoin and it went down to $30k, then you may not feel good, but you haven't lost anything unless you sold. For example, the few people who bought at $19900 in Dec 2017, they probably didn't feel good for 3 years, but if they didn't sell, I think they'd be pretty happy today.

              For those jumping in now, don't stretch yourself. Only invest what you are prepared to lose and never use leverage. Definitely don't borrow against your newly purchased Bitcoin lol, that's a terrible idea. I'm only entertaining the idea of borrowing against my Bitcoin because I bought some for under $1000 USD, I don't mind borrowing against those Bitcoins.

              •  

                @techlead: Borrow against it or not, I've seen plenty of people put down more than they can afford to lose and then get caught out when they need money back and its worth way less than they paid at that time. Stretching yourself is never a good idea on such a volatile asset - I think we are in agreement on that.

                You are adopting the view it only 'owes' you USD$1000 - but look at your bird in the hand. Regardless of what you paid for it, it is worth high value now. That's real now. If you choose to borrow against it, you are putting a line in the sand at its value now and choosing to take on a debt repayable with interest in a fiat currency, rather than exchange currency you already have, to spend it on your expenditures just because that vendor doesn't accept the currency your existing liquid cash asset is held in…. That's risky when you consider its value in the hand now.

                If its truly a currency, then that's like saying I have USD$1 million but the house I want to buy is in AUD, instead of converting it, I'll get an AUD loan instead. It doesn't matter what you paid for the USD, you make choices today - 1/ that real estate provides tangible value that outweighs renting in a fiat currency and 2/ you'd rather owe a debt measured in fiat currency despite what governments may do and influence interest rate rises in the long term, then simply use that fiat currency temporarily (for a matter of days) as a means to simply convert your currency in the hand into the tangible asset you want to buy.

                Interesting choice.

          •  

            @techlead: Mania around property?

            It's literally propped by years of government policy. Negative gearing, record low interest rates since the GFC, limited supply, catering the economy to overseas investors and wealthy migrants (e.g. chinese investors and chinese students). Global interest rates are low, making asset inflation a problem across the board - homes, stocks, options, etc. Combine that with FOMO on a home, the result if obvious.

            The government will not let it crash, because it would spell disaster for the economy and everyone knows it. The voters voted in the liberals because of it too, as the labour party was stupid enough to go against negative gearing. It's become its own third rail of politics in Australia.

            That's why everyone in Australia continues to play the game and the people that can't - young uni students, young couples - are the only ones that complain about it. The players unconsciously know this is a rollercoaster, where the only way is up. Not going on the ride means being left behind by the massive inflation eroding your wealth.

            Bitcoin - that's being propped up by the whales,

            Bitcoin uses too much energy?

            Yes. That and the amount of time it takes to verify or complete the blockchain makes the "experimental" uses for it and ethereum extremely impractical; besides the current use of being traded back as assets. Not any different from the high frequency stock trading executed by powerful computers.

            The combination of art and crypto into "NFTs" is hilarious, considering both art and crypto have a history of being used for laundering money and tax evasion.

      •  

        just wondering are you able to sell all of your portfolio if you want, as in are there any buyers willing to buy at high price?

        • +1 vote

          Definitely. Do you know how liquid the cryptocurrency markets are, at the moment?

          Globally, there was $165 billion USD of trading volume in the entire cryptocurrency space over the last 24 hours. Bitcoin accounts for $54 billion USD of that volume.

          If I decided to dump my entire portfolio of $45 mil USD, I wouldn't even make a bleep. I may move the market for some of the smaller alts, but for the vast majority of the big market cap coins I have, eg BTC, ETH, ADA, BNB, even if I market sold (so not drip feed, but one huge market sell order), I'd probably push it down for a second before it bounces right back up.

          • +2 votes

            @techlead: what I only see here is $45 mil USD. wow, your really make a fortune. amazing job!!!

      •  

        Just wondering where you've gotten your tax guidance for this? According to the ATO (from discussion within the ATO community forum), and my accountant, depositing your crypto into a platform like this to use as collateral is seen as a CGT event, the same as disposing your assets. Feel free to message me with your accountant's name as I'd be keen to find out more. Congrats on the gains :)

        • +1 vote

          No, I have not. I haven't taken any loans out yet. I'm just considering my options. I can live off the interest generated by staking and depositing my coins on various portfolios. However, I want to buy a bigger property, around $5 mil budget, so I need to find a way to fund that.

          I don't think the bank will give me a mortgage backed by my crypto portfolio, haven't explored that, not sure if I should.

          I have been checked the ATO forums as well, they don't have many answers, such as this:

          https://community.ato.gov.au/t5/Cryptocurrency/Cryptocurrenc...

          •  

            @techlead: How do you get out of paying tax on the interest earned or even access the cash given this is in SMSF?

            It seems to me that either way you have to pay tax except CGT would actually work out 1/2 your nominal tax rate as opposed to interest which is deemed as earnings payable at your full tax rate in not in your SMSF.

            If I am reading this correctly you are in a bit of a predicament if you bought all this in a SMSF, as all earnings need to stay in the fund, so in theory you cannot leverage any of this to purchase private property and any property bought with the proceeds cannot be used for private purposes has to be bought in the trust attached to SMSF and only to earn income for your SMSF.

            Of course if you are close to 60 you could be fine.

            •  

              @tomfool: My main portfolio is not purchased with my SMSF. My SMSF is quite simple, I don't do any trading on that at all. I just periodically buy either Bitcoin or Ethereum whenever money comes in and I withdraw to Blockfi to earn interest. That's all I do, the Bitcoin and Ethereum then sites in Blockfi to earn interest.

              I'm looking for ways to fund a property purchase from my main portfolio, not my SMSF. I'm nowhere close to 60, so I'm not going to do anything else with the SMSF apart from purchase the coins and putting it in Blockfi.

      • +1 vote

        This is the way

      •  

        questions:
        1. How you repay the loan from Celsius? With crypto? If so, do you pay CGT for these part of crypto?
        2. Or you repay the loan with interest from bitcoin? Since interest from bitcoin is also bitcoin and attract CGT, I think it is a good way to sell the interest to repay the loan, but the question here is, if the interest is enough to cover your loan?
        Looking forward to your answers. Cheers.

        •  
          1. You repay the loan using CEL, other cryptos or fiat currency. I'm thinking of using either CEL or fiat currency. Using CEL will lower the interest as an incentive, but then I think that's a CGT event, not sure if the discount is worth the hassle.

          2. I'm not going to repay with Bitcoin. Yes, interest on Bitcoin would be enough. The interest on the loan is 1% or 0.75% if paid with CEL. Interest on Bitcoin is 6% at Blockfi, so more than enough to cover the interest of the loan, but I want to avoid using Bitcoin to pay because I believe it will go up further later.

          •  

            @techlead: for question 2, I mean to repay the loan and the interest from the loan, not the interest of the loan only, like you borrow 10k, interest 100, then is your interest from your bitcoin enough to cover this 10100?
            Also for the bitcoins you lock in Celsius as collateral, how can you make use of it? For example, you borrow 1 btc worth of fiat, but you lock 4 btc as collateral, do you receive any interest or benefit from these 4 btc?

            • +1 vote

              @Tony Strong:

              for question 2, I mean to repay the loan and the interest from the loan, not the interest of the loan only, like you borrow 10k, interest 100, then is your interest from your bitcoin enough to cover this 10100?

              I haven't taken out a loan from Celsius yet, I'm just exploring this possibility. My understanding is that I can pay with fiat or crypto to repay the interest and principal of the loan.
              The loans from Celsius go for a maximum of 3 years, so the principal must be paid back in 3 years. So I thought was to keep opening new loans to repay the old one.

              For example, Let's say I need $1.5 million to purchase a new property. So, I deposit $6 mil worth of Bitcoin as collateral to take out this loan. Then after 3 years, let's assume the Bitcoin price is the same, I take another $6 mil worth of Bitcoin as collateral to take out another $1.5 mil loan, to repay the old one off and I just keep doing this perpetually. Since I'm taking a loan against my Bitcoin, a CGT event did not occur.

              Also for the bitcoins you lock in Celsius as collateral, how can you make use of it? For example, you borrow 1 btc worth of fiat, but you lock 4 btc as collateral, do you receive any interest or benefit from these 4 btc?

              From what I have read so far, you don't get interest on the Bitcoin you give them as collateral.

              •  

                @techlead: if no interest on the bitcoin as collateral, I would say not a good deal. You pay 1% interests for XBTC, and you lost the potential interests of another 4XBTC.

      •  

        You're a great example.

  • +5 votes

    "if you invest in the right asset, property is actually getting cheaper and cheaper."

    I've heard that if you invest in the wrong asset, it's actually getting more and more expensive as well - is that true?

    With a conservative risk profile, what sort of mix of right assets and wrong assets should I be making? Right now I've been 80% wrong and 20% right, but I'm wondering if I might get some better results if I changed the ratio - thinking maybe 15% right and 85% wrong, thoughts? Would your answer change if I had access to "okay" assets?

    •  

      Haha, yep, if you invest in the "wrong" asset, it might cripple you for life. It can shackle you in debt and force you to work all your life.

      The ratios can change al ot, eg your "right" assets can swallow your "wrong" assets whole. This what happened with me, I had 90% "wrong" assets in 2013, then as I progressively bought more Bitcoin and other cryptocurrencies and with each bull run, the percentage swung heavily towards the "right" assets to the point where its essentially 100% "right assets" now.

      Fund managers are selling gold to buy Bitcoin in 2021, I already did that in 2015.

  • +2 votes

    I recently got into crypto via this deal https://www.ozbargain.com.au/node/604435

    I used the $20 signup plus put in $100 of my own so $120 total, today my portfolio is up to $140. I'm not sure what to do next, leave it or invest some more. Any advice on good crypto to buy?

    • +2 votes

      You can sign up to various platforms such as:

      Celsius
      Nexos
      Crypto.com
      Blockfi
      Binance

      just to name a few, there are much more, do your research.

      • +1 vote

        I haven't been in the crypto game for a few years, but the only one of those that seem reputable from a shallow search is binance, and I wouldn't be surprised if this guy was hoping to shill his referral link.

        • +5 votes

          Nope, you only get like 10 or 20% of the fees of the person you refer. I'm not bothered with that. It would be nice, but I didn't start this thread for that purpose.

          I'm happy to recommend exchanges for you. There are other reputable exchanges other than Binance.

          I just think cryptos are misrepresented in the media and not many people take the effort to find out about it, so maybe I can help.

          They just follow the usual line, eg crypto are used by criminals. Which is true, but do you know what is more widely used by criminals? Fiat money!

          • +3 votes

            @techlead: You just did below and got unpublished.

            •  

              @deme: Its not the main reason why I started this thread. Someone asked for recommendations, I gave it and made a passing comment about having referrals. I didn't know I couldn't shill it, so it got deleted, fair enough.

          •  

            @techlead: So which exchange do you recommend ?

            • +1 vote

              @treekangagaroo: I have been using Coinspot, Indepdendent Reserve and BTCmarkets.

    •  

      Same I got into it here, was going to cash out my 20 bucks n leave then I decided to buy random cryptos with it next minute I Had invested 900 bucks and made 700 in about 2 weeks .. I honestly have no idea what im doing i buy cryptos based on their name and if they are cheap and so far this tactic has not let me down .. I've since withdrawn my initial investment and now i'm just playing with what I have Left,

      To me cryptos seem just like a big ponzi scheme nothing can go up as fast and uniformly as all of the cryptos seem to be at the moment?, in the end ill probably return to 0 with some fun had along the way.

      •  

        Most alt coins are overhyped, they probably worth $0, looking at Doge haha, but this kind of inefficiency exists in other markets too.

        Look at Afterpay, at its peak it was rivalling the market cap of Macquarie Group. I highly doubt Afterpay is worth anything close to Macquarie Group and yet for a period of time, it was valued close to it. Afterpay has since dropped off down to $100 ($28.8 Billion MC) but still, its definitely not worth that much.

      •  

        Be careful doing that, you can get rekt just as quickly. Safer would be to buy the bigger coins (you can sorry by market cap in coingecko) when they're down, or buy one of the numerous crypto index funds.

      •  

        i buy cryptos based on their name and if they are cheap and so far this tactic has not let me down

        This 'strategy' for want of a better word works fine in a bull market. A rising tide lifts all boats, so you can make money with essentially random picks. When the market turns you will get absolutely wrecked though. Keep that in mind!

    •  

      Oh I got in the same time with you too. But I put in 2K and have made a decent 4K profit in a month.
      It seems that I was lucky and got on some "right" coins. I had no idea what I was doing.

      Now that I have moved 1/5 of my savings into CoinSpot, I need to learn/figure out a strategy to retire early like OP…

      • +1 vote

        You should follow the Warren Buffett rule, "Only invest in things you understand".

        It took me 4 years to actually pull the trigger and buy Bitcoin. I was aware of it when it was created in 2009.

        • +3 votes

          I was aware of it back in 2012, and also following the Buffet Rule. Right now, have zero crypto and lost out on $2M profit. I don't understand it, neither do you, not anyone else.

          It's simply one of those things that goes against textbook/traditional investing, but still wins. If I put all my money back then into the best performing stocks of the past decade (Tech Sector: Google, Apple, Tesla, Amazon, Netflix etc), I would've beaten the market by a fair margin, but it still would've been way way below the performance of Bitcoin. So undeniably it has been "dumb luck". There are thousands of other risky assets than crypto, and majority of them fail in the first year or two.

          •  

            @Kangal: Dumb luck is winning the lotto or getting black jack on a million dollar punt. Op has done the research and has been dollar cost averaging for the last 8 years. The fundamentals stack up with BTC and ETH which is why they’re still standing today. He stuck to his convictions and I say good on him, he risked it for the biscuit. Tall poppy syndrome for days in this thread lmao.

  • +2 votes

    How do you pick which crypto to invest in? There are so many? what kind of research do you do if any?

    • +1 vote

      I usually look at new sections and use for blockchain. For example, I bought Polkadot below $3USD, it was a promising project in a new space in blockchain, interoperability (allowing you to swap coins on different blockchains in a decentralised way). I also invested in ETH for this reason, smart contracts are not available on Bitcoin. So I look for new coins which enable new functionality.
      You need to make sure you don't get too caught up in the hype though.

      • +1 vote

        have a look at $go gochain, it is on the verge of a massive push up, $90m marketcap, ETH compatible, fastest tps blockchain, 1000x less energy use, and about to release a lot of good news with arabian bourse exchange in the UAE, among other things. $OMI (Ecomi) runs on gochain. https://gochain.io/

      •  

        As a fun thought experiment, what do you think the Limit of Currency should've been for Bitcoin?

        21 Million seems very limiting.
        Say you're the architect and you envision it becoming the world's dominant exchange medium. Say it started in 2010 but it won't go proper/mainstream until 2050. There's 7 Billion people living today, that figure might go to 10 Billion or 20 Billion more. Then estimate how much currency one person might use in their lifetime. It would be above $10,000 and below $1,000,000. So perhaps we can try to seek out an average of $10B people x $100k = currency in circulation. That's 1x10^15, aka One Quadrillion, aka A Billiard, aka $900 Trillion (rounding down).

        However, traditional computation doesn't really scale upwards in Powers-of-Ten, so perhaps we could find something better Mathematically Speaking. The most ideal is Binary, a la Powers-of-2. Very appealing number is 2^40, aka One Terabyte. But that figure is x100 away from our mark. Do we just settle on an ugly figure like 2^47 instead? Or look back on our formula to better it?

        What if we quantify people having $10 to spend in a day, that's 365 days a year, multiplied by 73 years life expectancy. That would give us a total figure of $266,450. Let's multiply that by 9 Billion people, and we get roughly ~3 Quadrillion. That's 2^48. Wait no it isn't, I made a mistake here and above. It is 2^51.

        I think we found it. The ideal figure for 2050 is 2^50, aka One Quadrillion, aka A Billiard, aka One Petabyte, which is…..$1,125,899,906,842,624. What's your thoughts?

        • +1 vote

          When Bitcoin reaches $1 mil USD, its a matter of when not if, then one satoshi (the smallest unit of Bitcoin) would be worth $1. This is of course not practical, because not everything will be in nice round numbers in price and also, what if Bitcoin goes beyond $1 million USD.

          What I think will happen is that the developers will develop a code change to modify what a satoshi is. So instead of one millionth of a Bitcoin, they can change it to one billionth of a Bitcoin.

          I don't think 21 Million Bitcoin is a limiting factor, it can be 10 million or even less because of the divisible nature of Bitcoin.

          • +1 vote

            @techlead: Current santoshi is 1/100m of a Bitcoin, not 1/1m. If Bitcoin reaches 1M USD, a santoshi will be one cent.

          •  

            @techlead: I think that's my point. We humans don't want 1/100M of a Bitcoin. We want 1 Bitcoin, or something tangible. Traditionally people aren't very good at Maths, so really long decimals scare them.

            If it was 21 BILLION total/max Bitcoins that would've been a bit better. Because people could've strived to attain 1 Whole Bitcoin throughout their life (kind of like amassing 1 Million USD). Then perhaps a Satoshi could've been 1/100M of a Bitcoin, making it roughly One Cent, which is ideal for daily spending/calculating. But again, that decimal is surely going to scare/annoy/confuse many people. Hence my recommendation above for 2^50 instead.

            • +1 vote

              @Kangal: True, that makes sense.

              The Bitcoin dev team might do a redomination, like what happened with Dot. I purchased Dot at around $300, if you look at the price now, its nowhere near $300, so did I lose like 90% of my investment? No, because there was a redomination, like a stock split. So they did a 1 to 100 redenomination, so if you had 1 Dot, it became 100 dot, that means the price will also re-adjust. That meant my cost price is around $3 per dot at today's prices.

              Bitcoin can do something similar, do a 1 to 1000 split, so the limit becomes 21 Billion instead of million. That would work. There's a reason why stocks do stock splits, so they don't become like Bershire Hathaway which creates friction because most people can't buy a whole Hathaway share which is at over $390k USD.

      •  

        Fantastic. Can you open a channel or a email list and share the new coins that you will invest? I would be more than happy to pay for this. It was my biggest pain to miss the opportunity to invest in ETH and dot early. Golden keys to financial freedom, sigh

  • +1 vote

    Hello, two questions:
    1) I purchased about $100 in BC some years back, and then started getting letters from the ATO requiring I declare that purchase as an asset after they obtained transaction details from the business I purchased from … how do you recommend dealing with the ATO and their expectations ?
    2) How would you recommend converting BC to real $ quickly and cheaply ?
    Thanks

    • +3 votes
      1. Easy, tell them the truth. Seek some tax advice from a tax professional and keep records to substantiate your position.

      2. This depends on how much BC you have. If you have like $50k worth now, just sell and pay the discounted CGT if you have held for more than a year. If you have more than say $1 mil worth of BC, then consider what I suggested above, borrow against it so you don't trigger CGT. Seek the advice of a tax professional on this, this is all new, the ATO may not see it as a "loan" and treat it as a transaction which triggers CGT.

      • +3 votes

        you said you borrow 25% of the value of your BTC and pay 1% interest.

        I assume the lender takes your BTC as collateral.
        to do this do you give the lender 25% of your BTC keys or more?
        as you repay the capital are BTC keys returned?

    • +3 votes

      Since when does ATO require an asset register?

      They did send notices reminding people that they need to declare any capital gains from the disposal of crypto. But if you have not sold then there are no capital gains. I suspect this is what the letter was about.

    •  

      Certainly worth reading this ATO legal statement, especially clause 17.
      Seems to indicate that you can buy up to $10,000 of crypto (for personal use) and dispose of without attracting CGT.

      • +4 votes

        Incorrect, you are reading like everyone else with confirmation bias does. Reread it again, reread it in whole

  • +1 vote

    Do you still worry about the price of everyday expenses such as energy and phone plans?

    •  

      No, because I have enough reserves for the "essentials", such as energy, phone plans etc. I also get interest payments as passive income which can fund those essentials, of course they are taxed normally.

      •  

        yeah, i was wondering about that. if you borrow from Celsius, you'd still have to send it to an exchange to sell into AUD or whatever.
        would you essentially show the ATO your records from Celsius that the money was a loan and not a profit?