In his issue: Save stuff that retains value!
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I  have some Bitcoin.  Rising prices make it sell out fast, but I'm always buying...

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Protect Yourself From Fiat

One thing that frustrates me a lot is that people who know stuff don't speak up when I could benefit from their knowledge.  Of course, there's a fine line between being helpful and being annoying when you share information, but after attending school (where you're not supposed to talk to people seated right next to you), most of us stay on the quiet side.  So a customer, Roman, today inspired me to speak up about a problem we both see on the horizon.

Bitcoin's built-in protection from hyperinflation is one of the things that often comes up.  If you didn't know already, the number of bitcoins will never exceed 21,000,000, so it can't be inflated (or, to be more accurate, it will inflate only up that point, and everyone already knows it).  However, its value could be damaged if, for example, governments instituted horrible enough punishments for people found to be using it.  Some of us are convinced that hyperinflation in the USD is coming, and this leaves us with a problem.  Since bitcoin could someday be of little value, how can we have any savings if USD and bitcoin are both problematic?

Metal, one of the early and most widely used stores of value comes to the rescue.  I keep my savings divided into three assets, primarily.  They are bitcoin, gold, and silver.  I allocate about 1/3 of my savings to each one.  When the price of one goes up or down a lot (it's usually bitcoin!), I sell or buy it, buying or selling whichever of the other two is down or up the most.

If this interests you, I have a page on my website that you're welcome to use,  The page sometimes has an error on it that you can ignore.  The idea is to enter your holdings in ounces of gold, silver, and bitcoin. There's a default price for bitcoin but you can enter a different price if you want.  When you use TAB to move out of any field, the message at the bottom will update with a target for the number of bitcoin that equals the average dollar value of the two metals.  The value of the metals is calculated from each time you visit the page.

If you haven't realized it yet, this is the "dollar-cost averaging" strategy, but used with metals and bitcoin instead of dollars.  As long as all three assets retain some value, the strategy usually generates a profit if you don't trade too often.  Trading too often will pump your profits into transaction fees.

Here is a good review of some precious metals dealers to get you started if you'd like to convert some of your slowly dying fiat into metal.  Or I can sell you silver for your BTC through LBC, and if I get requests for it, I might start selling 1 ounce gold krugerrands that way too.

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Copyright © 2014 dscotese on LocalBitcoins, All rights reserved.

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