Bitcoin, Currency, and Alternative Investments AIC SAW Committee
What Is Bitcoin? A digital encrypted currency which has a limited supply About 12.3 million bitcoin have been “mined”; maximum supply that will ever be released is 21 million You can mine for bitcoin by using computer processing power to solve complex algorithms Solving one problem awards the miner 1 block, which is equivalent to 25 bitcoin
Acceptance of Bitcoin
Is Bitcoin Truly a Form of Money? What are the characteristics of money?
Characteristics of Money Store of value Medium of exchange Unit of account
Price of Bitcoin Why is the price of bitcoin so volatile?
Volatility of Money Does the price volatility of bitcoin mean that it should not be considered money? Not necessarily… The Hungarian pengo experienced monthly inflation of 4.19x10 16 % in July 1946 Prices doubled every 15 hours The Zimbabwe dollar experienced monthly inflation of 7.96x10 10 % in November 2008 Prices doubled every 24.7 hours Loaf of bread cost $35 million
Why Does Bitcoin Matter? It’s a new currency that is not under direct control of any government entity Transactions can occur across geographical boundaries without processing delays Bitcoin cannot be traced to the holder
Silk Road Incident One of the largest underground drug dealing operations, and transactions were done solely via bitcoin
Silk Road Incident - Busted October 2013
What Is Foreign Exchange? Foreign exchange gives you the ability to swap one currency for another country’s currency The exchange rates are in constant fluctuation
Major Currencies SymbolCountryCurrency USDUnites StatesDollar EUREurozone membersEuro JPYJapanYen GBPGreat BritainPound CHFSwitzerlandFranc CADCanadaDollar AUDAustraliaDollar NZDNew ZealandDollar
What Causes Exchange Rates to Move? In general, an improvement in a country’s economy will cause its currency to appreciate The following economic conditions are important to monitor: Differences in inflation Differences in interest rates Current-account deficits Public debt Political stability Terms of trade
Currency Distribution
Composition of World Reserves
Why Trade Forex? Very low minimum account balance (about $25) Market is open 24 hours a day No commissions 50-to-1 leverage allows you to magnify your gains No single entity is able to move the market
Art as an Investment Art-Fund Industry popularized in last 10 years Variable returns ArtVest Partners: 8% annualized over 5 years Fine Art Fund Group: annual net of 7 – 12% Brandeis University: Real returns of 1 – 5 % Auction vs. Private
Factors that Affect Price Demand by emerging countries, such as China and Russia Supply of museum-quality pieces is shrinking Store of value; does not generate income Low liquidity Commissions ranging from 12.5 – 25.0%
Investment Potential Old Masters Mature market, low margins European painters who worked before 1800 Postwar and Contemporary Growing collector base, slow down of supply Works of art from the 1940s and onward Coca-Cola by Andy Warhol Sold for $57mm Jackson Pollock Sold for $32.6mm Gerrit van Honthorst Sold for $7.5mm Rothschild Prayerbook Sold for $13.6mm
Super Prime Real Estate Increase in values from New York: up 47% Tokyo: up 8% London: up 107% Singapore: up 232% Mumbai: up 176% Refuge for ultra wealthy from emerging market economies Brazil, Argentina, Russia, and so forth
New York City The Penthouse at The Pierre Hotel Listed at $95mm Steve Cohen (SAC Capital), One Beacon Ct Listed at $98mm
London 18 Carlton House Terrace Listed at £250mm Kensington Palace Gardens Listed at £100mm
Want to be a shark but don’t have $2.5 Billion?
Angel Investing Typical Venture Capital Investment : 1-3 Million Typical Angel Investment : K Angel Investing allows a diversified portfolio of early stage investments without the steep capital requirements of Venture Capital
Angel Networks and Angel Funds Angel networks allow access to early stage companies Angel funds are groups of people who pool money together to create a diversified portfolio of angel Investments