Unlike real estate which requires much higher amounts of capital (read: your after-tax savings) to invest in, Bitcoins and other cryptocurrencies allow for people with just double-digit or less discretionary income to speculate.
In this manner, speculators/gamblers/investors are able to gain some experience with actual money and trading. The fees on the cryptocurrency exchanges are rather low, and since cryptocurrencies can go down to multiple decimal places, transaction fees of 0.45% (for example) are still feasible even on sub-$1 trades.
Of course, one could say that play money is just as useful for this type of scenario, but I think there’s a cognitive fallacy that tries to explain how people behave when real vs. imaginary money is in play, even though the net effect is essentially the same (let’s ignore the salient point that just $100 invested in Bitcoin in Jan 2013 would have netted $5000 in Dec 2013 as that needlessly distorts the point).
EDIT: One is unlikely to outguess the bitcoin market vs. any other exotic or local real estate market. However, cryptocurrencies allow for one to cheaply test whether they can outguess or not. Real estate is not cheap to test your prediction skills.
However, cryptocurrencies allow for one to cheaply test whether they can outguess or not. Real estate is not cheap to test your prediction skills.
It’s hard to say how general financial guessing skills are, and something like “I bought Bitcoin in 2011 and held for two years and now my $1k is $1M, time to start buying real estate because I’m clearly a good investor” seems like a poor idea.
Unlike real estate which requires much higher amounts of capital (read: your after-tax savings) to invest in, Bitcoins and other cryptocurrencies allow for people with just double-digit or less discretionary income to speculate.
In this manner, speculators/gamblers/investors are able to gain some experience with actual money and trading. The fees on the cryptocurrency exchanges are rather low, and since cryptocurrencies can go down to multiple decimal places, transaction fees of 0.45% (for example) are still feasible even on sub-$1 trades.
Of course, one could say that play money is just as useful for this type of scenario, but I think there’s a cognitive fallacy that tries to explain how people behave when real vs. imaginary money is in play, even though the net effect is essentially the same (let’s ignore the salient point that just $100 invested in Bitcoin in Jan 2013 would have netted $5000 in Dec 2013 as that needlessly distorts the point).
EDIT: One is unlikely to outguess the bitcoin market vs. any other exotic or local real estate market. However, cryptocurrencies allow for one to cheaply test whether they can outguess or not. Real estate is not cheap to test your prediction skills.
It’s hard to say how general financial guessing skills are, and something like “I bought Bitcoin in 2011 and held for two years and now my $1k is $1M, time to start buying real estate because I’m clearly a good investor” seems like a poor idea.