How Bitcoinz began

First posted on Facebook early Feb 2012

As a group we shall raise $2000-$3000, with each individual share valued at $200.

This total amount raised shall then be invested into the digital currency, Bitcoins, with the aim to increase the underlying share value based on a series of trades over a 12 month period.

Bitcoins are an emerging, peer-to-peer digital currency with no central authority.  They have existed since Jan 2009 and are currently valued at 5.69 BTC/USD

More info on Bitcoins can be found here:
http://en.wikipedia.org/wiki/Bitcoin
http://arstechnica.com/tech-policy/news/2011/06/bitcoin-inside-the-encrypted-peer-to-peer-currency.ars

How the group will operate? Each member has between now and Feb 29th to transfer $200 (or multiples thereof) to purchase their share(s).

On March 1st 2012, money shall be pooled and invested via the Mt Gox Bitcoin exchange (for which a service fee shall be charged by Mt Gox – approx 50bps)

As a group, we shall vote on stop-loss and profit-take tolerance (i.e. if the value doubles: sell half)

Based on this agreed terms I will manage any trades and send through a monthly update on our progress and asset values.

Once you are in, you are locked in until all money has been converted back to currency and withdrawn.

We will aim to leave money invested until 1 March 2013, or until there is a majority vote to withdraw and close the group.

What could go right? Bitcoins are a highly volatile currency just starting to flirt with mainstream acceptance. Because there is a finite amount of Bitcoins that can be produced, if this acceptance does occur I tend to believe this value could be realised.

Every now-and-again the mainstream media does a story on Bitcoins and speculation goes nuts.

Following this item by the Wall Street Journal, the value of Bitcoins jumped from $15, to $50 in the space of a couple of days: http://blogs.wsj.com/tech-europe/2011/06/09/bitcoin-on-line-currency-taking-off/

What could go wrong? Bitcoins are a highly volatile currency, their intrinsic value is debatable. While they are currently worth far less than their $50 peak, their true value may prove to be a lot less than where they are currently.
Bitcoin exchanges have been hacked previously. I will do everything I can to protect against this, but this is a lot more risky than putting your cash in a Ubank account. Also, if something does go wrong, your coin are gone, forever.

When prices crash, they crash quick:
http://www.forbes.com/sites/timothylee/2011/08/07/the-bitcoin-crash/

In summary, there is absolutely no guarantee this will go the way we hope it might, and this should be considered more a fun gamble than an investment. If losing $200 would piss you off, please PLEASE don’t even think about getting involved here.

That said, if this does come together, we could have a very nice little nest egg to play with come this time next year.

 

Disclaimer: This blog is not investment advice. Bitcoin could become one of the best investments in the financial world, but there are significant risks involved related to bitcoins and, like other financial assets, it is possible to lose money. Always do your own due diligence, and consult your financial adviser before doing any investing. Long-term trading success or positive investments require accepting errors and uncertainty if one wants to forecast probabilities in the future. Never invest unless you can afford to lose your entire investment!

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Long Straws is the personal blog of Stephen Colman.

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