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Thoughts on Bitcoin and making money

I’ve been reading about Bitcoin a lot lately. It’s a very interesting concept… its a crypto-currency, its value is only worth as much as how much people are willing to accept it. The more Bitcoin is used, the more value it has and the more accepted it becomes. There are two ways to get Bitcoin: Mine them, or buy it at an exchange. Online Bitcoin exchanges post the currency value which fluctuates day to day, but Mt.Gox seems to be the biggest. Mining them is very interesting.

When you mine Bitcoins, you need a powerful computer that can compute the answer using the bitcoin algorithm to a computer problem. Once you get the answer, a block of bitcoins, depending on difficulty and time, is awarded to you. The more bitcoins that are out there, the higher the difficulty, the higher the difficulty, the less bitcoins you will receive relative to the time the computer spends on the problem.

So in 2011, Bitcoins were dirt cheap because not many people knew about them, and people were using their home computers and GPUs to mine them. Now though, more people know about Bitcoins, and the value of a Bitcoin currently is around $135. And specialized computers called ASICs are being developed to mine them. These manufacturers like Butterfly Labs and Cointerra are building computers designed specifically for Bitcoin mining, with up to 2 Terahashes per second.

So how much money would you make buying one of these machines, and start using them Jan 2014 (since they ship in fall 2013)? Well, the thing is with Bitcoin, its very volatile. How much its worth depends on how much people trust it. And the advantage of time. If someone had started investing in Bitcoin last year for example, when it was around $20, they would have made a lot of return, since now its $135 and it was even as high as $260 at one point. Therefore people who started mining earlier, even at the beginning of this year, would have alot of advantage and would have made alot of money. But now though, its kind of late to start. There’s comparison charts all over the web like this one.

The thing is, once these 500+ GH/s ASICs start shipping, the difficulty is going to increase massively, and its going to be much harder to get a return on investment. So, I would not invest in a miner now for that reason. At the beginning of this year, probably. But not now. But it might be worthwhile to purchase bitcoin currency now. If you think people will continue to accept Bitcoin at the rate it is now, then its worthwhile to purchase some, even at $135 a piece. The reason is because once more and more people start mining, each individual Bitcoin is going to be harder to get, making the supply of Bitcoin ever lower (actually the total circulation is capped at 21 million). Thus, because of lower supply and holding demand constant or higher, you can expect the value of Bitcoin to be higher in the future.

This brings me to a talk about money. I’m not the kind of person to care too much about money. Last year, I had $200,000 cash in the bank from my parents to help me finance my house, and in addition to my Intrade earnings, I could’ve used that money on various investments, but I chose to be a good son and not risk that money anywhere. If I had heard about Bitcoin back then and invested in it, at $20/bitcoin in Dec 2012, and $200k, that would be worth over $1.3m today. Or I could’ve invested in stocks/options like TSLA/PCLN/LNKD/NFLX/QIHU which have had monstrous returns this year. Anyways, the point is there’s always opportunities to make money, and I’m not really concerned about it too much. As long as I keep steady on my current job and do reasonable investments on properties and stocks, then I have a reasonably good chance of becoming a millionaire in the near future (take a look at this page).

In fact I have two stock option strategies to share: the first is called Straddle. Straddling a stock basically means you are betting that the stock will move in either direction. So you buy both a put and a call option on the same stock. If the stock moves in either direction, you hope that the return is higher than the premium you paid for both the put and the call. And that’s it.. pretty low risk option strategy.

The second is called Naked Put. Some people may say this is a high risk option strategy because you are uncovered, but the payoff graph is the exact same as a Covered Call, and its even better than that: With a naked put, you can be in a win-win. If you see a stock you really like, but the price is too high, sell a put contract on it, at the strike price you would like to buy it at. You get the premium for the put no matter what; and if the stock does go down to that price, you are obligated to purchase it; but that’s what you would have wanted anyway!! So I see naked puts as a win-win strategy.

Anyways, there always opportunities to make money, and so I’m not too worried if I miss out on some of them; I realize there is always more in the future. Did you bet on Obama winning the election on Intrade last year? Did you invest in Bitcoin in 2011? Did you invest in any stock in 2009? Did you invest in Shanghai/Seoul properties in the 1990s? Did you invest in the US housing market in 2010? Did you buy AAPL stock in 1990s? Did you buy call options on TSLA at the beginning of this year? Working part time on IT consulting? Buying iPhones in US and selling them in China for a markup? Stocking up on gold in 2008? How about writing a book about how to make money? How about selling an app in the App Store that links you to your book about how to make money? All of these could’ve net you a massive profit. But point is, its always about timing, and available capital. Its hard to estimate timing, but as long as you take the risk, there is always opportunity to make money and get rich. And the more money you have, the more money you can afford to risk, and thus the more you can make. That’s what I’ve learned through all my financial knowledge.

Videos:
I uploaded some videos recently, including reviews of the Ouya and Wikipad and cover of Bruno Mars:

httpv://www.youtube.com/watch?v=BcGnw03UZaw

httpv://www.youtube.com/watch?v=fjDkSEL4Zwg

httpv://www.youtube.com/watch?v=RrXoTleC344

Categories
Business General Politics School/Work

To do list for next two months

Need to keep track of things…

School:

-Contact Registrar to allow me to enroll in ECO courses needed for graduation Start enrolling Aug 6th

-Defer for OSAP application

-Taking money out from stocks to fund tuition

-Do well in ECO220 (80+, exam left)

-Attend Club day and sign up for positions for potential internship and leadership

-PEY final evaluation

-Contact professor for possible CSC490/CSC494 project

-Interview for Chinese course

-Get accepted into ECO major

Work:

-Fixing Mantis issues; Fixing bulletin importer

-Designing and implementing DMS web interface prototype

-Spec document for query interface following data model changes and MD5 checksums for duplicate bulletin issue

-Getting AppFuse to work with Oracle and Maven

-Getting Spring Roo to work with DB Persistence objects, Hibernate, Oracle, Maven

-Migrating components for new release

-Designing file system persistence

Other:

-Procuring investment capital for hiring

-Assessing and developing more cohesive business plan to present to investors

-Designing contract for selling backend of Joomla+Kaltura

-Work on Love@UofT project; figuring out CodeIgnitor; implementing messaging system

-Work on design of future video based sites in Chinese (need translator) and mass market (need frontend)

-Finding source of advertisement and promotion

-Consolidate domain names into one dedicated server and one shared (dedicated for video,shared for blog)

-Find potential buyers for my car and sell it for decent price

-Stocks better go up before end of Aug!

-Eliminate 60%+ of my debt

I’ve also been working on a video site. You can check it out Here.

Things to do for it:

-Fixing up Clipshare frontend so that onclick javascript events can work when using fx functions

-Modify banner

-Add advertisements

-Allow users to feature videos and submit their own related links to blogs, videos, articles, etc

-Translate any untranslated items

-Move upload to main page

-Change redirection from signup to login.php

-Change most viewed on featured page to most helpful (highly rated)

–Add Ajax pagination

-Add mobile phone support

-Change categories to show on main video page instead of separate page

-Add more videos

-Fix conversion / file limit

-Do more SEO on it

-Add fb/twitter connect for login

-Import from youtube

-Add expandable descriptions

-Wikipedia, Twitter, Blogger, Stack overflow, Google latitude content aggregation