With the meteoric rise of Bitcoin currently trending, everyone from your neighborhood barber to your own grandmother is asking the same question; Should I invest in Bitcoin? Let’s explore that question.
Before we can make a logical decision about investing in Bitcoin it’s probably best to start with a definition of what a Bitcoin is. This definition from CNN seems to give a quick and easy to understand breakdown.
“Bitcoin is a new currency that was created in 2009 by an unknown person using the alias Satoshi Nakamoto. Transactions are made with no middle men – meaning, no banks! Bitcoin can be used to book hotels on Expedia, shop for furniture on Overstock and buy Xbox games.”
While the inner workings of Bitcoin are very difficult to understand, its usage seems pretty familiar. If you’ve ever used Paypal or ApplePay then you probably get the concept. But, unlike the aforementioned payment options, Bitcoins have to be bought and once you buy one its value can go down just as fast as it can go up.
Heads or Fails?
You might have heard that Bitcoin is now worth such and such dollars, but is it really? It may not be worth anything. Check out this quote from the NY Times article, What Is Bitcoin, and How Does It Work? “A Bitcoin is a digital token — with no physical backing — that can be sent electronically from one user to another, anywhere in the world.
A Bitcoin can be divided out into eight decimal places, so you can send someone 0.00000001 Bitcoins. This smallest fraction of a Bitcoin — the penny of the Bitcoin world — is referred to as a Satoshi, after the anonymous creator of Bitcoin.” I don’t know about you, but that doesn’t sound like something I feel safe putting my money into.
I’m likely to not purchase an item online if there’s no way to get in contact with a customer service rep. How about you?
Okay so to play Devil’s Advocate US currency isn’t backed by anything either, but it is a globally accepted currency and the Federal Reserve that runs it works closely (ahem) with the government to regulate interest rates etc. If something goes wrong with your Bitcoins (like they disappear) who’s going to give you your money back?
Let’s be honest we all know if it’s connected to the internet it can be hacked. Bitcoin is no exception. Do you want proof? Check out this article from Business Insider. Go ahead make it easier to steal your money. The United States bailed out banks that were “too big to fail”, do you think they’d intervene if Bitcoin disintegrated?
A Bunch of Craps
When it comes down to the question; Should I invest in Bitcoin? I think the answer depends on the situation If you have a million dollars in the bank and can afford to invest 1% in Bitcoin and the loss won’t bankrupt you, then maybe its a risk worth taking.
If you’re struggling to make ends meet but you just got a big tax refund check and want to see if you can hit it big with the latest “get rich quick” idea, you might want to think twice or even three times. I think this article from the New York Times captures my feeling perfectly.
In the article, the author proclaims, “This isn’t really about Bitcoin at all. Just like it wasn’t about real estate in 2007 or internet stocks in 1999. This is about investing versus something else we typically call gambling or speculating. It’s not about where Bitcoin is going, or what we might have missed out on over the last year. All of that is out of our control.”
I’m not a financial expert and these are only my opinions, but the opinions are based on expert analysis. I agree this is not a question of investing at all. I equate this whole Bitcoin craze to a person walking up to a craps table while a roller is hot. If you’ve ever hit the craps table, you can easily envision this analogy.
Your standing there watching and asking yourself, “should I make a bet”? Your fear that the odds are against you is making it difficult to make a decision. You know how the game goes. This person is going to crap out soon.
As you wait the cheers get louder and the winning continues. You are really tempted to drop all your chips on the 6 or the 8, but now the odds are even riskier than before just due to the number of dice rolls and basic probability.
When you invest your money it’s never a good idea to go throwing your money into a rising pot hoping it will boil over. Smart investing involves carefully researching a growing market or business and set an achievable goal or return on investment. How can you even begin to predict a market for something so volatile?
I don’t want you to think this is a hit piece on Bitcoin investing, but the truth is, if you’re reading this you already know the best-case scenario for purchasing a Bitcoin; you make a lot of money. I’m just here to balance things out and also to help you focus on the real investment opportunity here; Blockchain.
Blockchain looks like the real horse to get behind. Instead of focusing on the different currencies why not focus on the problem they are solving. That’s how you make a sound investment. Sure Amazon got their start selling books online, but they became the juggernaut that they are today after realizing that they had created a sustainable way to get products to people quickly and easily with a system of reviews set up to help you make the best decision possible. Fads fade away, but solutions stick around forever.
“Another risk is obsolescence. Should another technology emerge which does everything that Bitcoin does but faster and more energy-efficiently, the value of Bitcoin could plummet overnight.”–Bernard Marr, Forbes
So the real question is; Should I gamble in Bitcoin? Right now we are all standing at the crap table looking around at the smiling faces and down at the GREEN board. It’s no coincidence that the dice are often RED.
Anything involving money is a gamble, right? Fortunately for you, the house doesn’t always have to win. Would you rather hope for 21 and pray for enough luck to take one more hit without busting or know how to count cards?
Would you rather be able to read tells along with your gut instincts or depend on them alone? If you’re looking for a competitive edge in the game of life check this out.
Hopefully, you now have a better understanding of this cryptocurrency. Maybe this will help you decide if you should or shouldn’t invest in Bitcoin. Let me know if this helped you. Leave a reply in the comment box below.