Since I started studying investments, I can recall that there has always been a hot investment that was sure to make anyone who invests in it rich with little effort. In the 1990’s, it was the dot.com stocks being traded on new online trading platforms. In the mid-2000’s, it was flipping real estate. Currently, it is hard to find a financial media outlet that is not talking about Bitcoin. I don’t know if Bitcoin is a bubble like the dot.com stocks and Las Vegas real estate market. The one thing that I can tell you is that I will not be investing in Bitcoin.
Since the first time I heard about Bitcoin, it did not sit well with me. About three years ago, I was at a birthday party for my best friends Dad. My friend’s nephew Denis who was fresh out of drug and alcohol rehab was also at the party.
I have known Denis since he was a little boy. Denis seemed happy that I was at the party and struck up a conversation with me. He told me that he was grateful to be sober and that his family has welcomed him back into their life. He went on to tell me a few of his war stories from his addiction. The one story that he told me was that he was using Bitcoin to buy drugs from the dark web.
As a teetotaler, I had no idea what Bitcoin or the dark web was. At that time, I thought the dark web was a cheesy Lifetime movie. He explained it to me as being a web portal where you can buy just about any type of contraband and the cryptocurrency that you use to conduct these illegal transactions was Bitcoin. It might not be fair, but as the result of that conversation, I now always associated Bitcoin as the PayPal for the online black market.
My second real-life encounter with Bitcoin came last fall. My own nephew told me that he was investing in Bitcoin. Not to be harsh on this kid, but he is not as sophisticated as my friend’s nephew Denis. He is just a nineteen-year-old boy who is working as a dishwasher at a nursing home. He is debating on going into the military but has not decided what he wants to do with his life yet.
He told me that his friend at work invested $5 in Bitcoin and it grew to be worth $85. He also invested a few bucks of his own and was hoping for the same return. During this conversation, I think I knew how Joseph Kennedy felt when a shoeshine boy was talking about stock tips with him prior to the market crash of 1929.
I generally do not get involved in other people’s personal business. That is especially the case when it comes to family. The angles have taught me that only fools rush in.
The issue that I have with my nephew messing around with Bitcoin is that it will give him the wrong idea about what investing is all about. Odds are, he will mature one day and have to save for retirement. If his Bitcoin adventure blows up in his face, he might be afraid to invest for retirement. That would be a tragedy.
The last conversation that I had about Bitcoin was over the holidays with my sister-in-law who was up north visiting from South Carolina. She told me that she was going to invest in Bitcoin because she thinks that it has huge growth potential. She even thinks that it might overtake the U.S. Dollar as the main currency in the United States.
I asked her why she thought that would occur. She explained that her Mother who owns a beautiful bed & breakfast in Ashville, North Carolina is losing business because she does not accept Bitcoin as a source of payment. She is considering making the change to accept Bitcoin to grow her business.
Now my Sister-in-law is far from being a dummy. I have a ton of respect for her. She is a Psychologist and is exceptionally intelligent. She is an expert in PTSD and works for the VA helping veterans who are trying to readjust to civilian life. Unfortunately, when it comes to greed, logic and reason sometimes go out the window.
I see Bitcoin as speculation. It is not an investment. When a person invests in stocks, they are buying shares of a company that produces a product or service. It is an entity that has financial statements to indicate why it is worth its current value.
Bonds are also an investment. Bonds are a loan to the government or corporation. They have a quality grade and risk associated with the term length. Shorter-term bonds are generally less risky. Most investors use them to offset the risks of owning stocks or for income.
I did not think that I would ever write a post on Bitcoin. I have no interest in it. I am only writing this because I fell that I owe it to anyone who is considering buying Bitcoin.
Bitcoin is not an investment. It is pure speculation. I consider it speculation because people are just buying it with the hopes that it will go up in price. Hope is not a strategy or logical reason to buy an investment. Bitcoin does not produce anything. It does not provide a service to help anyone. There is no reason to invest in Bitcoin other than the illusion of striking it rich. I see it as simply gambling with your money.
Some people consider the Blockchain technology that Bitcoin uses to be truly cutting edge. Blockchain is software that allows two people or computers to conduct a transaction when there is not a relationship between them. Maybe that is why foreign drug dealers are using it as a means to sell poison to kids in the suburbs.
I imagine that there is far more good to Blockchain than bad. Yes, I have a biased point of view. However, my friend almost lost his nephew as the result of being able to use this technology to buy drugs on networks such as Tor.
As for those who want to invest in Bitcoin, my advice is simple. Just say no. Don’t walk away from it, run away from it. If you feel that you absolutely must invest in Bitcoin, Limit your exposure to a very small percentage of your portfolio. It is an alternative asset class. If It continues to climb in value, you can brag about owning it to your friends. If it crashes, you won’t lose all of your life-savings.
If you want to become a serious investor, think long-term. Look for a balanced mutual fund that holds the right mix of stocks and bonds for your individual situation. Take advantage of your employers 401K or open an IRA. Don’t pay attention to investment manias. They come and go and most of them wipe out wealth along the way.
Do you invest in Bitcoin?
If you do, please share why you see it as a valid long-term investment option.
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