Is Bitcoin right for you?
I see where Russia is turning to cryptocurrency to avoid sanctions.
Seems like there’s a new cryptocurrency every day. Scam? Ponzi scheme? Part of your retirement portfolio?
To answer this question for myself, I have to compare crypto to its alternatives. I’ll focus on Bitcoin because it’s been around awhile and seems to have a recognizable community of investors outside of the criminal users who imagine—wrongly—that Bitcoin transaction cannot be hacked.
Is Bitcoin a store of value? A casual examination of Bitcoin’s history says no, it’s far too volatile. It’s driven by speculation, not investing.
Is it comparable to gold as an investment because both are scarce? No. Gold has utility in electronics and jewelry, for example. Bitcoin is stored electrons.
To me, Bitcoin and all other crypto really belong to the greater fool theory of investing—you make money by finding a greater fool willing to pay more for it than you did. As an investment, it is too risky. It belongs in the “investment” market of tulips, art or NFTs—which aren’t investing, they’re gambling. Look, I’ve gambled money once or twice in my life. My daughter once bet on a horse at the Saratoga racetrack that she knew nothing about and won $7. You be you.
The biggest gamble I ever took was the opportunity cost of going to grad school for my PhD. It paid off for me, but it’s not for everyone.
is bitcoin a store of value or speculation?
Seems like there’s a new cryptocurrency every day. Scam? Ponzi scheme? Part of your retirement portfolio?
To answer this question for myself, I have to compare crypto to its alternatives. I’ll focus on Bitcoin because it’s been around awhile and seems to have a recognizable community of investors outside of the criminal users who imagine—wrongly—that Bitcoin transaction cannot be hacked.
Is Bitcoin a store of value? A casual examination of Bitcoin’s history says no, it’s far too volatile. It’s driven by speculation, not investing.
Is it comparable to gold as an investment because both are scarce? No. Gold has utility in electronics and jewelry, for example. Bitcoin is stored electrons.
To me, Bitcoin and all other crypto really belong to the greater fool theory of investing—you make money by finding a greater fool willing to pay more for it than you did. As an investment, it is too risky. It belongs in the “investment” market of tulips, art or NFTs—which aren’t investing, they’re gambling. Look, I’ve gambled money once or twice in my life. My daughter once bet on a horse at the Saratoga racetrack that she knew nothing about and won $7. You be you.
The biggest gamble I ever took was the opportunity cost of going to grad school for my PhD. It paid off for me, but it’s not for everyone.
is bitcoin a store of value or speculation?
The rural part of the state is years if not decades behind the metro areas in most things, but even down in the big city I have never seen any business I patronize that says they accept Bitcoin or any other crypto as payment. I may have missed it, and what I buy tends to be more in the necessity than luxury category so that may explain it, but until Bitcoin or any other crypto becomes accepted for the purchase of goods and services used by most people it will continue to be a speculation. Not even really a commodity because there is no functional use for an abstraction. I think of it as a cross between Ponzi and a pyramid scheme. And all those billions can be wiped out with a good degausser or a random (or deliberate) differential pulse or write.
I do my gambling at the casino.