Don’t Get Bit By Bitcoin!

The other day, someone asked me what I thought about investing in bitcoin or other cryptocurrencies.  The person who asked is someone that has never invested in a mutual fund or stock, and now they’re asking me about bitcoin!

STOP!!!

I am a big believer that some cryptocurrencies are here to stay.  However, at the present time, I will say this to you with certainty: Don’t invest in bitcoin unless you are willing to lose 100 percent of your money.

Bitcoin has captured the fancy of Joes and Janes all over the world.  It has had a meteoric move, its value going from around 10 cents to as high as $17,000.  However, in my view, it is more gambling than investing.

For one thing, with bitcoin, the easy money has already been made.  Those who got into it 2 or 3 years ago have made a fortune.

Also, we have no idea what the price of bitcoin is going to be in a year, 2 years, or 5 years.  It could be $100,000, $1 million, or 1 penny.  Part of bitcoin’s appeal is the fact that it is not controlled by any central bank; it is a transaction between 2 people, and you don’t even know who is on the other side of the transaction.  It is not protected or backed by any government, and its value is based merely on what people are willing to pay for it.

Listen – bitcoin is currently a “mania”.   And like all other manias in the past, it will crash.  People gravitate to get-rich-quick schemes all the time – this is no different.

Remember the dot-com boom?  In 1999, every Tom, Dick and Harriet invested in any company with a “dot-com” at the end of it: companies like Pets.com, Toys.com, and others that are long gone today.

In contrast, the value of a stock is based on the profits and growth of a real business.  It is therefore possible to make projections with some degree of confidence.

Instead of allowing yourself to get bit by bitcoin, set your sights toward real investing.  Learn how to get started in my e-book and at The Motley Fool.  Share your experiences, thoughts and questions in the comments!

Until next time…

 

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