Welcome to CountingAccounting, I am again really excited to have you back with us today. Now I’m going to be writing about something I’m really passionate about and that’s “Why bitcoin is a bad investment?” there’s been a lot of words about bitcoin going on at the moment with it pushing forty thousand dollars and here in today’s article we’re really passionate about ensuring that you guys don’t fall into traps, that could hurt your wealth.
Now bitcoin at forty thousand dollars at the moment, it really does frighten me. I really don’t believe bitcoin is a bad investment I actually owned bitcoin long ago at a thousand dollars and even back then I didn’t think it was worth much money. So we’re going to do is going to talk about how bitcoin came into existence. Why the price has gone so high? Why there’s a lot of risk to it attached? What you should do to avoid bitcoin and other things you can do to be making money. So let’s jump in and look at that now.
Background on Bitcoin
Now, why is bitcoin a really bad investment? Let’s look at bitcoin came about, so several years ago bitcoin was created to be a digital currency that wasn’t tracked or traced. So people could be able to buy bitcoin by cash meet other people about it and get transfer digits to their wallets. There was no identification on bitcoin. This was great because it had people do the transactions without the governments being able to see them. So bitcoin is limited to a certain number I think it’s 21 million. They’re originally a dollar each. One bitcoin equaled a dollar for many years, it stayed around the same level. Now as time went on people started to buy more and more bitcoin and started getting involved and that’s because it starts to be used in different markets, even illegal markets to sell and buy things that you shouldn’t obviously buy and sell a couple years ago.
It came about I think another fund manager decided that you could list bitcoin as an index fund. So mutual funds could buy it and companies could buy into it and suddenly it became a tradable asset. Then people started to see bitcoin not just as a currency as such but as a physical investment that you can buy into it, but what is bitcoin?
Bitcoin is not an Asset
It’s computer code you’re not buying the blockchain technology, that sits behind bitcoin. You’re buying a computer code. Now people are paying forty thousand dollars for a bit of computer code? I’ve heard a lot of people saying bitcoin’s next best thing, it’s going to go to $200,000 it’s going to go half a million dollars. You know what, it could go to a billion dollars when we’re talking about fancy and fairy tales, it could go anywhere. There are no underlying earnings for bitcoin, there are no underlying assets. It’s not appreciating you can’t do anything to control the outcome of how bitcoin works. You’re buying something in the hope that’s going to go up. Now we want you to be in control of your financial future and being controlling the financial future is making decisions that you can see are going to have an impact.
Your Financial Future
So say for example you want to buy a house. Houses can be expensive but you can look at the right house in the right street the right property yield you can do the house up. You can look at the track record of going up over time. Shares, you can look at the value of the company, the managing directors, who’s in the company, what the value the assets? There are so many different things that you can look at to determine the wealth of an asset.
With bitcoin you are gambling, it’s speculative. No one knows why it’s worth forty thousand dollars. I personally wouldn’t even put a dollar on bitcoin. Now that’s just me I’ve got my wealth through hoping that things gonna go up, and that’s the next biggest challenge in why bitcoin is a bad investment.
It is because people love to buy things that are going up. So challenges most human beings don’t really sit there and like to think about things too much. They like things handed them on a platter. Let’s say, “Bob, you know bitcoin’s doubled”, “it’s double again”. Bob goes okay that’s a great idea I might put ten thousand dollars on it. How long had bob saved that ten thousand dollars working at a job? Saved it over three or four years after tax. Bob earned twenty dollars an hour that’s so many hours of work, that bob did to earn that money. What happens you put some money in bitcoin? You just watch it every day going up, going down, and going up. What controls you have over that? Why would you invest in something that you have no control over, that is computer code?
Problems with Bitcoin
Now I had a lot of people say that because bitcoin is scarce that means the price is going to go up. Now Firstly, bitcoin is a computer code, which can be changed. You can increase the number of bitcoins in circulation if you change the code. Secondly, there’s no regulation as well so bitcoin is a deregulated currency that is being run by people and a number of servers. So the ability of people to hack bitcoin & take bitcoin off you is still there.
Also, bitcoin is not actually backed up by any government or any currency, so say you use gold for example as an investment, gold actually is a tangible asset there’s a finite amount of it in the world and it’s been there for many many years. Bitcoin it’s computer code, it’s brand new and people are gambling on it. So bitcoin is a really really bad investment.