With the falling fiat currencies and countries printing money left and right, people has been looking for places to put their money. This is the main reason why bitcoin and other cryptocurrencies are going up right now. They are getting popular because it confirm their biases. But is bitcoin and cryptocurrencies actually a good investment?
I have been bombarded with questions pertaining to bitcoin, crypto and my opinion on it. I don’t want to talk about it because I don’t want to add fuel to the fire. I’d rather stay quiet and let it die. But I think I also have to write my thoughts so that anyone with a sane mind may find his way.
A lot of people has been getting into the crypto bandwagon. Finance youtubers and gurus are getting on the craze. Even Robert Kiyosaki is promoting bitcoin as the “people’s money”. Elon Musk even bought bitcoin as well. Money that no government can control. But should we actually follow these people into crypto just because they said so?
I like Robert, I read his books. His books are one of the few that actually altered my view on money and life. But I don’t think I could agree with him with bitcoin, heck, I didn’t even agree with him about stocks. It just goes to show that, you don’t have to follow someone else’s view on things. You have to think for yourself.
But enough about that, let’s think a bit deeper about bitcoin since its the most popular of the crypto currencies.
Why is bitcoin it going up?
Government Printing and Weakening Dollar
The investment thesis to a rising bitcoin is because of government printing money. They are printing money because they want to battle COVID. But almost all government has been printing money since 2008, as a way to fix the Financial Crisis. It fixed it for a while until more printing doesn’t do anything good but worse.. With this reason, if you have a lot of cash, you already know that your dollars will depreciate in value because of inflation and more money supply. More supply = less value. So bitcoin solves the problem of “no one has the power to print money”. It becomes a “storage of value” that nobody can control. The same reason Kiyosaki says its “the people’s money”.
During the hyperinflation of Germany, people discarded their fiat money for real tangible objects as storage of value. Cigarettes for example instead of 1million reichmarks. In our case, bitcoin is the cigarettes. Its not an official storage of value, but just a bunch of people agreeing that it is. We will talk about the storage of value argument later.
Gurus, Scammers and Criminals are Promoting It
If its one thing I hate the most is the appearance of knowledge. And gurus in particular are very good at this game. Just as I said that it takes skin in the game to be a great investor, gurus doesn’t care if you lose it all in bitcoin (no skin in the game). They will make money because they earn from partnerships from bitcoin companies if you join. The person that join will now have a way to earn money too. Just like an MLM pyramid scheme.
If you want to know if its safe to invest in bitcoin? Ask if the guru bought more bitcoin than any other asset class in their portfolio. If they don’t have bitcoin or just an ample amount invested in bitcoin, then you can conclude that he doesn’t really invest in bitcoin. Just a way to appear investing. If he invest a significant amount, then that’s a sign that he’s investing. Of course, this is hard to prove because no guru would show how much they really invest in right? So if you invest, its just you being greedy and fomo.
Why Bitcoin might not be adopted?
Storage of Value
I am going to discuss now one of the main argument for bitcoin as the storage of value. First, in order to be a storage of value, its price must be stable. If you’re a manufacturing company who buys raw materials in bitcoin, you should expect to make a profit when you sell the finish products. But bitcoin has a wild price swings. Its very volatile. It could be up 20% today and 15% down tomorrow. And that is not a good storage of value. It will kill businesses and industries with that kind of wild swings.
Limited Supply and Can Not Be Printed
Let’s assume that bitcoin can not be printed and there’s only a limited supply once it stops halving. Now what happens when there’s only a few supply of something? Well, people will hoard it. Powerful people will horde it. So that becomes a problem and liquidity will dry up. Think gold in ancient times… They fought wars for these things.
Countries Will Try to Replace Bitcoin
China is on the process of introducing their own cryptocurrency. The FED (Federal Reserve) is also on its way to offer their crypto coins. The technology itself is useful, but bitcoin perse, I’m still not sure.
Imagine money that can not be tracked. Always anonymous. Its very alluring for criminals. That’s why they are one of those who promote it. Ransomware has risen significantly the past few years because of bitcoin. They can get paid and still remain anonymous.
What’s the Value of Bitcoin?
There’s no value in fiat currency. I have discuss this in my course. And that’s the reason why we invest. We trade our no value fiat money with something of value like assets. But bitcoin is the same. Its also just a fiat currency if you think about it. The only reason why people buy it for now is because its going up. And its going up because people are buying it. Its as reflexivity as you could get.
What if I’m Wrong?
Sure I could be wrong about bitcoin. It could be one of the greatest invention of mankind and we all use it in the future. But I will not worry about that. Do you know why?
Because bitcoin is just another fiat currency. If I invest, buy stocks, real estate and productive assets, even if bitcoin becomes the global currency, my stocks, real estate and productive assets would still be valuable. These assets will retain their value and its just the currency they use, that will change. For example, if I have stocks that is priced in Peso or US Dollar today, what am I to worry about if in the future, they use bitcoin for it? My assets will still retain its value in the same amount in bitcoin.
Its still the assets that’s important. And I still think bitcoin has no value. I would like to think that this time in our lives is just like the South Sea Bubble or the Tulip Mania. If I’m wrong and I missed out on this, I don’t really care. I will still continue how I have always invested.
Still Want to Invest in Bitcoin?
If you’re still interested to invest in bitcoin or just wants to try it out, I have created an eToro Review. Just follow that link and that platform will help you get started in investing in bitcoin.