Here’s the key to understanding risk: it’s largely a matter of opinion.” – Howard Marks
Very rich of me to post this whilst Bitcoin is under half of its all-time highs. But I find it worth it to explain my thoughts on investing in this asset class.
And I know I’m beating a dead horse here choosing not to invest. But I thought it would be at least beneficial for myself at the very least to put some of my thoughts into words and list my convictions.
Bitcoin and other cryptocurrencies were once at the forefront of financial news with their meteoric rise. And now it’s an uncertain time for them with people wondering will they hit those heights again. Although is it a currency? Is it an investment? Let’s try to find out.
To be frank, I’m no crypto expert. So if you came here to find my views on blockchain decentralization of hashes and how it affects block time (Is it obvious I have no idea?), I apologise.
I’m just here to list my opinion on them as an investment.
So to get into it, a couple of reasons why I won’t touch Bitcoin.
I Don’t Understand It
Hell yeah I’ll admit I’m too damn dumb to understand the hype over it.
I think this is one of those times where it may be wise to stay within your circle of confidence.
Is it a currency? If so why can’t I purchase more items with it?
And if the excuse is “well you can just change it into Fiat currency to spend it”. Then why don’t I use Fiat currency to begin with and save the hassle?
So is it an asset? If so what is the intrinsic or underlying value? Is the only value purely the price people are willing to pay? I don’t like investments riding purely on speculation and guessing what other people are going to pay for it.
I purchase a property, I can charge rent on it. I buy shares in a company, they may pay a dividend or at least retain profits to increase future earnings. I put my money in a bank account at least and earn interest on it. Bitcoin as it seems to me as an investment relies on someone else paying a higher price for it than what I did.
Investing for me involves paying for things at a price attractive relative to their intrinsic value, hoping on the fact that they will generate more money than what I paid for it in the future.
What’s the line of thought that Bitcoin will continue to generate gains in 5, 10, 15 years’ time? Other than hoping other people will pay a higher price than what I paid for it? (AKA speculating).
Is Bitcoin the Best Crypto
Is it because it’s the first? Because it has the most liquidity? Or because it is the most well known to the common man?
Why should I put my hard-earned money into Bitcoin as opposed the hundreds other Crypto options available?
Look into any Facebook comment section or Reddit thread mentioning Bitcoin in even the slightest negative sense and it seems an army of loyal Bitcoin holders will show up in order to defend it and state it’s “going to the moon!”.
Has a down day? BTFD.
It seems a little cultish and euphoric for my liking, but hey, what do I know?
Either way, the last thing I want to be doing is getting caught up in the madness of crowds.
Instead of Investing, Would I Short Bitcoin?
To invert the question of would I ever invest in Bitcoin would be to ask, would I risk shorting it?
The answer is also a no, for the market can remain irrational longer than you can stay solvent. I don’t like my chances of accurately predicting it. I have a hunch and I back my beliefs. But damn, it’s like playing with fire.
Look at the people that shorted Tesla. You might be so sure in your research and beliefs but other peoples hype can kill you.
So thanks, but no thanks.
Either way, time will tell, and it will be interesting to look back on this 5, 10, 15 years down the track and to see what happens with this whole thing. As Howard Marks said, understanding risk is largely a matter of opinion, and in my opinion, I’m happy to sit this one on the sidelines and spectate.
Feel free to let me know what you think though.
If the Bitcoin really is the currency of the future why aren’t people spending it? Why are they buying a ‘currency’ as if it were an asset only to hold and wait for the price to increase? Why is it so volatile?
Overall I have too many questions regarding bitcoin and too few answers.