Bitcoin is invisible digital currency. You never get to see it, hold it in your hand or smell it. It is not like transferring real money into your PayPal account and digitally pay for goods or services. You buy Bitcoin with real currency and sell it for real currency.
Wikipedia says, “Bitcoin is a cryptocurrency and worldwide payment system; it is the first decentralized digital currency, as the system works without a central repository or single administrator.”
Hmmm, decentralized, no central repository or single administrator. So you use real USD to purchase invisible “cryptocurrency”. If it loses value your real cash vanishes like a prop in a Las Vegas magic show.
Over the last few days, Bitcoin value (?) has skyrocketed to over $11,000 per Bitcoin. Then it took a dive and lost $2,000 within a couple of hours. To say Bitcoin is volatile (easily evaporated at normal temperatures) is an understatement. Yes, you can use Bitcoin to buy stuff that you can’t buy elsewhere without the inherent risks of buying illegal drugs or other contraband. So perhaps this make-believe money has a place in the black markets of the world. But to treat Bitcoin as a legitimate financial instrument is pure lunacy or simple stupidity IMHO.
Easy Come, Easy Go
There has been a fair amount written on Bitcoin as if it was some form of sound investment. I like to remind us of the tech bubble of the eighties, the day trading frenzy in the nineties, and the great real estate rip off of 2007. All great investment ideas…right? Easy money or setups for failure. Here it is 10 years later and the next shiny object of the day, “Bitcoin” has thousands of people pouring real money into this system in hopes of getting rich quick.
Now we have what sounds like legitimate voices singing the praises of Bitcoin. Sure they point to its rapid increase in value, I’m talking straight up on any graph you look at from the last few days. You know what goes up also comes down.
Fortune reported the IRS has gotten legal access to over 14,000 accounts. “In a ruling on Tuesday, a federal court judge ordered San Francisco-based Coinbase to comply with a summons that requires it to identify 14,355 accounts, which have accounted for nearly 9 million transactions.”
When You Die
Fortune also reported, “Bitcoins are a virtual form of money protected by unbreakable cryptography. This attribute makes it a secure way to store wealth but also creates the risk that when Bitcoin owners die, their digital fortune will be out of reach forever. That’s a major problem for the relatives of tech-savvy individuals who have invested”
Make sure your survivors know how to access your account. The anonymous administrators of Bitcoin are not going to go out of their way to recover funds for your surviving family members.
Opportunity Or Risk
The opportunity to earn big appears to have already passed. In 2013 you could have purchased Bitcoin for about $13. If you bought back then, you are sitting pretty today. And bless you for having the huevos to take the risk. If you’re just getting started investing in Bitcoin the boat may have already sailed so good luck.
I may be overly cautious or even old fashion, but I’m not putting my hard earned money into any system that doesn’t have a 1 800 number.