Should you invest in Bitcoin is a common question asked by many who have witnessed it cryptocurrency’s roller coaster ride In recent years.
Each Bitcoin is now worth around $30,000 after a year of gains for the cryptocurrency, but over the past five years it has fluctuated from $3,000 to $65,000, showing the seesaw it has been on. It has not only led to an increase in Bitcoin investment, but also in Bitcoin mining.
I’ve tried my luck at it, albeit with fairly small sums compared to some, but it taught me that seeing it as an investment is the wrong course of action for most people. Unless you really, really know what you’re doing, it’s a gamble, just like playing the tables in Vegas.
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That means it should really be seen as something you can only try if you can afford to lose the money, so something to have fun with rather than really invest in. That’s my view and you may disagree , but here’s why I think so.
Why Bitcoin is closer to gambling than investing
When investing in the stock market or in commodities, you can at least do some research to help inform your decision. How has this fund manager performed? What are this company’s growth plans? Or, what do the experts think will happen to the price of gold?
These are all questions you can answer by using research to inform you about potential outcomes. You can also get financial advice from experts who know the markets and the system.
Of course, most investors know that there is always a risk that their investment will fall out due to major world events such as COVID-19, or due to more localized or company-specific issues.
Yet few stocks or commodities have experienced the white knuckle of Bitcoin, and that propensity to move suddenly, sometimes seemingly without warning, is why it’s so much harder to predict, and why it’s closer to gambling than to invest in my vision.
One reason Bitcoin is hard to predict is because the mechanics behind it are so complex that most people don’t understand them and therefore don’t have the same knowledge they have about more traditional investments.
I suspect die-hard crypto experts who do nothing but study Bitcoin and other similar currencies like Ethereum will disagree with me, but this article is not aimed at them, but at the less informed majority.
My Bitcoin Loss
A few years ago, when everyone seemed to be talking Bitcoin up during one of the peaks, I bought $300 of it. I saw it rise to around $500, then drop suddenly, only to go back up.
After a few months later I pulled it all with a loss of $50. I could swallow a $50 hit and I saw the experience as a bit of fun to see what would happen with $300.
The problem is that I had no idea why it went up or down and saw no way to predict which way it would go. I didn’t like the feeling that I wasn’t in control at all.
Do not enter Bitcoin unless you understand the risks
Bitcoin has a good 2023, with a value up 75% so far this year. It might encourage someone to try their luck.
I say go for it if you want to have fun, but only with money you can afford to lose, unless you really consider yourself a cryptocurrency expert.
But beware of the many companies out there trying to sell you a Bitcoin investment as a surefire way to make money. You might get lucky, but you might as well get burned.
Whether you agree or disagree, feel free to tweet me @guyanker.
