Category: Personal Finance

Should I invest in Crypto Currencies such as Bitcoin?

The meteoric rise of bitcoin is creating hysteria and FOMO (Fear Of Missing Out). Many have told me it’s a real easy way of making money. Those who bought it early on and held on to their coins are millionaires. Others are wondering what would have happened to their personal fortune had they bought it at “ground-level”, about 5 years ago when it was trading for a dollar or two or even three.

All valid reasons for asking one question which is on everybody’s mind — “Should I invest in crypto currencies such as bitcoin?”

This article is my answer.

Imagine there is a real estate boom.

This is no ordinary boom. It’s a boom of specialized properties.

These properties come with two special conditions — you cannot rent these properties to anybody and you cannot renovate them.

Preposterous, I know! But those are the conditions.

The only way you will make money is if the price of the property goes up in future and you successfully sell it. Or, if you barter it with someone else for something other than another specialized property.

Are you still with me? Okay. Good. Now, I have a question for you.

Would you buy into this boom?

What if I told you … All properties looked alike and were priced exactly the same. As more people buy these properties, the price of every single property increases. So if your neighbor bought one of these properties for $1,000 today, then all properties would be valued at maybe $1,100 tomorrow.

How does this pricing thing work? I don’t know what makes the price of the property increase. It just does, like magic.

Would you buy into this boom now?

What if I told you … these properties don’t really exist in any physical form, but are made up of a piece of code that is stored someplace online. But don’t you worry, the code is protected and very secure. So, I’ve been told.

Would you buy into this boom now?

Oh, and one last thing … there are no guarantees to your investment. These investments are not FDIC insured, not backed up by anything else of value, and they are not supported by any government organizations.

Would you buy into this boom now?

So, how does this relate to Bitcoins and other cryptocurrencies?

Crypto currencies don’t give you dividends. (Read rent).

As more people buy bitcoins, price of all bitcoins go higher. Bitcoin was priced at about $1,000 on January 1, 2017. In a 12-month period, thousands of people bought bitcoins. Result? The price of each bitcoin is nearly $20,000. By the time you see this article, it could have very well surpassed that mark.

A bitcoin is not an actual coin like a quarter. Rather, it’s a piece of code created online using block chain technology. Block chain is believed to be extremely secure.
Lastly, bitcoins are not backed up by anything and not supported by Government organizations either.

Hope you see the similarities between my real estate exercise and bitcoins.

I quickly took 25 people (it’s all I could get my hands on right away) through the above mentioned real estate exercise and every one of them told me they would not invest in it. When I told them such properties do exist and thousands of people own them, I got back different versions of — “That’s totally absurd. Why would anybody invest in such a thing?”

Then I asked them another question — “Would you invest in Bitcoins?” Half of them said, “Oh yeah, I’m totally considering it. Have you looked at how high it’s trading?”

So, if you’ve found yourself asking the question — “Should I invest in cryptocurrencies such as bitcoin?”, I’d say use your judgement. You know what’s best for you.

Not Bitcoin. Think Blockchain.

Bitcoin has been getting a lot of press in the recent years as an alternate form of currency. At the end of the day, it simply that – a form of currency that one can use to trade goods and services, nothing more.

In addition to it, Bitcoin is fighting a steep, uphill battle. The bitcoin enthusiasts love bitcoin because it’s an unregulated form of currency with no boundaries. As wonderful as this might seem, this is precisely the reason Governments around the world want it abolished. If the government can’t control it, they don’t want it to be around.

Hence, I personally am not too inclined to own bitcoins. I’ll stick with my dollars for now until they find a way to regulate bitcoins.

But, I am more than excited about the underlying technology bitcoin operates on – Blockchain.

The uses of Blockchain technology are far and beyond digital currency and its exciting. Here are a few to mention:

  • Smart contracts – digitization of documents and proof of ownership for transfers
  • Stock exchanges – digital trading platforms
  • Health records – decentralized patient records management
  • Smart property – digitally recorded assets
  • Music distribution – proof of ownership for digital content
  • Secure digital voting – fraud-proof, anonymous digital voting solutions

Another fact I love this is it’s a technology. It doesn’t have to be regulated.

Combining these two facts alone makes blockchain an exciting future technology, in my humble opinion.

If you’re going to invest into something like this, do you own due diligence before investing. This post is purely for entertainment and educational purposes.

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