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Bitcoin – A Gamble at Best

[/fusion_text][fusion_text]Bitcoin first appeared on my radar screen a little over four years ago. A friend of my brother-in-law asked me about it when he heard I was an investment advisor. At the time I knew nothing about it, and had to go home to research it. It didn’t take long for me to realize that I hadn’t been missing a legitimate investment opportunity. Bitcoin is a gamble, at best, certainly not an investment.

What is Bitcoin? They call it a cryptocurrency. It is a method of payment that has a value, just like dollars or pounds or yen. It is not issued by a government, rather it was created in 2009 (per Wikipedia) by programmers. It has garnered a lot of attention because it has surged in value this year. The number of businesses accepting it as payment has also surged.

Before you rush out to buy some Bitcoins, I have a few words of caution. I view Bitcoin as a cross between gold and any other currency. While they may be fun and do go up and down in value, none of them are appropriate investments. They have no economic value. They are only worth what the next person is willing to pay for them. Stocks, on the other hand, represent a share of ownership in companies that (presumably) provide goods and/or services and make money. Call me old fashioned, but I like to invest in things that make money, not go up in value on a whim.

Bitcoin is also quite volatile. If it can go up a few hundred percent in a year. It can go down a few hundred percent in a year. Don’t fool yourself by looking at a chart today and only seeing upside.

Lastly, Bitcoin has competition. It is the first cryptocurrency and the most popular one, but Ethereum is gaining in popularity. Security and market manipulation are also risks. Ethereum recently dropped from over $350 to less than a $1, only to recover to $350 in the same day. That’s not a “market” I want to participate in. Buyer, beware[/fusion_text][separator style_type=”single” top_margin=”” bottom_margin=”” sep_color=”” icon=”” width=”” class=”” id=””][fusion_text]

Legal Disclaimer: These posts do not constitute an offer or recommendation to buy or sell any securities or instruments or to participate in any particular investment or trading strategy. They are for informational purposes only. ASA gathers its data from sources it considers reliable. However, ASA makes no express or implied warranties regarding the accuracy of this information or any opinions expressed by the author and may update or change them without prior notification.