Ed Rempel is a Fee-For-Service Financial Planner, tax accountant & popular blogger.
We talk about on whether Bitcoin:
- has any intrinsic value,
- is it or is it not a currency
- is it an investment of a gambling tool
Alain’s experience with Bitcoin
I bought bitcoin when it was worth $500. I sold it a few weeks later at $600. Yep, I made 20% return on my money in a couple of week.
I bought it because I was swept away with the enthusiasm. Also, I wanted to understand what was all the fuss about.
Right now Bitcoin is worth more than $50,000. I could have made a 1,000% return on my investment in a couple of years.
Do I regret it?
No for one second.
As I owned Bitcoin, it confirmed my suspicions.
- It’s not a currency
- It’s not an asset
- It’s nothing!
It’s not a currency because people do not use it as a currency. Most Bitcoin holders don’t use it to buy stuff with it and most retail places don’t accept it as payment for merchandise.
It’s not an asset because it doesn’t produce anything.
When you buy a stock, you buy it with the expectation that the company that issued the stock will sell a product or service and eventually make some money.
When you buy bonds, you expect interest.
When you buy real estate you expect rent money.
When you buy Bitcoin, you expect nothing.
Yes, Bitcoin has some amazing cheerleaders who will promote it and defend it as a currency that’s not under the control of any government, that it doesn’t depreciate due to the common practice of the government of money printing.
But none of those arguments truly explain the spectacular increase in the value of the digital currency.
In my opinion, it’s a fashionable financial instrument that people buy particularly because they can’t understand it yet, and they fear missing out. I am sure that if they did understand it, they would not buy it.
Eventually the bubble will pop.
Someone will decide to cash out before everybody else, somebody else will follow, and eventually, there will a stampede of people rushing for the exit.
When will that happen? No one knows, but IT WILL HAPPEN because eventually, people will get tired of holding a non-productive asset. They will need that money to buy groceries, to pay the rent, or to buy a productive asset.
I don’t feel bad for the millionaires who have decided to take a gamble on the currency. if they lose their money, it will only be a small part of their portfolio.
I feel bad for the thousands of gullible people who will be left holding the bag and will lose a big part of their savings. I know a guy who has borrowed money from their credit cards to buy more Bitcoin.