{"id":9543,"date":"2021-04-29T15:43:39","date_gmt":"2021-04-29T15:43:39","guid":{"rendered":"https:\/\/zackspcg.com\/blog\/?p=9543"},"modified":"2022-02-26T13:05:52","modified_gmt":"2022-02-26T13:05:52","slug":"the-perils-of-investing-in-bitcoin","status":"publish","type":"post","link":"https:\/\/zacksim.com\/blog\/the-perils-of-investing-in-bitcoin\/","title":{"rendered":"The Perils of Investing in Bitcoin"},"content":{"rendered":"\n

Charlie G. from\nPhiladelphia, PA asks: <\/em>Good afternoon Mitch, I would like to hear your\nthoughts on bitcoin as a long-term investment. Every time people think bitcoin\nis in a bubble, it just goes higher and we keep seeing more institutional\nbuy-in. What do you think? <\/p>\n\n\n\n

Mitch\u2019s Response:<\/strong><\/p>\n\n\n\n

Thanks for writing, Charlie. I don\u2019t write about bitcoin much,\nbecause I think its risks, benefits, ability to generate earnings, and\nvaluation are not well understood. <\/p>\n\n\n\n

So, the short answer to your question on whether bitcoin is\na viable long-term investment is: I don\u2019t\nknow<\/em>. But I\u2019ll tell you why I\u2019m not investing. <\/p>\n\n\n\n

Bitcoin\nhas no well-defined intrinsic value \u2013 it is not gaining much traction as a\ncurrency, and its real-world applications are growing but not as quickly as the\nhype would indicate. To be sure, bitcoin has a blockchain, which I acknowledge\nis a groundbreaking technology with extraordinary potential. But blockchain\ndoesn\u2019t generate earnings for bitcoin, and bitcoin itself isn\u2019t profitable. At\nthe end of the day, why is $50,000 or $100,000 the right price for one unit of\na digital currency with no earnings? I\u2019m not convinced anyone has a good\nanswer.<\/p>\n\n\n\n

__________________________________________________________________________<\/p>\n\n\n\n

What To Do When You Think, \u201cThis Time May Be Different\u201d<\/a><\/strong><\/p>\n\n\n\n

Bitcoin, and other cryptocurrencies, have left the media in\na total frenzy for the last few weeks. While some investors are looking for\n\u2018get-rich-quick\u2019 come ups, others are still seeking long-term financial\nsuccess. In times like these, when we are trying to recover from a worldwide\nhealth crisis, it\u2019s easy for investors to fear for the future and make\nemotionally-driven financial decisions. Feeling uncertain is still completely\nnatural, but what exactly can you do when you think, \u201cthis time may be\ndifferent?\u201d<\/em><\/p>\n\n\n\n

As difficult as it may seem, it\u2019s better to remain calm and\navoid rash moves. It\u2019s easier said than done, but the actions you take right\nnow have the greatest potential to define your financial future.<\/p>\n\n\n\n

That\u2019s why we have put together a free Black Swan investing\nplaybook with insights and guidance to help you seek success when investing\nthrough these unprecedented times. If you have $500,000 or more to invest, get\nour free investing playbook today.<\/p>\n\n\n\n

Download – <\/a>The Black Swan Investing Playbook<\/a>2<\/a><\/sup><\/em><\/strong><\/p>\n\n\n\n

__________________________________________________________________________<\/p>\n\n\n\n

I also worry\nabout the type of risk-taking that drives retail investors to buy bitcoin. Many\nretail investors are using heavy amounts of leverage on lightly-regulated\nexchanges, where derivatives contracts are sold cheaply and amount to\nessentially a \u2018rolling of the dice.\u2019 Many of these retail investors are trading\nsimply in the hope of getting rich quick, with no real attention to\nfundamentals or value, and no real understanding of what bitcoin is. To me,\nit\u2019s a problematic setup, and it helps explain why a -17% drop in 20 minutes \u2013\nas we saw last week \u2013 is possible. <\/p>\n\n\n\n

In my view,\ninvesting in bitcoin or other cryptocurrencies is a sign of investor impatience\n\u2013 wanting to take shortcuts in the effort to secure long-term attractive\nreturns. It is leading to a sense that risky asset classes can only go up, and\nby extension is resulting in retail investors ignoring fundamentals \u2013 which, in\nbitcoin\u2019s case, don’t exist. <\/p>\n\n\n\n

Throughout\nthe course of history, we have seen similar stories many times over. I am not\nsaying Bitcoin is doomed and the bubble will burst any minute. For all I know,\nit could keep marching higher all year. But I do believe that excessive\nrisk-taking and the practice of throwing fundamentals out the window \u2013 in\nexchange for the hope of making big returns \u2013 is a story that rarely ends well.\nAnd in my view, I do not want to be invested in a speculative asset class as\nsuch a story unfolds. <\/p>\n\n\n\n

It\u2019s\ncompletely natural to feel uncertain about your financial decisions at the\nmoment. But in times like this, it is better to base your decisions on research,\nnot emotions! Don\u2019t sell and exit the market or wait on the sidelines\nout of fear. <\/p>\n\n\n\n

That\u2019s why we have put together a free Black Swan investing\nplaybook3<\/sup> with insights and guidance to help you seek success when\ninvesting through these unprecedented times. If you have $500,000 or more to\ninvest, get our free investing playbook today. You\u2019ll learn about seven time-tested\nguidelines to help you seek investing success through this historic \u201cBlack\nSwan\u201d market downturn.<\/p>\n","protected":false},"excerpt":{"rendered":"

Bitcoin continues to climb and attract new investors. But without fundamentals, how do you gauge its value? <\/p>\n","protected":false},"author":3,"featured_media":7436,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[66,71],"tags":[],"class_list":["post-9543","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-mitchs-mailbox","category-private-client-group"],"acf":[],"_links":{"self":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/9543","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/comments?post=9543"}],"version-history":[{"count":1,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/9543\/revisions"}],"predecessor-version":[{"id":10407,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/9543\/revisions\/10407"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/"}],"wp:attachment":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media?parent=9543"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/categories?post=9543"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/tags?post=9543"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}