Bitcoin; the craze of the decade!
When I first heard of bitcoin some years ago, I was like ‘oh, that’s a thing now’ and proceeded on my merry way. Since then, something has changed, and bitcoin has gone mainstream in a way that this humble writer would never have guessed possible.
It was only a month or so that I started taking an interest in crypto currencies when I overheard two colleague of mine talking about the possibility of making an investment, and soon.
This got me thinking, and I took a gander at bitcoin as it exists today…
There are certainly some interesting features of online currencies and Blockchain that are worth discussing, however today I will be focusing exclusively on the currency’s value as a tradable commodity rather than its utility.
After all, most bitcoin investors don’t really care (much less understand) their investment from such a technical perspective, and to be perfectly honest, I’m not sure I do either.
Before I go any further, I must state that I am NOT a financial or investment expert by any means and this article should NOT be taken as financial advice. Just assume I don’t know what I’m talking about and everything will be hunky-dory, kay?
What I do know however is three basic principles which I believe serve as useful guidelines for any first-time investors considering whether now is the right time to get involved:
1. Short-term investment is high-risk
2. Investing in an inflated bull market is high-risk
3. Emotional investment is high-risk
From this writer’s layman perspective, a significant number of bitcoin investors are disregarding at least two of these principles.
Short-term vs Long-term Investment
Markets are unpredictable; they rise and fall on a daily basis and even the most experienced investors can’t always predict the trend, especially with a market as unstable as bitcoin. It takes considerable expertise to even attempt to make a profit in the short-term.
Many bitcoin holders may be forgiven for thinking of their investment as a long-term one (as many of them are) and generally speaking, an investment over a period of years (disregarding financial crises of course) is a safe bet.
However there is more than a little buzz from experts who think bitcoin is a bubble waiting to burst, and any day now. They may be wrong of course, but should that be the case, long-term investment may not be an option at all for newcomers.
Unless you invested a year or more ago, you may be at risk of losing the lot should the worst case scenario become a reality.
Beware of uncertainty newcomers, beware!
Bull Market vs Bear Market
In case you’re unfamiliar with the terminology, a ‘bull market’ is one in which investors are more commonly buying (pushing the value of the commodity up) and a ‘bear market’ is one in which investors are more commonly selling (pulling the value down).
If ever there was an obvious example of an out-of-control bull market, bitcoin is it.
In modern history, there has literally NEVER been such a dramatic growth in the value of a commodity over such a short period of time; nothing comes even close to bitcoin.
This isn’t normal!
Arguably, it’s only a matter of time before enough bitcoin holders decide to cash-out on their success (or some other major event causes them to lose confidence in their investment) and it all comes crashing down.
In fact, December has already seen a significant market-correction, and more (and possibly even larger ones) could be on their way. Markets often go through self-correction of course, but the degree to which bitcoin has done so is highly unusual and certainly a cause for concern.
To quote Warren Buffet:
“Be fearful when others are greedy and greedy when others are fearful.”
Greed is undeniably a predominant factor driving this market of bulls, and if the bears are coming, beware!
People are incredibly emotionally attached wherever money is concerned, it’s just human nature. Unfortunately for most of us though, the nature of investment is far from welcoming to those who want stress-free security for their money.
If you are the sort of person who is prone to panic attacks whenever you see the market fall a few points, then investment is probably not for you, at least not if you plan to manage your investment yourself.
If you are a long-term investor with a stake in a reliable commodity, the best thing you can do is to turn a blind eye on your investment and only look back once a year. Better yet, let an expert (or team of experts) manage your investment for you – they know what they’re doing better than most of us.
Unfortunately when it comes to bitcoin, there are no such luxuries as reliability or expert management to fall back on should security or stress be an issue for you.
On the other hand, if your first thought at the sight of skyrocketing prices is to immediately pull your wallet out and BUY BUY BUY, then investment isn’t for you either.
Any and all emotional investment is a trap which puts you at incredible risk of buying or selling at the wrong time.
With bitcoin, you’re in on your own and must endure the wild ride of ups and downs and decide for yourself when the best time to act is.
If you’re not confident you can do that and if you can’t detach your emotions from your investment, then please don’t fool yourself into trying.
YOU. WILL. LOSE.
Before I sign off, I hope you understand that I’m not telling you what to do – that’s not advice I’m qualified to give.
You may disagree with me, and that’s fine.
The only point I wish to stress is that you need to be careful. If you do decide that bitcoin is for you, then you should approach your investment as a high-risk gamble with the understanding that you may lose.
Above all, whatever you do, please don’t put all your eggs in one basket – you can’t afford to.
If you are a first-time investor, or considering an investment in bitcoin, I hope I’ve at least given you some food for thought, and I sincerely wish you the best of luck!