Surf the net at the moment and you will find plenty of blog posts and articles about Bitcoin and cryptocurrencies. In particular, you will see lots of zealots and enthusiasts flagging it as a way to make a fortune. I’m sure some folk have and will make big money fast. I must admit I’ve been tempted to dabble.
Why is King Cashbags not keen to invest? If there is a chance to become King Kryptobags and make pots of cash, why am I not jumping on the gravy train with the rest of the investors who seem to be on board, and becoming fat cats overnight?
My main reason is the most obvious. I’m still struggling to grasp what it actually is and how it works. Having done a lot of research, the concept is still making my brain ache. And I’ve just read that Warren Buffet has said that Bitcoin and cryptocurrencies “will come to a bad end”. So when you have someone of that stature dissing it it’s hard not to be affected. I mean I get that we are talking about digital currencies which aren’t backed by any country’s central bank or government. And I also get that it means money can be sent and received across the internet even to someone you don’t know or trust. But it’s the buying and selling of Bitcoins that bothers me. How can I trust the seller of the Bitcoin or other crptocurrency that I will be buying for cash in the first place? And all this talk of mining it for free I find really bewildering. Perhaps if I took a degree in computer engineering, I’d have a chance to comprehend it all.
It seems like too much of a gamble. There is a finite supply of these cryptocurrencies. They also appear to have no intrinsic value. My fear is it is just a bunch of speculators following each other like sheep, hoping to buy and sell before the bubble bursts. As far as I can see there is no guarantee it will become widely accepted across the world in the way that regular currencies are. If you ever have any problems, presumably you have no recourse to any regulation or enforcement authorities?
When something sounds this great, it is difficult to believe. Surely currencies are only useful if they are stable, so that you have stable prices? Some commentators are comparing the current situation to Tulip mania. This was a period in the Netherlands in the 1600s where the contract prices of the newly introduced and fashionable tulip bulbs reached crazy levels which were out of all proportion to their value (rare bulbs peaked at 6 times the average salary!). There followed a spectacular crash, making this the earliest example of a speculative bubble.
When we bought our first property, it was just before the most recent financial crash. With a property, history tells us that the price will eventually recover and exceed what it was before the crash. With cryptocurrencies it feels as though that kind of assurance is missing.
I’ve blogged before about not taking my advice too seriously as I’m just an armchair blogger, not a properly qualified expert. I do recommend that you think carefully about putting any money into Bitcoin or anything like it. You may have a much better knowledge of it than me though. Anyway, we shall see what becomes of it. I’m just glad I have other ways to grow my gold.
I know I probably should do more reading on the subject. I may end up being proved completely wrong in the future. But for now, I won’t touch Bitcoin or any cryptocurrencies.
Have you bought or sold Bitcoin or any cryptocurrencies? I’d be interested in your comments…