I'm not typically a contrarian, but there can't be anything more disturbing than the savagery I've seen this year over Bitcoin. I've received so many eye rolls when I express my honest view that buying Bitcoin right now is a horrible idea. By no means am I advising you on whether or not you should be investing in Bitcoin – please note I use the word “investing” lightly – but since soooo many of you keep asking for my opinion, here is goes: "Issa no for me, dawg"
So without any further ado, Here’s why I literally hate Bitcoin:
I'm jealous.
I own my truths, so let's start with the facts. The truth is, I'm mad as hell that I didn't know or care enough about Bitcoin years ago! There, I've said it. People have made real money from buying cryptocurrency in it’s prime, and I know some of these lucky newly-wealthy folks personally. The one factor these brilliant people all have in common is: they bought Bitcoin YEARS AGO. They have been quietly making a (not so) small fortune, before the majority of us had ever heard of the terms “crypto” and “currency” combined together as one word.
The point here folks is: smart people buy assets while they’re cheap. The best return is made from investors who buy in early before the rest of the market can realize the value potential – This is how you make money 101. You’re welcome. It’s an early movers advantage that pays off simply because "you be knowing” and everyone else doesn’t. But the reality is, sometimes you actually don’t know, but you take the risk anyway. And if the risk of losing your money is perfectly fine with you, then you take the leap. Sometimes it pays off, sometimes it doesn’t. In this case, for them, it paid off Big Time. So yes, I’m super salty that I wasn’t in the know back then when Bitcoin was just a few hundred bucks. But I’m also smart enough to realize when I’ve missed the value opportunity and disciplined enough to not jump on board just because its popular at the current moment. Which brings me to my next point…
Too Much Hype.
Generally speaking, I don't like anything over hyped. For me, that’s always a cause for concern. Per my previous point, good investing usually comes with discovering uncovered value before everyone else knows about it. So If everyone is already talking about “the next best thing”, then you’ve probably already missed out on some good good return. But in this case, when everyone is going completely nuts over it – it’s probably just bad altogether. This is a perfect time to run away as fast as you possibly can.
I'm actually quite irritated by this. Because when a guy who can’t name three stocks in the Dow Jones Index, nor can he quote an exchange rate for any G10 currencies, somehow becomes qualified to give investment advice because he made a few bucks on Bitcoin, that’s when I bow out. Like seriously, shut down the entire shop! It was very evident to me early on that the only reason behind bitcoin’s ridiculous price climb were the hype men gassing it up.
Millennials, if I can’t get you to understand anything else: Please understand that good, solid investing is BORING. Literally, worse than watching paint dry. We generally love to get behind the latest craze and be a part of the sensationalism. It’s phenomenal, and it all sounds amazing. But these get rich quick money schemes don’t make you a qualified investor and definitely aren’t guaranteed to work out well for you over the long run.
The Price Ain’t Right.
When Bitcoin’s price popped off late last year and hit $20,000, it was a +2436% increase from where it was just a year ago (doesn’t it just sound ridiculous when you say it out loud?!) So kudos to those who bought in 2016, you da real MVP! But just a few months later, the price dropped back down to $7000. Now, for those who are trying to convince themselves that now is a good time to buy because the price is low and it’s basically a steal…BWAHAHAHA, Don’t! What I've realized is that many people exhibit short term memory bias when it comes to the market. I'll pose a question, which one sounds more ridiculous: paying $7000 or something that was worth $20,000 last month, or paying $7000 for something that was worth $700 a year ago? The first option sounds like a Black Friday deal on steroids, until you realize it’s exactly the same as the second option (where you get played to the max). The mind tricks here are ungodly. Let me break it down layman-style:
You can buy shoes from Payless (no shade) for $30.
Somehow that year everyone is talking about Payless, and people start paying $730 to own those shoes
A few months later these people are selling their shoes for $260.
How proud would you feel about purchasing your $30 Payless shoes for a discount price of $260?
Sound ridiculous yet? But this is exactly how I look at Bitcoin this year. There was never enough underlying value to support a price point of $20,000 to begin with (and this is called a Bubble, by the way). So just because the price is now much lower than the high mark, it doesn't change my opinion of the underlying asset. And simply for me, the price just isn’t right.
Too much volatility.
For my millennials who have never invested in the stock market, but are trying to get in on Bitcoin, This section is for you! Bitcoin is a highly volatile investment. If you are a novice investor, I would never cosign you jumping into volatile stocks that you know nothing about. So why would I ever recommend jumping into Bitcoin? Volatility by definition means unpredictable and drastic fluctuation (that's a Mirey definition, just so you know) – so this ultimately this means Bitcoin has a higher risk of losing money.
Here's why blindly investing in volatile stocks is never a good idea for beginners: If you make a lot of money (usually by luck, which happens quite often), you now have a heightened sense of overconfidence and are likely to do something stupid the next time around. If you lose a lot of money, you get discouraged and may not want to try investing again (and let's not forget the fact that you're now poor. Eeek). I also find it highly ironic that Millennials tend to save more money and generally don’t invest in the stock market because we think it's too risky – yet here we the primary investors and promoters of Bitcoin. How does that disconnect happen? Sounds like extremely backwards logic, that is likely motivated by propaganda and such ( to my prior Over Hype point), but who am I to judge?
Bitcoin price volatility is 10 times that of the US stock market – which means a greater ris kof losing money So if you are scared of investing a little bit of cash in some regular stocks, you definitely should NOT be pouring your life savings into Bitcoin.
Fake Value.
As far as I'm concerned, Bitcoin's fundamental value has yet to be seen.
Most assets have an intrinsic value and a market value. For example, let’s take a house. The cost of land + materials + labor to build a house may cost $250,000. However, it could sell in the market for $295,000. The intrinsic value of the home (i.e. the replacement cost if you were to build it again) is $250,000, but the value of that home for buyers in the market is worth $45,000 more. This is standard in every market. There’s usually some dislocation between the real cost of asset versus the market value. But what is the fundamental value of one Bitcoin? How can this be modeled and validated? At it's current price, does Bitcoin really have a valid exchangeable value of $7,000? Or any value at all? Don’t think about it too long about it, the answer is No.
Fake Supply.
Usually when I bring up my “Bitcoin has no real value” argument, my adversaries love to chime in that it's scarcity is valuable. For those who have no idea what I’m referring to, Bitcoin was designed to have a limited fixed supply of 21 million units, and currently 17 million are already in circulation, leaving only 4 million left to mine. The limited supply creates a scarcity effect (like rare diamonds... you can only mine so many). Believe or not, this has actually led people to compare Bitcoin to gold and oil commodities, which justifies the price inflation -- excuse the brief pause while I laugh out loud! But hypothetically speaking, if we did reach 21 million full occupancy tomorrow ( which we won't), but if we did, The World would not change! This narrative around treating Bitcoin as a precious scarce commodity is laughable, to say the least. Who's to say that folks wont stop using Bitcoin, and start using Ethereum or Litecoin or Ripple instead -- or any of the other hundreds of cryptocurrencies that exist! Yes hundreds, but more like thousands! (around 1300 is a decent estimate).
Bitcoin has become the generic trademark for cryptocurrency, and unfortunately many people investing in Bitcoin have no idea about the massive competition brewing in the cryptocurrency space.
To spell it out in plainer terms, if Kleenex puts a cap on how much tissue they produce next year, will you all of a sudden start paying $5000 for a box of Kleenex? Probably not, you’ll just buy a different brand of tissue! (In fact the Dollar Tree “Kleenex” works just fine.) But if Kleenex and facial tissue are synonymous to you and you don't know other brands are available, you'd be screwed. The hard reality is that most bitcoin investors likely don't know that many other cryptocurrencies exist. So if you're betting on the Bitcoin being a hot commodity because the product is so scarce, don't fool yourself. As far as I'm concerned, Bitcoin, Schmitcoin... any ole crypto will do.
My rage against Bitcoin is exactly just that: against Bitcoin. As a millennial, I fully recognize the movement towards the future, and cryptocurrency is happening whether we’re ready for it or not. I'm also a HUGE proponent of the Bockchain revolution — it will transform so many industries in a drastic way! However, my stance is very clear on Bitcoin. At $8000, its simply just not a good investment. If I could short it this year, I would.
I've listed my reasons, but this doesn’t have to be restricted to Bitcoin. Use parts of this logic for any asset you are considering for investment. Ask yourself similar questions around the vital components of how the asset is priced. And if it just doesn’t make sense, its too good to be true, and the price is too high — Don't risk it. Just be like Future, and don't be afraid to say “I'm good luv, enjoy."