I Don't Think You Should Invest In Bitcoin, and Here's Why | Skyler Irvine
I have been receiving a lot of inquiries about bitcoin that up until now I had ignored. I didn't understand bitcoin, and from what I did understand simply didn't interest me as an investment. Because of this, I had decided I was just going to let the whole 'bitcoin craze' pass me by and maybe I would pay more attention to the next one.
But when so many people I talked to, many of whom were 'investors' in bitcoin, also did not know much about this new digital crypto currency, I decided to dedicate a week to learning what I could.
Similar to studying for a mid term or final, I gave myself this week to cram whatever information I could with whatever resources I could find.
Here are the results so far:
What is Bitcoin?
What is the Bitcoin Blockchain?
Who invented Bitcoin?
In addition to my own research, we spent a lot of time trying to find a guest for my podcast that I could interview on the subject of Bitcoin. When I initially shared on social media that I was looking for someone in the bitcoin space, we received a lot of people interested in listening to the podcast. Unfortunately, the only recommendations we received were people who had invested in bitcoin, but still did not understand what they had purchased.
After a few weeks, Hoff discovered Justin Recla, an Army veteran and former counterintelligence agent who has spent the last 6 months working in the bitcoin industry. He was an amazing resource with plentiful knowledge on bitcoin and the blockchain.
This is our chat.
As a follow up to this conversation I hosted a Facebook Live Q&A and summarized my feelings towards Bticoin after this week long deep dive.
I began this week in search of finding the piece of information I seemed to be missing from this bitcoin phenomenon. Up until Monday, I remained rather ignorant on the entire bitcoin conversation so I set out to learn what I was missing.
Unfortunately, I have yet to find what makes bitcoin a valuable 'investment'. I understand how groundbreaking this blockchain technology is and the impact it will have on so many industries that it's hard to even imagine. (especially the real estate industry!)
I understand the nice benefits that crypto currencies will provide, and that the systematic cap of 21 million bitcoin will create a scarcity that gold could never compete with.
But I cannot understand how it can be both a currency and an asset as these two things work counterintuitively.
I understand how it is decentralized and does not require a third-party or government backing it. But I also do not see the huge need in the system it is filing other than lowering transaction costs and forcing banks to improve their technologies to make it easy to send transfer money 24/7 year round.
The arguments for bitcoin as the currency of the future do not make sense to me if there are only 21 million available for an entire planet. Especially when the bitcoin blockchain only allows for 6 blocks per hour. The idea of using bitcoin to pay for coffee makes not practical sense.
So then the argument shifts to bitcoin as an asset class and to me this only works if someone is willing to pay more for your bitcoin tomorrow than you paid for it today. This is known to happen when citizens fear for their country's future. And this makes sense to me. Now, I don't think its logical to fear the future of the US economy, but it is a concept that I can get my mind around.
The Winkelvoss Twins, early investors in bitcoin, see it as a replacement for gold. Ok, cool. So we replace gold with bitcoin? What actually changes?
I won't be shocked if we see another 5 years of rapid bitcoin growth. But not based on anything other than irrational money and fear of missing out.
I would be shocked, however, if bitcoin itself overthrows our entire global economic system. And if that were the case I imagine I will have bigger problems to deal with than having not invested in bitcoin at $16,000.
If bitcoin is gold, then its a store of value to protect against inflation.
If it is currency then it is for a limited market only.
If it is an investment then my brain is broken and I will never be able to comprehend why.
All of this above I feel without mentioning:
- the ever growing electric costs of mining bitcoin,
- the rising costs of securing bitcoin,
- the ironic stories I am reading about using third-parties to store your bitcoin safely so that you can own a currency that doesn't require third-parties,
- 40% of the world's bitcoin are owned by just 1000 people
- and so much more...
It feels like 'mania' to me. And in manias, many people make a lot of money for a long time. The worst part about them is that its usually the working class and retirees that pay the biggest price in the end.
Bitcoin Headlines in December 2017
- Cameron Winkelvoss Predicts Multi-Trillion Dollar Value https://www.cnbc.com/2017/12/09/bitcoin-cameron-winklevoss-predicts-multitrillion-dollar-value-for-cryptocurrency.html
- 40% of Bitcoin are Held by Just 1000 People http://www.businessinsider.com/40-percent-of-bitcoins-are-held-by-just-1000-people-2017-12
- Bitcoin futures are about to go live, and they could change the game for cryptocurrencies http://www.businessinsider.com/what-is-a-bitcoin-future-2017-12
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