As of December 12th, the price of bitcoin trades for roughly $16,500. Throughout the past week, the price has risen from about $6,000 to upwards of $17,000, making it the most volatile investment on planet earth. Although it’s often used as currency, the price surge of recent in regards to bitcoin has resulted virtually entirely from the actions of investors.
If one had purchased just one bitcoin exactly one year ago, when the price was under $1,000, you’d make an astounding return of over 1,700 percent. However, nobody knows whether the cryptocurrency is a solid investment or not. Absolutely nobody was able to accurately predict this price uptick – even if that person predicted today’s price from one or more years ago, they did so blindly, with tons of luck on their side.
Many of us wonder, “Are Bitcoins a good investment?”
It depends on what we define as a “good investment.”
The Bare Basics Of Investments
Barring lofty sums of inherited money, high-scale lottery payouts, and finding briefcases full of 100-dollar bills in your backyard, people earn money from working. As time passes, the value of money decreases – in most situations, at least – due to inflation.
Rather than holding cash, people stow away their money in stocks, bonds, and other assets that are likely to rise in value over time. Doing so safeguards against inflation and provides an opportunity for you to earn money tomorrow from saving money in the present.
Unfortunately, those without much money – like those considering SA title loans to get by, for example – can’t reasonably invest. However, with just a little saving, it’s always possible to safely stow money away in hopes of receiving more in the future.
What Makes A Good Investment Good?
Put simply, the quality of an investment depends on the purpose one is investing for.
Most people invest to grow their wealth over coming years. As such, they must make sure investments can be safely expected to return money in the future. One can look at the length a public company – in the case of stocks – has been around, its historical performance, the volatility of that class of investments, and the recent financial statements of companies.
Let’s apply these characteristics to the likes of Bitcoin.
It’s worth noting that Bitcoin is both a currency and investment, depending on how it’s used. Those that use Bitcoin to immediately make purchases use it as currency, whereas those that purchase the cryptocurrency to hold it are investing in it.
Bitcoin is not a company, so financial statements do not apply to the determination of the cryptocurrency being a “good” investment.
Bitcoin was created in January of 2008. While it’s been around for a decade, that time period is incredibly short for most companies. Facebook has a similar lifespan, though the prospects of the two are entirely different. Such a short history makes Bitcoin an iffy investment.
In terms of historical performance, it rose to the hundred-dollar mark five years ago, roughly. It’s only experienced such great rises in the past month. If you invest in Bitcoin, consider everything you paid to purchase it lost – completely gone.
Cryptocurrencies like Bitcoin are highly volatile, making it a terrible investment for long-term gain.
Although many seasoned investors see Bitcoin’s price soaring in coming years, its now-slow transaction time, inability to be used anonymously, and rapidly decreasing use as a currency – including the above characteristics – make Bitcoin a bad investment.
For the record, I think Bitcoin will continue to rise in value. However, that’s purely a guess, and is not, in any way, a “good” investment. Unless you’re willing to lose everything you invested in it, that is.
