3 Reasons Why Bitcoin is a Speculative Investment—At Best, Ep #166

John Oliver once said, “Everything you don’t understand about money combined with everything you don’t understand about computers—that’s Bitcoin.” Bitcoin is the most famous of over 4,000 different cryptocurrencies. All of these currencies are the subject of both endless debate and fascination. Many people are speculating about what role it should play in your portfolio. So in this episode of Best in Wealth, I talk about the volatile path of Bitcoin—and three reasons why financial stewards shouldn’t hedge their bets on cryptocurrency.[bctt tweet="In this episode of Best in Wealth, I share 3 reasons why Bitcoin is a speculative investment—at best. Don’t miss it! #wealth #retirement #investing #PersonalFinance #FinancialPlanning #RetirementPlanning #WealthManagement #Crypto #Cryptocurrency #Bitcoin" username=""]Outline of This Episode[1:08] I got my first COVID shot![4:13] What to Make of Bitcoin now?[7:50] Why the steep rise?[9:08] Bitcoin and gold as an investment[12:13] THREE issues to considerThe volatile journey of BitcoinBitcoin hasn’t been around that long. It was steady for a long time around a couple hundred to a couple of thousand dollars. But had a dramatic rise to $20,000 in 2017. What happened next? It plunged at the beginning of 2018 and a lot of people lost money. In October 2020, it shot straight up. It’s worth over $53,000 per coin. It has proven extraordinarily volatile—gaining or losing 40% in a month or two. It’s been a wild ride.So what’s led to this volatile track record? Why is the cost of Bitcoin continuing to rise? Bitcoin is earlier to purchase now. There are also a lot more people talking about it. More millennials and institutions are buying. Others feel it’s a great hedge against inflation. But Bitcoin is of limited value as a reliable medium of exchange and as a risk-reducing asset. It’s not a hedge against a well-diversified portfolio.Bitcoin and gold as investmentsAssessing the merits of Bitcoin as an investment can be difficult. It means you have to lower your allocation of stocks, real estate, or bonds. You have to give up something to get Bitcoin, right? We expect to receive future income from stocks, real estate, etc. As a stock-holder, we participate in the profit.Bitcoin is similar to holding gold as an investment. Even if they’re held for decades, the owner may never receive more Bitcoin or gold. It isn’t clear that Bitcoin offers investors positive expected returns. You own a coin or a lump of gold, hoping that supply and demand drive the worth in an upward trajectory.Some say Bitcoin is worth more than gold. Why? Because you can discover more gold, which means what you’re holding would inevitably be worth less. On the flip side, there’s a finite number of Bitcoins—as far as we know. But could they make more coins? Can code be written differently in the blockchain scheme? Could cryptocurrencies merge? There is no guarantee.[bctt tweet="Why has the price of #Bitcoin been so volatile? What made it skyrocket? Listen to this episode of Best in Wealth for my thoughts! #wealth #retirement #investing #PersonalFinance #FinancialPlanning #WealthManagement #Crypto" username=""]THREE reasons why Bitcoin is speculativeBitcoin—and other cryptocurrencies—are speculative at best. Here are three reasons why, as family stewards, investing in Bitcoin isn’t responsible.Firstly, it’s not backed by an issuing authority and exits only as computer code, kept in a digital wallet accessible by password. What if you forget your password? There is NO resource for any forgetful owner of Bitcoin. After a limited number of password attempts, you can permanently lose access, therefore rendering it useless. A holder of more than $200 million worth of Bitcoin can’t access them. Can you imagine being that person? This isn’t...