( ABC Everyday)Īnother issue to consider is Bitcoin's volatility.
But that doesn't mean the trend will continue. So don't go too far with the crypto speculation front," Mr Musk said recently.īitcoin's meteoric rise has made many investors rich. "It should be considered speculation at this point. It's something even Elon Musk, who recently bought $US1.5 billion of bitcoin for his company Tesla earlier this year, can admit. It's great news for people who held on, but there's no guarantee the trend will continue.Īnd while the jury is still out on Bitcoin's future, it's clear that there is a lot of speculation going on. Today, a bitcoin is worth more than 70 times that. In late 2016, you could buy a single bitcoin for around $1,000. Security firm CipherTrace estimates that nearly $US2 billion was lost in cryptocurrency theft, hacks and fraud last year. The exchanges where people trade their cash for cryptocurrency are often targeted by hackers and thieves. It's far riskier than a bank savings account, because cash deposits of under $250,000 are guaranteed by the Government.Įven in the unlikely situation your bank goes bust, you won't lose your cash because the Government will bail you out. These interest payments are often generated by lending out holdings to other investors and traders. This introduces counterparty risk: if your company lending your Bitcoin goes bust, you can end up losing money. Sure, some companies pay interest on Bitcoin, but these arrangements are nothing like a typical savings account. Read more Bitcoin interest is not the same as bank interest And that's one of the reasons I'm steering clear. I certainly don't know how much a Bitcoin is worth myself. It's really just a token that trades at whatever price people are willing to pay. That can help you decide how much you're willing to value the investment: in this case, 20 times rent or income.īut how do you decide how much to pay for Bitcoin? It doesn't produce earnings or cash flow like a business or rental property. You might decide, for example, to accept a certain return from a business or rental property, like 5 per cent. It's the same with property, which can be rented out to generate an income stream for the owner. When they succeed, businesses are productive: they tend to make money, and as a shareholder, you're entitled to some of it. When you invest in the stock market, you become a part-owner of a business. It's just that Bitcoin doesn't make a lot of sense as an investment to me. That is not to say that Bitcoin is going to collapse. And while Bitcoin and other cryptocurrencies have been around for quite a while, and have made lots of people rich, these two points sum up why I'm staying away. 2.The lower the price you pay, the better your results.1.The price of an investment doesn't necessarily reflect its value.The quote highlights a couple of important points about investing. "Whether we're talking about socks or stocks, I like buying quality merchandise when it is marked down." "Price is what you pay value is what you get," the 'Oracle of Omaha' wrote in a letter to his Berkshire Hathaway shareholders in 2008. When I think about Bitcoin, the best known cryptocurrency right now, I think of a quote from Warren Buffett.
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