Scott pape: Should you invest in Bitcoins?
THE Barefoot Investor won’t be investing in booming Bitcoin, and he doesn’t recommend anyone else does either. Here are the reasons why you should avoid the virtual currency.
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MY son turns four next week. Trouble is, I’ve come to understand it’s a dangerous age.
See, like most kids, he’s always asking me questions:
“Why is the sky blue?”
“Why don’t you ever cook us dinner?”
“What happens to the little lambs that go on the truck?”
Up until this point I’ve been able to bluff my way through by simply putting on my “Daddy” voice, avoiding eye contact, and nodding my head. Yet he’s now old enough to understand when I’m talking out of my hat.
More Barefoot:
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Sadly, it won’t be long before he works out his old man is in fact no smarter than Thomas the Tank Engine.
And it’s a similar situation when I’m at work and someone asks me about whether they should buy Bitcoin.
Toot! Toot! says Thomas the finance guy.
WHAT DO YOU THINK OF BITCOIN, BAREFOOT?
Right now a lot of people are asking me about Bitcoin.
And there’s a very good reason — lately the price has been going up, up, up.
Seriously (over the past few years at least), the price of Bitcoin hasn’t been a roller coaster, it’s been a rocket ship:
If you’d bought $US1000 worth of bitcoins in July 2010 — when the price was a mere US5c — it would now be worth an astonishing $US48 million.
That’s a handy FOUR POINT EIGHT MILLION PERCENT RETURN since 2010.
Sure beats the hell out of your pissy little ING Saver account, right?
Tim, a carpenter from Rockhampton, certainly thinks so.
He emailed this week and asked: “I know it’s pulled back a bit, but the Bitcoin price has doubled in the past few months. So maybe there’s a chance to double it again?”
And for good measure he attached a link to an article from global financial news network CNBC.
The article carried this headline: “Bitcoin could hit $100,000 in 10 years, says the analyst who correctly called its $2000 price”.
My thoughts?
When Tim the tradie from Rockie is speculating on cryptocurrencies, we’re in a Bitcoin bubble.
WHAT THE SMARTEST MAN ON EARTH CAN TEACH YOU ABOUT BITCOIN
One of the smartest chaps to ever walk the earth was Sir Isaac Newton.
His Wikipedia page says: “the English mathematician, astronomer and physicist, is widely recognised as one of the most influential scientists of all time, and a key figure in the scientific revolution”.
Bottom line? He was a very, very smart cookie.
Sir Isaac was also an early investor in the infamous South Sea Company, founded in London in 1711, and shrewdly sold out early and banked a tidy profit.
And then he sat back and watched the share price continue to skyrocket.
The lure of easy cash was too strong. As the share price climbed, Sir Isaac bought back in to the South Sea Company, paying a price that was reportedly three times higher than his original stake.
And then the South Sea bubble became the South Sea bust ... and Sir Isaac lost his life savings.
The famous astronomer commented: “I can calculate the movement of the heavenly bodies, but not the madness of people”.
NO REALLY, WHAT DO YOU THINK OF BITCOIN, BAREFOOT?
I won’t be investing in Bitcoin, and I don’t recommend anyone does either.
Now, I can almost guarantee that there will be a dominant currency for transactions across the internet when my son is my age.
However, I’m also honest enough to admit that I don’t have a clue as to whether that currency will be Bitcoin, or the latest cryptocurrency Ethereum, or maybe even something from tech giants Apple or Google, or Amazon.
What I’ve learned by being a parent is that it’s OK to admit to your kids that you’re not an all-knowing, all-conquering genius (besides, they already know this, and they love you anyway ... after all, who else gives horsey rides like you?).
Besides, most things can be answered with common sense and some basic life lessons:
Don’t invest in things you don’t understand. (Personally, I struggle to work our new toaster, let alone the data mining of Bitcoins via computer algorithms).
Don’t invest in something just because it’s gone up in the past. (Learn from Sir Isaac Newton’s mistakes).
And finally don’t listen to the press who are currently hyping Bitcoin ... because if they’re really honest, they’ll admit they’re really just talking out their hats.
Toot! Toot!
Tread Your Own Path!
Don’t take on long term debt by marrying into a family in denial
People can get into deep financial trouble but taking control gives a way out
Teach your teen money management
Love can lead to a dumb call on shared finances
Originally published as Scott pape: Should you invest in Bitcoins?
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