“Damn! I should have invested some money in Bitcoin 4 years back.”
“Banks will lose their control. Bitcoin is the next big thing. I should have done it before”
If one is not living in a cave, these are some of the stuff that one must be hearing recently. I haven’t invested in any cryptocurrency and I wouldn’t be doing that anytime soon. As the title of the post suggests, I have my own reasons to do so.
Not exactly a real currency
Real currencies are regulated and guaranteed by a federal body, while cryptocurrencies are valued based on the intelligence of the crowd. I am not exactly a fan of governments’ economic policies but I would definitely prefer it over intelligence of the crowd.
USD has its value because the world trusts the currency and is a de facto currency for carrying out important transactions of the world, including oil. If someone thinks Bitcoin or any other cryptocurrency can bring in such level of trust, I suggest you invest half your net worth in it. All the very best.
For that matter, If you think certain currency, may be Zambian Kwacha(ZMW) or Afghan Afghani(AFN) has potential to rise over next year, you could buy them as well. I would argue that even these are better regulated than most of the 1500+ cryptocurrencies available in the market.
Not based on real asset
There is a new wave of ICOs . ICO is the mode of launching a new cryptocurrency in the market and allowing them to be bought. Anybody with a good programming background can launch an ICO and start distributing tokens. The idea is that if you believe in certain product/business , you can participate in its success by purchasing the issued tokens. Well, call it something like an IPO, just without any regulation. The idea is definitely great on its own, but just that it is rather a cool way of launching a ponzi scheme.
If I am participating in an IPO, there is a lot better transparency in terms of history of the company, its bankers, its real assets and a lot more. As a investor, I have access to its business model and audited quarterly results based on which, I can value my stocks.
Let’s take a look at Gold. It does not generate any real income as well. Value of Gold is based on its limited supply. Just in case, somebody finds a large fleet of ships filled with stash of Gold sunken deep in the ocean, it’s value would instantly drop just because there is a whole lot of supply now. Extend the same argument to any other precious metal, diamond or art.
Every cryptocurrency on its own has a limit till which it can be mined. Well, a great idea. However, there is no limit on number of cryptocurrencies that can be launched. It means that there is going to be an infinite supply of cryptocurrencies.
The value of cryptocurrencies is also because they are unregulated by the banking system. But, for how long? Do you really think you could replace your Visa or Mastercard with a Bitcoin or some other cryptocurrency card and keep swiping at every grocery shop without paying taxes to the government? Call me a pessimist, but that’s never going to happen, at least in the countries where there is stable government. Even if you are able to transact, they will eventually come under the regulatory system and pay taxes. Once that happens, the utility of the currency will reduce and the value will reach its sane value.
It will be current equivalent of purchasing a forex card, loading it with a foreign currency and swiping in India because you speculate that the value of that foreign currency is going to increase.
Not the only-missed-opportunity
For easier calculation of its rise over last 4 years, Let’s take the reference during Dec ’13 when it was USD 1000 and Dec ’17 when it is USD 18000. 18 times in 4 years roughly translates to 106% CAGR. I don’t deny the returns are over the roof and if you pick the low and high of Bitcoin at different time, the returns will be still higher. However, there were other such opportunities in stock market as well. Of the NIFTY 200 stocks, at least 65 of them have swung more than 106% in 2017 alone. If I include the unheard stocks, then this number would be really high. Of course, how much of bitcoin had you heard 4-5 years back? Extend this logic to currency markets and other global exchanges. There were too many such opportunities.
For a smart investor, such opportunities appear every day. If you had taken bets in Options market in NSE, you would have multiplied your money by 10x or 20x or even more in a single day. Take a look at today’s options performance here for reference. Again, extend this to currency options and global markets.
Do you really worry about not “investing” in these options this morning or yesterday? Then don’t worry about missing out on the Bitcoin rally as well.
The new “investors” are “investing” mostly because they have been bombarded with the news everywhere and not want to be left behind.
Whether someone makes money or not depends on the when they enter and when they exit. For reference, take a look at the bubble chart of Tulip Mania. We dont know where we are in Bitcoin’s version. For all we know, there could still be rally left for certain cryptocurrencies.
So, don’t worry and just chill out🍻🍻. There are many ways of making money and it was just one opportunity that you might have missed for now of the thousands of other opportunities that you could have participated in, every day. Just be happy about blockchain and its various other applications.