Bitcoin or Not?

Facts about Bitcoin:

  1. Buying cryptocurrencies is an speculation.

A well-diversified portfolio of value-adding equities is an investment.

Speculation is the act of conducting a financial transaction in hopes of large capital gains at the risk of losing most or your entire initial investment.

 

  1. Do you understand cryptocurrencies ?

Rule no 1 for investment is never invest in something you do not understand.

 

 

  1. A combine total of $750 billion dollars are coming from 1,426 different cryptocurrencies.

Out of these 1,426 cryptocurrencies , 43 of them are currently worth $1B or more. They all can’t be winners in the long run.

 

  1. 2.5% of Bitcoin owners hold 95.5% of the total Bitcoin wealth.

What could happen to the price if any of these users decide to cash out?

 

  1. In last few years, multiple major cryptocurrency exchanges and Individual cryptocurrency accounts have been hacked or claimed bankruptcy.

 

  1. Coinbase, the #1 broker for cryptocurrencies, charges a fee of 1.5% to exchange USD to bitcoin.

You pay 1.5%  to make initial exchange and another 1.5% to exchange it back to USD when time comes. To break even on a bitcoin trade, you need your speculation to appreciate by 3%.  Immediately , you are in an unrealized loss position of 3%  when you purchase bitcoin.

 

Conclusion:  

  • Like any investment, you should invest in cryptocurrencies only if you understand them.
  • Until cryptocurrencies become more stable, purchasing them is a speculation and not an investment.
  • This speculation may result in a significant loss or gain.
  • Exchanges are still highly unregulated and have proven to be vulnerable to hacking and other nefarious activities.

 

[1] http://www.straitstimes.com/business/companies-markets/bitcoins-nouveau-riche-run-to-gold-as-cryptocurren

http://www.straitstimes.com/forum/letters-in-print/bitcoin-crash-not-a-foregone

http://www.straitstimes.com/asia/east-asia/stop-buying-bitcoin-please-the-korea-herald-col

 

Please note:

 

The information contained in this article is for general guidance on matters of interest only. While we made every attempt to ensure that the information contained herein has been obtained from reliable sources, we are not responsible for any errors or omissions, or for the results obtained from the use of this information. Neither the information presented nor any opnion expressed constitues a solication for the purchase or sale of any financial products. As such, before taking any action you should seek advice from an independent professional advisor.

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