Are you familiar with Bitcoin?
It’s a cryptocurrency and digital payment system. Known as the first decentralized digital currency, the system works without a central repository or single administrator.
Saying Bitcoin has had a banner year would be a major understatement. In 2016, the cryptocurrency was valued at under $800 per coin before recently surging to over $17,000. That is impressive, but is it something that you should buy into?
Is the Bitcoin bubble going to burst?
Imagine if you would have bought into Bitcoin in the early days. In 2010, you could buy one Bitcoin for just 5 cents.
Do the math on that. If you had invested $100 at 5 cents each, you would have purchased 2,000 Bitcoins. It’s selling today for over $16,000 per coin, which means those 2,000 Bitcoins would be worth around $32 million.
However, to actually make that kind of return on investment everything would have had to go perfectly. First of all, if you paid 5 cents per coin how long would you have held onto it? As the Bitcoin price rose you most likely would have been tempted to sell a long time ago at a much lower price. It would take some awfully strong willpower to hold onto it until now, where your $100 would be worth $32 million.
Then there are the security issues. Bitcoin is not issued nor guaranteed by any country, so if they are lost or stolen there is no intermediary with the power to make you whole.
With Bitcoin prices soaring, I can’t recommend buying into the phenomenon. The world is in the midst of what can only be called, “Bitcoin Mania,” and the bubble could burst at any time. It’s reminiscent of a similar bubble-type situation from the 17th century. Here’s a little history lesson:
Everyone knows that Holland is long famous for its tulips. In the early 17th century, the price of certain tulip bulbs in Holland reached astronomical heights. You could buy a very nice, large home for just 10 tulip bulbs.
Everyone was investing every penny they could. Wealth was everywhere, (at least on paper). Then, without warning, on a February morning in 1637, the bubble burst. Thousands of people lost everything.
Bitcoin is clearly a bubble today…not an investment for the faint of heart. I’m not saying its value will collapse tomorrow, but I’m not forgetting the tulips. Neither should you!
SPEAKING OF MONEY, HERE ARE 3 SURE-FIRE WAYS TO SAVE BIG ONLINE SHOPPING THIS HOLIDAY SEASON
It’s never too early to prepare. Yep, I’m talking about Christmas shopping. Our goal this year should be to try and get ready for Christmas before Christmas Eve. This means we need to start holiday shopping ASAP. So if you’re not willing to brave the crowds at the mall, I’ll show you ways you’re guaranteed to get good deals online.