If you’ve been in tune with the world of investing during 2017 or simply are breathing and have a pulse – you have probably heard about Bitcoin and all the craze around it.
As a Stock Market Investing Educator, I have received a whole lot of questions around this topic and is completely understandable! The value of one single Bitcoin has gone up from around $1,500 in January of 2017 all the way to over $17,000 in mid-December. As of recently, the price has dropped to around $13,000’s.
Many in the social media world are claiming fame and fortune as a result of Bitcoin and whenever money is being made in massive amounts people want to know why and how.
Because of all the hype and information overload around this subject; I feel is important for me to share my two cents on this – mainly in the form of education – which is the core of all the content I share within Girl$ on The Money.
I have been doing a good amount of research on this topic and I am here to share the basics plus some resources for you to learn more. As you may have noticed – I also titled this blog post “Volume I” because I plan to continue writing posts about this in the future as I learn more and as additional information comes out.
I do this in order to help YOU (and myself) navigate the sea of data that is out there and to hopefully keep you from making decisions with your money that you might regret in the future.
With that said, here we go.
First Things First – I Don’t Own Bitcoin (or ANY Coin): Here Is Why
The MAIN reason(s) are quite simple –
#1. Not very confident about whether or not Bitcoin (and similar coins) is something that will stick around or will fade with the passage of time.
Note: I am talking specifically about specific coins and not necessarily the technology behind it. I feel that the technology is here to stay (more on that below).
While reading the December 2017 edition of Kiplinger Magazine, I found a very informative article covering cryptocurrencies. Christian Catalini, a professor at MIT Sloan School of Management and part of MIT’s Digital Currency Initiative noted the following:
“There are currently hundreds of different cryptocurrencies. In 10 years, many of them probably won’t be around anymore. It’s hard to predict which have long term, mainstream potential”.
#2. I do not understand it well enough to participate.
I’ve been investing for almost 10 years and one of my personal golden rules of investing is to never put my money in anything that I cannot fully understand or seems confusing. That single strategy has saved me a whole lot of headaches and money.
My investing mentor (and virtual bff) Warren Buffett has taught me many valuable things about investing including this one.
Bitcoin and Blockchain – Know The Difference
Bitcoin and Blockchain are two different things. Bitcoin (and its relatives including Litcoin, Ethereum, etc.) are the actual investments. For example, you can buy one bitcoin or a fraction of a bitcoin with the expectation that it will go up in price in the future.
Blockchain, on the other hand, is simply the technology where individuals are able to buy or sell their coins. In other words, the technology that allows an individual to make these transactions.
If we were to compare this to the world of stocks – Blockchain would be the stock exchange (ie: New York Stock Exchange, or NASDAQ) in which the investment is being traded.
I personally feel there something there when it comes to Blockchain technology and its capabilities so I am watching that closely. I am not so sure about the actual coins.
Bitcoin Has No Tangible Value
Another important thing you should know is that bitcoin has no “real” tangible value. For example, things like gold, silver, individual stocks, index funds, etc. are made up of things and/or companies that exist in real life. In the case of bitcoin, the sole reason that causes the price to go up or down is the demand – the number of people that want to buy and the amount of bitcoin that is available. That’s it.
The SEC Has Your Back
The Securities and Exchange Commission is the government entity that regulates publicly traded companies (stocks) and securities (investments) in general. Earlier this month, the chair of the SEC released his first public statement on cryptocurrencies.
One of the most important things to note from the report is that as of right now – no type of cryptocurrency has registered with the SEC and thus, it is all unregulated at the present moment:
“Investors should understand that to date no initial coin offerings have been registered with the SEC. The SEC also has not to date approved for listing and trading any exchange-traded products (such as ETFs) holding cryptocurrencies or other assets related to cryptocurrencies. If any person today tells you otherwise, be especially wary. “
The SEC has also released a series of reports about different coins that are under investigation and/or that have been confirmed a fraud (*to see all the articles scroll down to the end of the SEC’s public statement for the links). If you are suspicious about any kind of coin and/or are considering a specific “crypto-investment” – head over to the SEC website for a “background check”.
Something that was also mentioned in the release is that the technology behind bitcoin appears promising. This is something I, in fact, agree with as well and, as previously mentioned – will definitely be watching:
“The technology on which cryptocurrencies and ICOs are based may prove to be disruptive, transformative and efficiency enhancing. I am confident that developments in fintech will help facilitate capital formation and provide promising investment opportunities for institutional and Main Street investors alike”.
Listen To These Podcasts
The best educational resources I’ve found around this topic are in the form of Podcasts for which I’ll share links below. Take your time to listen to these ones at the time (I’ve placed them in order) and take some notes:
And that’s all folks! I will be back at some point in the future with any interesting findings around this topic. As mentioned at the very beginning – I plan to make this a series as I learn more.
My views might change or not as time goes by. At the end of the day, my #1 recommendation is this: do your homework and never invest in anything blindly!
And if you do decide to invest in this simply because you might feel you are missing out – make sure any money you allocate is “play money” and something that you can afford to lose.
Questions? Comments? Know of anyone that has invested in Bitcoin? Share below!
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