Here’s why I won’t buy bitcoin and why you think twice too…

From the creation of Bitcoin in 2009, there has been a lot of talk, controversy, and a mix of stories surrounding the cryptocurrency.

For every billionaire like Elon Musk and Richard Branson that rave about the fairly new form of currency, there are others like Bill Gates and Warren Buffet who are huge critics.

While it may be a trending topic for the billionaires of our world who can afford to dabble in the risky investment, for real people like us, it may not be the wisest choice.

While some people have their rich stories, many others have their own stories where Bitcoin has sent them broke.

Many people don’t do their due diligence before they throw their money in for the opportunity to get rich.

Many people don’t really know how Bitcoin operates. Yet it is still a surprisingly popular avenue.

According to Finder.com.au, there is over 18 million Bitcoin in circulation.

One in every four Australians invests in cryptocurrency. Bitcoin is the most popular.1

It’s easy to throw around the term ‘Bitcoin’ in conversation. But when it comes to knowing what Bitcoin actually is (other than just digital currency), as well as how it works, many of us are completely unaware.

Yet, many of us are still willing to invest our money into it to be part of all the hype.

So, what exactly is Bitcoin?

Bitcoin is a type of cryptocurrency meaning there are no physical coins or notes, only balances kept in a transparent, public record that the entire world has access to.

Each Bitcoin is basically a computer file that is stored in a digital wallet. Every single transaction is recorded in a public list called the “blockchain”2.

The digital currency is completely designed for the public i.e. nobody owns or controls it, so everyone around the world can buy and sell Bitcoin.

According to Investopedia:

“Bitcoin offers the promise of lower transaction fees than traditional online payment mechanisms and, unlike government-issued currencies, it is operated by a decentralized authority.”

Bitcoin as an investment: yay or nay?

There are many Bitcoin fanatics out there who claim that digital currency is the future. The attractive exchange rate, as well as the high value it occasionally reaches, appeals to many investors around the globe.

However, with virtual currencies comes risks of scams, drastic changes in the market, and bitcoin mining.

However, the value of Bitcoin is extremely fluid. The lack of guarantee value makes it an extremely risky option when comparing it to other investment options.

“If you had invested at the start of 2020, you would be sitting on a 300% profit by the end of the year. However, if you’d invested at the start of 2018 and sold at the end of the year on New Year’s Eve, you would have lost 73% of your money.” – The Times

The return of most investments cannot be guaranteed which means that there is always some degree of a risk in investing. But while investments carry risk, some asset classes produce far less risk than that of Bitcoin.

The general rule is: the lower the risk, the lower the return – the higher the risk, the higher the return.

“(Bitcoin) is pretty much the highest-risk, highest-return investment that you can possibly make.” – Barry Silbert, CEO of Digital Currency Group

While expected high returns can be extremely valuable, Bitcoin and other virtual currencies are still in the extremely novel development phase.

“Compared to traditional investments, Bitcoin doesn’t have much of a long-term track record or history of credibility to back it.”3

To avoid taking unnecessary risks, our experienced financial advisers at Coastal Advice Group create diversified investment portfolios to balance risks and returns in line with what our clients are comfortable with. Creating a strategy that invests in a number of well-researched, diversified asset classes can be a sound strategy to reduce risk.

While the hype around Bitcoin cannot be disregarded, there are safer options. Coastal Advice Group can help you determine a tailored investment strategy suited to your risk tolerance and financial goals.

If high returns are what you desire, there are alternatives to the volatile Bitcoin – alternatives with more credibility to ensure you are investing your money for greater success.

Want to plan your ideal investment strategy?

Contact us for a complimentary initial strategy session. We have offices located in Newcastle – The Junction (NFPG), Central Coast – Erina (CCFPG) and  Sydney CBD (SWA).

 

REFERENCES:

1 https://www.finder.com.au/bitcoinstatistics#:~:text=A%20Finder%20survey%20of%201%2C004,5%20million%20 digital%20currency%20investors.

2 https://www.bbc.co.uk/newsround/25622442#:~:text=Each%20Bitcoin%20is%20basically%20a,public%20list%20 called%20the%20blockchain

3 https://www.investopedia.com/terms/b/bitcoin.asp

 

DISCLAIMER:
The views expressed in this publication are solely those of the author; they are not reflective or indicative of RI Advice Group’s position and are not to be attributed to RI Advice Group. They cannot be reproduced in any form without the express written consent of the author. This information (including taxation) is general in nature and does not consider your individual circumstances or needs. Do not act until you seek professional advice. Newcastle Financial Planning Group, Central Coast Financial Planning Group and Sydney Wealth Advisers are subsidiaries of Coastal Advice Group which is a Corporate Authorised Representative of RI Advice Group Pty Ltd, ABN 23 001 774 125 AFSL 238429.

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