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Unless you have been living under a rock for the last few months, you’ve probably heard about the Bitcoin craze and other cryptocurrencies using distributed ledger technology. I’m a borderline technology geek, so I have been reading about, and tracking, Bitcoin for awhile. A few years ago, I looked into funding a bitcoin wallet in order to better understand the concept. My teenage son and I even researched Bitcoin mining as a fun and interesting project last summer. Neither plan formulated into action, but I had no intention of trying to get rich quick. I just thought it was interesting.

A Bubble of Massive Proportions

Since that time, Bitcoin has turned into something completely different from what it was originally intended to be.  Engineered as a way for people to securely pay for goods and services without being tied to any currency or exchange rates, it has turned into a speculative investment unto itself.

However; unlike most other investments, there is no regulatory oversight. By definition, cryptocurrencies are decentralized, so the most startling development to me has been the way this craze has captivated the entire World. There are over 3 billion people on our planet with internet access and, therefore, the capability to invest in Bitcoin. This is unprecedented, and the massive number of new Bitcoin  investors has created an investment bubble of massive scale.

Investing or Gambling?

If you want to invest in cryptocurrencies, do so at your own risk. Here are some of my thoughts on the subject:

  1. Buying into a bubble can work out very well, but it’s not for the faint of heart. If you do:
    • Use money you don’t mind losing; not serious money where important financial goals hang in the balance.
    • Maintain sell discipline and know your endgame. Decide what price you believe is in line with your expectations and sell when you get there. Buy and hold does NOT work when buying into a bubble because bubbles always bust. You’ll have to make an educated guess and stick to your guns. Remember: this kind of thing is more like gambling than it is investing.
  2. The valuations are absurd but the technology is real. Most experts agree distributed ledger technology is revolutionary and has the potential to be used across many industries including the banking, finance, medical, and real estate sectors to keep track of money, securities, records, and deeds. If you have no idea what I’m talking about, here is a good explanation of blockchain from Investopedia: What is Blockchain anyway? From an investment standpoint, it’s hard to know who will prevail as the dominant players because the winners may not even exist yet. I suggest paying attention and watching as the technology evolves because sound investment or business opportunities may present themselves.
  3. Stay away from Bitcoin Public Offerings. These new offerings available only for purchase in cryptocurrency are completely unregulated and have become a hotbed for scammers of all sorts. The SEC is ramping up efforts to curtail this activity because it is blatantly not in the best interests of the buying public, but it will take time.

We live in exciting times where technology is taking us places we could never have predicted. But opportunity and risk is manifesting itself so quickly that it’s hard to process the information into good decisions. If you need help better understanding your options, and how to better manage risk and opportunity towards you own goals, contact me and I’ll try to help in any way I can.