There has been a recent spike in the price of Bitcoin from $935 on March 3rd all the way up to today’s price of $1,470.
As with every time the price goes up, you have all kinds of people that “invested” in buying Bitcoin in the past coming out of the woodwork to gloat about their investment prowess. I truly am happy for all of those that have made money as the price has been going up. However, I did want to address what seems to be a very elementary view of investments that I see throughout the sector.
Buying Bitcoin with the hopes that it goes up in price would NOT be considered investing, it is in fact a high risk speculation. Investing is characterized by the ongoing cashflow that it puts in your pocket.
For a similar example I would refer to gold. Buying physical gold in the hopes that it goes up in value would be a speculation, while buying stock in a gold mining company based on the dividends it presently provides would be an investment. Of course, it is not always that cut and dry and many times something can be an investment and a speculation at the same time to varying degrees. The point is that simply buying and holding Bitcoin is not an investment strategy.
I’m not pointing this out to try to knock people off of their pedestals but to wake them up to the fact that investing is something that takes time and effort to learn how to do correctly. I know that many of the people that are interested in Bitcoin are fed up with the current financial system; I’m right there with you. Many of the underlying fundamentals of the overall financial markets are questionable at best and systematically criminally fraudulent at worst. Be this as it may, this does not mean that we should throw out all common sense metrics that have been developed throughout human history to measure investments.
I myself own Bitcoin and I’ll be happy if the price continues to rise. However, I would never consider my holdings to be anything more than a gamble and wouldn’t risk more than I would be willing to lose.
What do you think about Bitcoin’s rise in price?