Bitcoin is not an investment. When you purchase bitcoin what happens? Maybe you feel all warm and fuzzy inside because you think you’re sticking it to the man? Only problem there is, “the man” is actually sticking it to you.
When you purchase stocks you are actually purchasing ownership in a company. With that percentage of ownership you are entitled to a percentage of the profits the company makes. Most companies will redistribute profits to their shareholders or “owners” through dividends or share buybacks. If the company doesn’t pay dividends now, you are buying shares of a company predicting the future profits and dividends you will receive. Bitcoin has no profits and pays no dividends.
If you purchase a bond which is a debt instrument or a loan to a company, government, or entity you get paid interest on your loan amount. If you buy $1,000,000 worth of government bonds at 2% interest you will receive $20,000 a year in interest and when the bond is due you will receive the original bond value back. Bitcoin pays no interest.
If you buy real estate you can do two things with it. The first is you can live in it. It provides shelter, heat, and safety. Real estate you live in has utility. You can also have real estate that you purchase as an investment. The rent you receive is greater than the costs of financing and maintaining the property which gives you a positive cash flow. Bitcoin doesn’t have a positive cash flow.
Finally, there are commodities. Silver, copper, oil, corn, lumber, gold, etc. The reason commodities have value is because they have utility. You need to use these products to produce things which may be a necessity or a consumer good. As long as you need the goods that are produced with these commodities they will hold their value compared to the money supply. Bitcoin has no utility and isn’t used to produce any good.
Bitcoin is more like a poker game. The only way you can leave the table with your money, is if you take another person’s money. Bitcoin can’t make you money, you have to find another buyer and sell it to them. The thing about poker is, if you can’t spot the sucker in the first half-hour at the table, then you are the sucker.
This is the first of many posts on why I am a “no-coiner”. If you stay tuned I think you’ll be one too.