Monday, August 21, 2017

Be an investor, not a speculator, and avoid Bitcoins

Be an investor, not a speculator, and avoid Bitcoins
There are speculators and traders who make markets in things like Bitcoins.  They don't care about the underlying value of anything.  All they care about is the value right now, and the momentum of the pricing.  If something looks like it is going up they buy it, simply on the hope they can sell it for more than they paid and take a profit on the trade.  They don't see the things they trade as having stored value because they intend to spin the transaction very quickly in order to make a fast buck.  Even if value falls they sell, taking a loss.  That's why they are speculators.
Most of us work hard to put a few dollars, euros, pounds, rupees or other currencies into our bank accounts. Most of those dollars we spend on consumption, buying food, utilities, entertainment and everything else we enjoy.   If we have extra money and want the value to grow we invest that money in assets that have an underlying value, like real estate or machinery or companies that put assets to work making things people want.  We expect our investment to grow because the assets yield a return.  We invest our money for the long-term, hoping to create a nest egg for future consumption.
Unless you are a professional trader, or you simply want to gamble, stay away from Bitcoins.  They have no inherent value, because they are a currency which represents value rather than having value themselves.  The Bitcoin currency is not managed by any government agency, nor is it backed by any government.  Bitcoin values are purely dependent upon holders having faith they will continue to have value.  Right now the market looks a lot more like tulip mania than careful investing.

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