Bitcoin: When Should You Buy In?

I’m fairly consistent in my advice that you shouldn’t
invest in Bitcoin.

We’ve talked about Bitcoin before and you can read previous
articles or listen to past podcasts. You’ll see that I’m
fairly consistent in my advice that you shouldn’t invest in
Bitcoin. This isn’t because Bitcoin is bad.


It went grew to over 11,000 this week, which means one Bitcoin is
work $11,000 American Dollars. It dropped soon after but is still
hovering over $10,000. Overall this year the Bitcoin has grown by
over 900%. That’s great, and when you see those numbers alone
it’s tempting to want to buy in. However, investing in
Bitcoin is what I like to call Powerball Investing.


Think of when you’re driving down the highway and see that
Powerball billboard showing that the jackpot is over 100 million
dollars. So you call your brother, your coworkers and your
friend and you all buy tickets. The potential of that big win is
too exciting for you to pass up, but you forget that the more
people who buy tickets the less likely you are to win. It’s a
similar problem with any kind of cryptocurrency like Bitcoin.
You see that the value is over $11,000 and want to buy
in, but that’s when everyone else wants to buy in as
well. The system is then flooded with new money and it
loses value again.
You see that the value is over $11,000 and want to buy
in, but that’s when everyone else wants to buy in as well.

Here’s why it’s really dangerous: it’s not a diverse
investment. I believe in wide, massive diversification.
For example, I have the option in investing in the Coca-Cola
company or I can invest in 500 companies like Coke. Why should I
chose the 500? The upside of both of these are similar. You won’t
usually see a massive difference in the growth. The difference is
in the downside.


Coke could have a scandal so no one is buying Coke. That could
cause the stock to tank. Now I’ve lost all my investment. That’s
a big risk. If one of the companies similar to Coke tank, I only
lose part of my investment. Investing is all about risk
management and you shouldn’t take unnecessary risks.
Putting large amounts of money in Bitcoin is taking an
unnecessary risk.
Investing is all about risk management and you
shouldn’t take unnecessary risks.

Now, there is a practical strategy for investing in
Bitcoin for those who want to. You can use an amount of
money that is not part of your retirement.  In that
case, your investment in Bitcoin is a hobby instead of a
source of income. It must be an amount of money you’re okay with
losing, like a money you take on your trip to Las
Vegas. Your retirement fund, though, needs to be
diversified. Your future is not a risk you want to take.


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