Bitcoin price two years ago

June 22, 2021 / Rating: 4.8 / Views: 722

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Is bitcoin a real investment

I’ve been watching this bitcoin situation for a few years, assuming it would just blow over. But a collective insanity has sprouted around the new field of “cryptocurrencies”, causing an irrational gold rush worldwide. The reason why is that it’s not an investment; just as gold, tulip bulbs, Beanie Babies, and rare baseball cards are also not investments. It has gotten to the point where a large number of financial stories – and questions in my inbox – ask whether or not to “invest” in Bit Coin. These are all things that people have bought in the past, driving them to absurd prices, not because they did anything useful or produced money or had social value, but solely because people thought they could sell them on to someone else for more money in the future. When you make this kind of purchase – which you should never do – you are speculating. You’re playing a psychological, win-lose battle against other humans with money as the sole objective. Even if you win money through dumb luck, you have lost time and energy, which means you have lost. Investing means buying an asset that actually creates products, services or cashflow, such as a profitable business or a rentable piece of real estate, for an extended period of time. An investment is something that has intrinsic value – that is, it would be worth owning from a financial perspective, even if you could never sell it. To answer why bitcoin has become so big, we need to separate the usefulness of the underlying technology called “blockchain” from the mania of people turning bitcoin into a big dumb lottery. Blockchain is simply a nifty software invention (which is open-source and free for anyone to use), whereas bitcoin is just one well-known way to use it. Blockchain is a computer protocol that allows two people (or machines) to do transactions (sometimes anonymously) even if they don’t trust each other or the network between them. It can have monetary applications or in sharing files, but it’s not some instant trillionaire magic. As a real-world comparison for blockchain and bitcoin, take this example from the blogger The Unassuming Banker: Imagine that someone had found a cure for cancer and posted the step-by-step instructions on how to make it online, freely available for anyone to use. Now imagine that the same person also created a product called Cancer-Pill using their own instructions, trade marked it, and started selling it to the highest bidders. I think we can all agree a cure for cancer is immensely valuable to society (blockchain may or may not be, we still have to see), however, how much is a Cancer-Pill worth? Our banker goes on to explain that the first Cancer-Pill (bitcoin) might initially see some great sales. Prices would rise, especially if supply was limited (just as an artificial supply limit is built into the bitcoin algorithm). I’ve been watching this bitcoin situation for a few years, assuming it would just blow over. But a collective insanity has sprouted around the new field of “cryptocurrencies”, causing an irrational gold rush worldwide. The reason why is that it’s not an investment; just as gold, tulip bulbs, Beanie Babies, and rare baseball cards are also not investments. It has gotten to the point where a large number of financial stories – and questions in my inbox – ask whether or not to “invest” in Bit Coin. These are all things that people have bought in the past, driving them to absurd prices, not because they did anything useful or produced money or had social value, but solely because people thought they could sell them on to someone else for more money in the future. When you make this kind of purchase – which you should never do – you are speculating. You’re playing a psychological, win-lose battle against other humans with money as the sole objective. Even if you win money through dumb luck, you have lost time and energy, which means you have lost. Investing means buying an asset that actually creates products, services or cashflow, such as a profitable business or a rentable piece of real estate, for an extended period of time. An investment is something that has intrinsic value – that is, it would be worth owning from a financial perspective, even if you could never sell it. To answer why bitcoin has become so big, we need to separate the usefulness of the underlying technology called “blockchain” from the mania of people turning bitcoin into a big dumb lottery. Blockchain is simply a nifty software invention (which is open-source and free for anyone to use), whereas bitcoin is just one well-known way to use it. Blockchain is a computer protocol that allows two people (or machines) to do transactions (sometimes anonymously) even if they don’t trust each other or the network between them. It can have monetary applications or in sharing files, but it’s not some instant trillionaire magic. As a real-world comparison for blockchain and bitcoin, take this example from the blogger The Unassuming Banker: Imagine that someone had found a cure for cancer and posted the step-by-step instructions on how to make it online, freely available for anyone to use. Now imagine that the same person also created a product called Cancer-Pill using their own instructions, trade marked it, and started selling it to the highest bidders. I think we can all agree a cure for cancer is immensely valuable to society (blockchain may or may not be, we still have to see), however, how much is a Cancer-Pill worth? Our banker goes on to explain that the first Cancer-Pill (bitcoin) might initially see some great sales. Prices would rise, especially if supply was limited (just as an artificial supply limit is built into the bitcoin algorithm).

date: 22-Jun-2021 19:29next


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