See, I told You Bitcoin Was Volatile

Over the past year, I’ve written extensively about Bitcoin, essentially saying that I didn’t believe it was a safe investment at all. Most recently, it seemed that some people were becoming more comfortable with Bitcoin. A Canadian entity agreed to pay some of their workers with BitcoinOverstock.com allows it as a currency. Some states in the U.S. started to draft legislation about Bitcoin. It all seemed like things were headed in the right direction…until they weren’t.

Over the last few days, there has been an extensive amount of bad press about Bitcoin. Most notably, the Washington Post called the entire operation a Ponzi scheme. Those are some harsh words, but they definitely are rooted in some truth. After all, no one has been able to figure out how Bitocin works exactly and what makes the price fluctuate so much. No one knows why millions of Bitcoin have gone “missing” in cyberspace or who created the concept to begin with. There is no regulation, no bank to back it up, and several accounts that it’s a favorite currency of drug dealers.

spending-bitcoinsSure, some people made a lot of money in a short amount of time if they timed it just right, but for the vast majority, Bitcoin is not a get rich quick scheme. It remains a highly volatile, abstract digital currency that seems to do whatever it wants in terms of value. Plus, in the last few days, the price of Bitcoin has plummeted.

A recent article by U.S. News and World Report quoted several finance experts who strongly cautioned against Bitcoin as well. They argued that Bitcoin has no real, intrinsic value. Several financial planners indicated that they would never recommend it to their clients.

I personally would only recommend Bitcoin to someone who was just interested in utilizing it for entertainment purposes, just as they would go to a casino with a set budget of a $100 bill. Some people and technology enthusiasts simply get a thrill of tracking Bitcoin and seeing what the market will do. If this is you, just be extremely careful about your level of investment. Bitcoin should never be considered a real, genuine retirement plan, for example.

Despite all the recent bad press, there has been an interesting twist to the story though. In the last day or so, several Wall Street financial experts invested in Coinbase, a U.S. based Bitcoin companyto the tune of $75 million in funding. These financial experts are even what Coinbase CEO Brain Armstrong calls “Bitcoin believers”. Armstrong and these investors do not seem concerned with the recent price drops. Instead, they believe Bitcoin has some staying power. Their goal is to grow Bitcoin, help more mainstream companies adopt it as a currency, and spread it to more than 30 different countries.

It’s a tall order, but an interesting one. Once again, I will be watching from the sidelines as an interested party, not as a personal investor.

Do you believe in the legitimacy of Bitcoin as an investment?