Review: People are taking out mortgages to buy bitcoin, says securities regulator
We’ve been hearing a lot more about bitcoin lately. It’s done phenomenally well this year, and, as if the Bitcoin market wasn’t speculative enough, there’s also a brand-new Bitcoin futures contract that just started trading last week, and people are starting to get a little crazy.
In another article I saw on the subject, there was probably the most terrifying quote an investor could ever read. The reporter was at the “Bitcoin Bubble Bash,” an event organized by the Bitcoin Association of Hong Kong. One of the 200 people at the event said, “I’ve doubled my money. It’s only going up. I’m getting rich so quick.”
As a long-term investor, that statement should be like wet snow down the back of your coat. Investing is not a get rich quick scheme, and anytime people think that it is, bad things happen.
In the past, we’ve looked at whether Bitcoin, or cryptocurrencies generally, have a place in your portfolio. The short answer is no. They really don’t for most people, especially most people who are focused on investing for retirement.
I’m not going to rehash the argument, but the key point to remember is that market prices incorporate all of the available information.
Now, I think block chain technology is going to be revolutionary. There are still some technical issues to be resolved, but I think that they’re manageable. I also think that some cryptocurrency is going to become moderately mainstream at some point in the near future, maybe not in the US (since our banking and payment systems are wildly behind those of a lot of developing nations in terms of ease of use and features available to consumers), but globally. I don’t know if that currency will be bitcoin or not, but it will be something.
This is not news to the market. It’s already factoring this into the price of Bitcoins. Just like anything else, for the price to keep going up, it has to keep beating the market’s expectations. Maybe it will, maybe it won’t. I have no clue, and neither does anyone else.
So again, it’s worth coming back to the basics. You shouldn’t care about how flashy your investments are, you should care about how effectively they will help you reach the retirement that you want. To find out how to do that, read a Minimalist’s Guide to Understanding Financial Markets.