Should you invest in Bitcoin?

If you are asking this question, you probably shouldn’t, YET. Before investing your hard earned dough into Bitcoin, invest something else. Invest something even MORE valuable: Your Time. Invest your time to learn about Bitcoin. Specifically invest your time in learning how to store it securely. Holding your Bitcoin on a centralized exchange completely defeats the purpose of using Bitcoin in the first place. If you’re just here to speculate and make a quick buck, you’re doing it wrong.

Invest your time learning about WHY bitcoin is so amazing. If you’re reading this post, you’ve already won the lottery. You have access to the internet and you can understand English. There is a good chance you don’t NEED Bitcoin. Depending on where you live, there’s a good chance your government isn’t censoring your transactions or stealing (much) of your money through inflation.

So If you’re affluent and living in a country that speaks English, why do you need Bitcoin? Maybe you don’t. It, after all, has no inherent value. It is not backed by anything. There is no guarantee that Bitcoin will have value in the future.

If you’re continuing to ask: So should I invest or is it a scam?! We’ll have to go much deeper. Bitcoin is very complex. I am here to help you experience the journey I have experienced from researching and learning about Bitcoin and Cryptocurrencies since late 2014. To answer the above question, Bitcoin is most definitely not a scam. Bitcoin is a payment network. Bitcoin is a free market solution that doesn’t need trusted 3rd parties in transactions. We’ll go more in depth in a later post on why not having trusted intermediaries is so important.

Bitcoin is a payment network. BTC is the token of value that trades on the Bitcoin network.

Satoshi made this clear in some early writings that there was a difference between the two. An analogy would be: Bitcoin = Paypal, BTC = Dollars. So there is a difference between Bitcoin and BTC, so what? Bitcoin is a payment network, it grows in value continuously, just like a social network. The value of a social network is n². With n being the number of users. Think how much more valuable Facebook and Twitter are when there are millions of users. If it were just you and I, we probably wouldn’t be spending much time there.

So if Bitcoin, the network, continues to increase in value, why does BTC go up and down, then down some more, then sideways, and all over the place? BTC is the token that trades on the Bitcoin network.(Have I drilled this difference into your head yet?) The price of BTC is a measure of supply and demand. When more people want BTC, there are more buy orders than sell orders, and the price goes up. When less people want BTC, the price goes down. This is how assets like stocks, commodities, real estate, and precious metals are valued. It’s very simple. The price is merely a function of supply and demand. When there is Fear, Uncertainty, and Doubt (FUD) about the price of BTC, more people sell than buy. This puts downward pressure on the price. When BTC is constantly in the news, and when it’s entered the FOMO bull market cycle, everyone is buying thinking it’s going to the moon. Usually, the fundamentals haven’t changed much. So lets try to remove emotion and think rationally about why Bitcoin and BTC have value.

So why is Bitcoin valueable?

Bitcoin is a protocol. It uses math to ensure a fixed supply of 21 million coins is never exceeded. The protocol has been set in stone, the only way for it to change is for the entire community to agree that it change. So adding more coins is very unlikely, as this would inflate the supply and drive down the BTC price.

Bitcoin is valuable because we are trusting algorithms, not people, to control our monetary policy. Fiat money is money that is backed by nothing, a government simply says that it has value. This is what a Dollar, Euro, Yen, or Peso is today. Since the invention of fiat money, I haven’t yet found a case where governments could resist the temptation to print more money. Governments do this for a variety of reasons. This hurts you and I when our salaries and savings accounts remain constant but the supply of money increases. The increased supply lowers the value, and this is where we get inflation. Remember when your parents used to talk about a candy bar costing a nickle?

Bitcoin has a fixed emission rate of supply. I can tell you tomorrow exactly how many bitcoins will be in circulation. I can tell you the exact date that the last bitcoins will be mined. I can tell you the exact date that the block reward will halve. (More on Halving and Block Rewards in a later post.) Try that with your fiat money!

I’ve studied value a lot over the past 3 years. Wealth flows in the direction of value. You can create value by offering a good or a service. You can create value by trading your most valuable resource (your time). You can also identify value prior to others. If you determine something is under priced, or will appreciate, you can buy that thing now, at it’s undervalued price, and keep it until it has reached it’s fair value. In our next post we will talk about how we can calculate value set up our accepted risk. You won’t want to miss that one! There is, a chance that you could buy an asset at an overvalued price. This is what happened in Late 2017 and Early 2018 with the BTC price being massively overvalued compared to the value of the Bitcoin network.

In closing, only you can decide if you should buy bitcoin. Please understand that we are still very early in this technology/money. There is no guarantee it will work, it could still go to zero. Please be responsible about your risk exposure. Please do not take out loans or neglect other debt to buy Bitcoin. Bitcoin will remain volatile until we begin pricing things in Bitcoin, which is unlikely to happen within the next 3 years.

When we talk more about value and creating a proper risk management, you will have a better understanding of how much of your wealth you should consider storing in Bitcoin.

This is my first post, there will be many more to come to help you understand how and why Bitcoin has me so excited about its future. The Current Price is $5,172.60. If you’re already wanting to invest, the easiest way is through the Cash APP. You can buy as little as $1 worth of bitcoin.