What I Told My Friend About Bitcoin
Not too long ago, a friend of mine got in touch with me. He wanted to know how to invest in cryptocurrencies like Bitcoin, Litecoin, Ethereum, and others.
He fell victim to the headlines and said “Moe, it feels like I am missing out. I see a lot of people talking about Bitcoin, and I have no idea how to even go about buying these things.”
A little background about my friend; he studied medicine at school and is working at a well-known hospital these days. When it comes to business, finance, and investing, he says “This is all beyond me. I don’t understand it.”
We met for lunch but our conversation about cryptocurrencies went on for a good three hours.
After I told him what cryptocurrencies essentially are, my friend continued, “So, you are telling me that Bitcoin, for example, is basically a code? I don’t really get a ‘coin’ in my hand?”
“Exactly,” I said. “And the value of Bitcoin is so volatile that it’s becoming ineffective for transactions. Recently, a company that tried to adapt Bitcoin ditched it. They said it’s becoming a headache rather than making things efficient.”
To give you some perspective, Bitcoin dropped 20% or more four times in 2017. It currently sits roughly 40% below its highs.
What Investors Really Need to Focus On
“So where do we go from here?” my friend asked.
“Bitcoin has just gained mainstream attention and that’s all,” I explained. “You need to focus on the technology that makes bitcoin and other cryptocurrencies possible; blockchain technology. As I see it, this technology could be like the new Internet. It’s very useful and can literally change how we do banking, investing, buying a house, entering into contracts, and the list goes on.”
As it stands, a lot of cryptocurrency “investors” are just speculators. I wouldn’t be shocked if a lot of them have no idea what they are buying and selling. Its been a solid run to the upside in them, so everyone has made money.
“I am very confident in saying this,” I continued. “In the next five years or so, a lot of the cryptocurrencies won’t be around. Some of them will certainly remain, but they may not be as valuable as they are now.”
“Let’s say I give you one bitcoin right now, what does it mean to you?” I asked my friend.
His answer, “I don’t even know. If you gave me $1.00, I would have a better answer for you.”
Dear reader, it can’t be stressed enough; don’t get lured by the hype. There are a lot of stories how there are people putting their life savings toward cryptocurrency. This is very dangerous. If one is planning to take a gamble at this, at the very most, allocate just five percent of their overall portfolio toward it.
I will end with what my friend said. He said, “Man, here I was, thinking I am missing out big-time. I am actually glad I didn’t buy into the hype. I don’t understand investing whatsoever, but this cryptocurrency stuff looks nothing more than just speculations. To me, it sounds like it might not end well. But, you have convinced me the blockchain technology could be the future.”