What rises, always must come crashing down, and those who have invested in Bitcoin, best brace themselves for the inevitable, which will come sooner rather than later.
The price of this digital currency hit US$8200 for the first time on Monday, and it is interesting to see many finance experts drawing comparisons to the dotcom bubble and even the 17th century's Dutch tulip mania.
With market increases of more than 700 per cent in value since the start of the year, Bitcoin is rising faster than any asset class in over the last 400 years.
According to some experts, the fair value of Bitcoin is around 99 per cent below its current value, which less than $US100.
There is no reason why a currency should be $US8200. Especially, one you cannot carry around in your wallet and use to pay for your groceries at the local store or pay a ticket machine for your parking.
The whole concept is nonsensical, especially as it generates no income. The whole premise of a currency is to exchange, buy, and sell items of value, not to invest solely into it.
While there is a medium of exchange, it has a very small amount of users.
Convertibility bans enforced by some nations also limits its use as a means for exchange, and it lends itself as the currency of choice for "the dark web", with criminals purchasing illegal goods and services due to the loose regulations surrounding its use.
A business created Bitcoin out of thin air and it is rather ironic that the people buying it think they are the smart ones.
Who will really be the winner here? At least you can see, touch and use gold for a number of different purposes and gold is almost impossible to destroy.
Bitcoins may not see the year through before they have vanished into nothingness. Perhaps some see Bitcoins as the way of the future, and this creates a feeding frenzy of investors who think they have found the best thing since sliced bread.
Highly speculative markets can lead to the creation of great riches for the early investors, but there are great risks for those who arrive at the party too late. Every boom and bust on the financial market has proven that when excessive optimism outweighs rational expectations, a crash is inevitable.
Sadly, this craze seems to be targeting my peers: the Xennials, who are a mix of Gen X and the Millennials. Perhaps the Xennials are hoping to get a foot into the property market or buy a year's supply of smashed avocado with their Bitcoin investment.
Little do they realise that every so often, something like Bitcoin comes along to 'suck in' those who know little about investing. Very few Baby Boomers have jumped on the Bitcoin bandwagon and those burned by the dotcom crash are very wary of this new technological investment craze, for good reason.
I would like to share some words of advice to those, especially my friends who have jumped on this Bitcoin bandwagon.
Take my advice or leave it. I am no financial expert or guru. I only invest in Blue Chip shares and do not look to make fast gains on the highly risky speculative financial market.
I invest for the long term in safe, Australian banks and corporations with proven, solid records of success. Firstly, it is evident that Bitcoin is in a bubble, there is no denying this.
Secondly, be prepared for when this bubble bursts. I cannot predict when this will happen, but it will end badly.
Finally, the only way to avoid catastrophe is to get out before the burst, and reap the rewards of getting in on the action early.
Sell, sell, sell! And don't say you weren't warned!
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