Roughly 7 months ago, I wrote the blog post titled "Bitcoin mania will end in tears." Given my experience during the internet stock bubble of 1999, it felt like bitcoin and crypto were in a similar period of boom soon to be followed by bust. Those who said "this time is different" were proven wrong, again.
Today I want to give you a tip to keep you out of trouble: never invest in something that you don't understand. That includes bitcoin, MLPs, annuities, structured products and even stocks. This may seem obvious but I have seen people make this simple mistake because they are chasing the hottest thing in the moment. Early in my career, it was internet stocks. People were buying companies with no earnings and no business plan and were simply interested because the price was going up. Years later, it was subprime loans. The worst quality mortgages were sliced and diced and then packaged as supposedly A rated bonds. When things are too good to be true and you can't understand how it is possible, trust your gut and run away as fast as possible.
Unless you are living under a rock, you surely have heard of bitcoin as it surpassed the $10,000 mark yesterday and briefly topped $11,000. You may have no idea what it is or how it works but the stories of kids turning into multimillionaires in short order are undoubtedly tickling your greedy side. We are all human and can't resist the thought of turning a few dollars into millions and then enjoying ourselves sipping a drink with a tiny umbrella on some exotic beach. But please heed my warning. The bitcoin mania will end in tears for most investors (especially those considering buying late in the game) and unless you are in it for a quick buck and trade, then please don't give into temptation.
Fidelity Investments announced on Wednesday that its clients can now view their holdings of Bitcoin and other cryptocurrencies held through digital wallet provider Coinbase. The process is much like linking your other bank accounts so you can see your entire financial picture in one snapshot.
I remember hearing about bitcoin for the first time about four years ago when there was news that someone used the digital currency to buy a Tesla Model S for $103,000 which was the equivalent of 91.4 bitcoins. That buyer may have a bit of remorse because if he held on to his digital currency, it would be worth roughly $260k today. This year the cryptocurrency is up 193% and it is up almost 4x in the last year. It has become one of the hottest investments of 2017. Now the question is: should you be a buyer or is it a bubble?
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