OK, before you start downvoting, this is just the title of an article I came across recently and not my thought. It is from Kiplinger on July 1st. I guess it is a clickbait title, but, it worked on me. I will go over the four ideas that Kiplinger says makes Bitcoin just a fad and give you my actual thoughts. In general, it is good to read these types of articles as this is the type of information most people are receiving from their financial advisors.
1. Factors Behind the Bitcoin Craze
Some people speculate that Bitcoin's growth is due to a worldwide shortage of money, looming economic problems or the fact that there is no way for governments to track transactions. Others claim that its popularity is driven by the mass actions of people who fear missing out on what might be this generation's most significant wealth opportunity.
I am not even sure of their point on this first idea. My only guess is that they say investing in Bitcoin is speculative and FOMO. If this is their argument, then the stock market is also just a fad. Kiplingers ends this section by saying be careful before you invest and know what you are buying. Great advice and is already a mantra (DYOR) of the crypto world.
2. Bitcoin Will Not Replace Paper Currency
There is a notion many people buy into that Bitcoin will replace paper currency. However, they are inherently different from paper currency. For one, there will only ever be 21 million bitcoins in the world, meaning that its supply is finite.
This is an interesting one. The article specifically attacks Bitcoin, and not crypto in general. A lot of Bitcoin buyers see it as a store of wealth, and not a replacement for currency. (This does not mean that other cryptocurrencies won’t become more of a utility currency for everyday use.) As for the idea that there will only be 21 million mined, that is exactly why people are involved and think fiat is a losing long term proposition because it can be created on a government's whim and spent however they want. (Still, how does Bitcoin not replacing fiat make it a fad?)
3. Cryptocurrency Lacks Regulation
Cryptocurrency and Bitcoin are not regulated by the government, banks or any other central authority. It also means there are no consumer protections on cryptocurrency transactions.
This one always gets me, which if you have read anything I write, you already know. The idea that it lacks safety because it is not regulated by the government or big banks is ridiculous. It regulates itself. If you send your crypto to a scammer or don’t protect your keys, then the lack of regulation was on your part, not the government’s.
4. Previous Trends Indicate It's a Fad
In 2000, there was a rush to invest in tech stocks and real estate. The dot-com bubble burst in 2001, and many people lost everything. During this period, many of the "successful" investors made money by shorting stocks or buying foreclosed homes.
From an industry that writes "Past performance is no guarantee of future results" on everything they put out and then says that because something unrelated went bad in 2001 you should not buy crypto is laughable. Second of all, who are these people that lost everything? The only way you would have lost everything is if your account tanked and then you sold at the bottom. Some people may have gotten scared and sold at a loss and really got hurt, but, that was not the normal turn out. Most people had losses on paper and then saw their accounts recoup the losses and then grow pretty much non-stop for the next two decades, with the exception of 2008 and 2020. Also, I would trade my account for the accounts of people hodling heavy in Apple, Microsoft and Amazon in 2000. If Kiplinger seriously puts out an article that says tech stocks and real estate are a fad because they dropped one time over 20 years ago, then they should probably just close up shop after a take like that. (One last point, why is successful in quotation marks here, if an investor made money, that is a successful transaction. Not sure why they downplay it because it was a short. I am not a fan of shorting, but, I don't doubt that you can make money at it if you are large and powerful enough to affect stock movements.)
Read the whole article at the link below, if you want.
Oh yeah, I almost forgot... it's been 13 years, what type of fad last 13 years?
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