Are You Ready To Buy Bitcoin?
Bitcoin is in the news again! This time it’s Elon Musk’s announcement that he just bought $1.5 billion worth last week. Its price subsequently spiked above $40,000. That’s for just one Bitcoin. Musk also revealed that Tesla is planning to accept Bitcoins for car purchases. Let’s hope the company’s cashiers will be provided with enough cash in their tills to be able to make change.
Now that you know Musk is jumping on the Bitcoin bandwagon, you might be inclined to invest in it as well. But consider this:
- Can you afford to lose $40,000 or more with impunity? The volatility of Bitcoin is legendary. Unlike most productive businesses there’s no guarantee that its value can’t drop to zero. Even if its price holds up, there have been numerous instances of hundreds of millions of dollars’ worth of Bitcoins having disappeared (likely stolen) from purchase exchanges. And there’s no regulator to turn to for help. Also, since there’s no record of the Bitcoins you hold outside of your electronic wallet, they are as good as lost if you forget or lose the password (which has happened on several occasions).
- Bitcoin investments are not tax-free. Unlike with ordinary currencies, gains from Bitcoin speculation are taxable at capital gains rates.
- Criminals and pornographers are the primary users of Bitcoin as a medium of exchange in order to avoid tracing and detection. Is that an activity you really want to support?
It’s hard to resist gambling on something that has recently has such a stellar gain, is being hyped so frequently in the media, and is even being adopted by some legitimate businesspeople (albeit ones who are pretty big risk-takers). If you can stomach the risks, go ahead. Or perhaps buy into one of its lower-cost cousins such as Etherium or Ripple/XRP. But please don’t use money that you’ve been saving for and need for your future. The possibility of going on welfare at age 65 would surely not be a pleasant experience for anyone.