Bitcoin – Has It Dissolved Yet?

With the New Year underway, I thought it would be a good time to give an update on our (very) small Bitcoin investment that I have written about several times. Reading the headlines, you would assume that the bottom has fallen out of the cryptocurrency market. Like many things, that is a matter of perspective.

Each morning, I get a notification on my iPhone signaling the current Bitcoin price. This morning’s quote was $4,048 per ‘digital coin’. We don’t own a full coin ourselves, we bought just a small fraction of one in June of 2017 when my son convinced me to jump into the market he joined in January of that year.

It turns out that the current price is almost exactly the same as what I paid – $4,000/ coin. My investment is up just 1% over a year and a half. My vision was that cryptocurrencies could be an effective ‘store of value’ over government p-backed currency, which is managed to produce inflation, and it has delivered that. The Consumer Price Index shows US currency devalued about 3.5% over the same period.

I’m not declaring victory in any sense, though. To give you a sense of how completely improbable my position of being roughly ‘flat’ versus when I invested is, consider my son who bought 6 months earlier than I did. He was the crypto-pioneer of the family and bought his Bitcoin when the price was just $800/coin. His investment would be worth a whopping 384% today. Unlucky in almost an equal amount are folks that bought 6 months after me and paid $20,000/coin. They are down a devastating -81%.

Clearly, timing was everything, and I happened to jump in right in the middle.

For my part, I still see potential in cryptocurrencies over the long term, especially as rising interest rates are likely to push inflation up. I don’t see them dissolving entirely, although I would continue to be incredibly cautious by limiting your investment to just a tiny sliver of your retirement account as there are thousands of individual cryptos and no one can tell which one (if any) will sustain themselves.

It’s perhaps no different that betting on one of the thousands of automobile companies that were active in the early 1900s. All but a few investors ever survived the shakeout in that market, and few will likely survive this shakeout. In the meanwhile, ‘happy motoring’ on the cryptocurrency highway!

Image Credit: Pixabay

7 thoughts on “Bitcoin – Has It Dissolved Yet?

    1. We purchased through a popular site called Coinbase. They have a simple app that tracks your ‘wallet’ and you can buy & sell whenever you want.

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  1. Awesome post. I too believe in investing 5-10% or as little as you want in very risky assets like cryptocurrency. I too believe that there will be a place for cryptocurrency in the future. I use circle invest and do micro investing as well and only own fractional shares. My avg price for my bitcoin is around $5000. Bitcoin is definitely speculative, but I don’t buy lottery tickets and I would definitely call my venture in crypto investing gambling. I just have to wait a little bit longer to cash in and my chances of turning a profit if I’m patient and maybe extremely patient will be more than those buying lottery tickets. Same concept, different strategy.

    Its crazy how sometimes the hardest thing to do is to wait and do nothing, but it takes the most discipline.

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    1. It is interesting to watch, but a risky venture for sure! I’ve did a lot of work on new product development / innovation strategy in my career and always believed that the line between brilliant and stupid is razor thin. Most new ideas don’t work, but at the same time, most brilliant ones aren’t recognized. As you say, it’s a gamble.

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      1. You’re absolutely correct. Market fox blog just wrote a great post on contrarianism where he discusses the same thing. His discusses how some of the best investors have been some of the most contrarianist of their time. He also discusses how it takes patience to be a contrarianist and the most patient individuals are often times contrarianist. You should check out his blog and podcast.

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