When you become an investor, youll be using yourmoney to buy more bitcoins. The way you do that is, you sell other investment opportunities on the same market.
Its like a stock or an ETF. Except you dont get paid in shares or ETFs. You get paid in Bitcoins. But with Bitcoin, the transactions cost money. The total amount you could buy is limited by how much the market will accept. That means the more Bitcoin is used, the more expensive it will become to buy more.
The transaction cost is the reason why most people say the Bitcoin market is anadventurous one. Its not a good investment. As a result, most investors dont hold the currency very long. That is, the market value of one Bitcoin would probably drop below the transaction cost. That means it would be very easy to sell your Bitcoin and take the money you got for yourself.
This could lead to a problem. If someone could sell you $1 Million worth of Bitcoin for $50, $10, or even $2, then you wouldn’t even get half the $2 Million you invested. That would be a good reason to sell the Bitcoin. In any case, Bitcoin is likely not a long term investment because you would probably get the most for the dollar if you buy it in a bank. In reality, Bitcoin is nothing but a highly leveraged speculation and as a result should not be considered an investment. For a more accurate assessment of Bitcoin’s long-term prospects, read my new book The Crypto Anarchist Revolution: How the Technology Behind Bitcoin is Changing Money, Business, and the World.
2. A $100 Investment Would Put You At a Loss.
Many people don’t realize the power of the dollar. Its value is fixed (though it can’t always be changed) and the value is determined by the strength of the United States dollar compared to other currencies, this si very important to keep in mind, specially when thinking of etf investing.
If you invest $100 into the currency you use most, say $100 in Bitcoin, you could lose 20% (or more), when the U.S. dollar drops against the Euro, or the Yen, or a basket of other currencies. It’s the only currency in the world where its value can fluctuate so wildly. Bitcoin is a currency that doesn’t take risks, the same way the dollar doesn’t take risks. In fact, since Bitcoin is a unit of account (and therefore a currency), it’s only logical to compare Bitcoin to the dollar.
But why would you compare Bitcoin to the dollar? Why not just use a currency that’s not controlled by any government (like the U.S. dollar) and where the value is determined by the amount of gold (a scarce resource) and the supply and demand of that currency in circulation? Bitcoin is based on math, like the dollar. Bitcoin has no inherent value beyond the market cap of the currency. Like dollars, bitcoins have values like anything else gold has values. They are essentially, nothing more than a commodity. If you want to compare them to any specific currency, you must look at that currency’s fundamental value and what the currency’s intrinsic value is compared to its price. Bitcoin and its predecessors (think e-gold and the Bitcoin) can be compared to anything.