Daily Gains Letter

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Bitcoin: The Next Hot Trade or a Scam?

By for Daily Gains Letter | Dec 19, 2013

BitcoinA friend of mine recently asked if he should invest in Bitcoin. He was astonished with its growth; he said, “I can’t believe it. You could get one Bitcoin for $100.00 not too long ago, and now that looks cheap!”

He asked if there will be growth in the digital currency in the long run, and if he will be able to make money for his portfolio. My response was simple: “I don’t know.” He didn’t like my answer at first, but when I explained further, his perspective toward Bitcoin changed.

You see, I am a big believer in investing in what I know. For example, I like to look at companies whose business I understand—I understand how they make sales and generate their profits. When it comes to foreign exchange, I look at currencies of countries that I know I can learn more about and the data sources are reliable.

But when it comes to Bitcoin, I am still uncertain about how it is priced. With stocks, you can get a general idea about where the stock prices might be headed. You can look at analysts’ expectations and the like. With Bitcoin, it isn’t mainstream just yet. There are some analysts who are saying the digital currency will skyrocket, while on the other side, there are those who are saying it will die as quickly as it became famous. At the very core, there’s too much noise.

On top of this, there’s too much volatility in Bitcoin’s value. I was watching a live chart of Bitcoin prices compared to the U.S. dollar not too long ago, and in a … Read More