Should You Have Bought Bitcoin? No, You Shouldn’t Have.
It’s easy to look at the headlines about Bitcoin making new highs and think about how you should have bought it back when it was lower. You remember vividly how Bitcoin seemed like such a steal not too long ago and think about how much money you’d be up if you'd have bought. Stop right there. This is the mentality of someone who loses money by gambling instead of investing. To be a good investor, you need to have the right mindset. This means letting go of the past and not worrying about moves you could’ve made when they were not wise in the first place.
I’ve written about why Cryptocurrencies are not worth your time as a serious investment. You can read here for clear, concise points. While that’s not the point of this blog post, you probably want to refer back to it. Just because Bitcoin has soared and performed well lately does not invalidate the points I’ve laid out against it. Nor does it make it a good investment in hindsight.
The point of this blog post is to look at the inherent risk-return tradeoff of Bitcoin relative to where else you could put your money. Take a look at the overall stock index over the past few years. Since 2020, the S&P 500 has more than doubled. Sure, Bitcoin has doubled in just under a year, but how much more risk is there in Bitcoin than the overall market? There is no comparison. If you put your money in the S&P 500 at the wrong time, you run the risk of being stuck for years waiting for a recovery. If you put your money in a bad investment, you risk losing everything. Besides, if you want something aggressive with the upside of Bitcoin, I've previously discussed legitimate blue-chip companies that have outpaced the overall index recently. One of the stocks I mentioned at the beginning of this year in that blog post has tripled in 2024 alone. This blog is for educational purposes only and should not serve as a buy or sell recommendation, but I use it as an example of legitimate, large-cap companies that have exhibited revenue growth, increased profit margins, and other quantifiable measures that justify a higher stock price. Why has Bitcoin doubled? There's no measurable reason outside of increased perceived demand from other buyers. It could go down tomorrow just as quickly as it has gone up.
To become a great investor, you must escape the mentality of worrying about investments that you missed out on or should have made and focus on making principled investment decisions. Sure, you will inevitably buy something at the wrong time or hold on to something for too long. That's called being human. Overall, if you take a measured and disciplined approach to investing, you will come out ahead in the long run when you consistently use good judgment. For every hyped-up cryptocurrency, there is another out there that has gone completely belly up. Serious investors don’t buy cryptocurrency. There is a difference between trading (gambling) and investing and your mindset is everything.
