Have You Bought Bitcoin? Show 46

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I try to be health conscious. Mallory, my wife, may debate this. Last December my exercise routine got thrown into a tailspin. We got COVID. And it threw my workout routine to the curb in a hurry.
We’re off to a great start to our year from a business perspective, but the drawback has meant that I’ve struggled to exercise this year.
Running (some may call it jogging) has been my exercise of choice the last 2.5 years. In 2019 and 2020 I ran a local 5k that benefits an elementary school. I am determined to run it this year despite my lack of preparation.
Oh, and it’s this Saturday. I hope I don’t hurt myself! I’ll share a picture of it next week to prove I ran it. I’m pictured below in 2019 with Amelia after the race.
Bitcoin is up 107.27% this year according the Morning Brew newsletter on Monday. I’m frequently asked about cryptocurrency and what I think about it. I’ll briefly share what it is and what I think about it below.
If you’ve thought about bitcoin or considered buying, it was probably because somebody you knew bought bitcoin. Cryptocurrency holders tend to be raving evangelist for it. It inspires enthusiasm.
Over the weekend, I read a Kiplinger article titled What to Make of Bitcoin. The article states that major companies have been announcing that they are buying bitcoin. Examples of this are Tesla, PayPal, and Mastercard. This is creating demand for it, and it’s up over 450% in the last 12 months. This has caused many people to wonder if it’s a bubble.
Little is known about who actually created bitcoin. I tend to be the type of person who doesn’t like secret societies or clubs that exclude people. Bitcoin’s lack of transparency in this regard makes me raise an eyebrow. Read the article linked here if you want read about this mystery. We’re pictured below after the Cowpens Battlefield 5k in January 2020.
Bitcoin was created in 2009 and has experienced significant volatility during its existence. Matt Andrulot, the head of research at a financial advisory firm Verdence Capital Advisors states, “It’s volatile and speculative.”
In January, bitcoin lost 25% of its value in just two weeks, and during the coronavirus market correction bitcoin lost 49% of its value. From December 2017 to December 2018, it lost 83% of its value. Talk about a roller coaster!
From the Kiplinger article, “Because bitcoin doesn’t generate any cash flow or earnings — and never will — its price is driven purely by demand so it’s speculative. That said, bitcoin could still have a small place in an investor’s portfolio. But given the sky-high volatility it should take up no more than 1% to 3% of your assets.” Basically, don’t put more in bitcoin than you can afford to completely lose.
If cryptocurrencies are of interest to you, look at it like an alternative investment asset. Things like gold and silver have traditionally filled this role, but keep in mind that bitcoin is three to four times as volatile as gold.
It’s not practical right now, because we can’t use it to pay for most goods or services. Eventually, it may be more widely accepted and my thinking on this may evolve, but it’s not practical for most people.
Recently, an exchanged traded fund was developed to allow investors another way to use dollars to invest in bitcoin. This comes with a pretty hefty internal expense though. Expect more funds like this to come to market.
So far I’ve given my basic opinion. Now I’ll give you my more elaborate opinion of bitcoin… I’m pictured below by the Cowpens monument after the race.
I see bitcoin resulting from people losing faith in the American monetary system and for valid reasons. America hasn’t balanced her budget in 20 years. Imagine trying to run your household for 20 years without balancing your budget. This is only one issue, but what it illuminates is that our fiscal path is not sustainable. This isn’t a Republican or Democrat issue. This is a math issue. I’ve written about David Walker who was the comptroller general for Bush and Clinton. He’s written extensively on this subject.
This aspect should motivate Congress to get our fiscal house in order, but the bitcoin warning seems to be falling on deaf ears.
Here’s what some may call a controversial position: I think countries flourish and operate best when left to rule themselves internally. Hopefully, we want harmony with others, but linking arms with other countries that don’t share our values is problematic. I could write a book on this danger. Cryptocurrencies facilitate a coming together of countries that I don’t believe will ultimately be beneficial for humanity.
I don’t own bitcoin and don’t plan to at this point. If I’m going to hold alternative investments, I’d much rather hold gold and silver. They have always held value since the beginning of time and it’s much harder to manipulate their value than many storehouses of wealth.
Until next week,
David C. Treece,
Financial Advisor

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