Few types of investment assets get as much media attention, or create as much polarizing discussion, as Bitcoin. People who love and believe in Bitcoin tend to make big bets and bold predictions about what they believe to be a world-changing asset category, while Bitcoin skeptics are, well…skeptical.
On March 13, 2024, Bitcoin reached an all-time high price of $73,135. In the few weeks since then (as of April 5, 2024), it's dropped in price by as much as 15.35% since that all-time high level. Does this mean that now is a good time to buy Bitcoin in 2024? Should we "buy the dip" and bet on future gains for cryptocurrencies?
I'm a Bitcoin skeptic. I'm not buying Bitcoin in 2024, even if it goes back to its recent all-time highs, or higher. Here's why.
1. I don't understand Bitcoin
Even now, after all these years, after all the media hype about Bitcoin, after many hours of reading about Bitcoin as a professional finance writer with a college degree who's spent many years researching complex technical topics…I still don't understand what Bitcoin is or what it's supposed to accomplish. What is the "use case" for Bitcoin? What does it "do" in the real world? Why does it need to exist?
Probably the best explanation for what Bitcoin is (at least the one that I understand and agree with) is that it's "digital gold." It's a speculative asset category that people buy because they like it and they believe it is valuable. OK, fine. I don't buy gold or invest in other precious metals, either.
2. I want my investments to generate income
Bitcoin doesn't pay dividends like stocks or generate income like bonds or have FDIC insurance and guaranteed interest rates like CDs or savings accounts. Bitcoin is a purely speculative asset: you're supposed to want to buy it because the price has gone up (and the price has, since Bitcoin's inception, gone way, way up!).
But I don't day trade and I don't invest based on the "greater fool" theory. I'm not trying to buy stocks just so I can sell them for a quick profit, or offload them onto someone else who will take the hit when the stock goes down. I'm a long-term investor. I'm patient. I'm not trying to beat the market or get rich quick, but I do want my investments to actually grow -- based on real-life economic fundamentals, dividends, and compound interest. Bitcoin can't give me any of that.
The stock market doesn't always go up, and not every stock pays dividends. But in general, when you invest in a diversified portfolio of stock ETFs, you will get richer over time from your share of the profits of the many, many companies that you own. I'd rather have my stock dividends reinvested and quietly growing behind the scenes than worry about cashing in on a big one-time score from one risky asset.
3. I don't believe in the investment thesis of Bitcoin
There are two main "theories" of why you should buy Bitcoin. They both can't be true. Either:
- "Bitcoin is the future of money and someday it will replace all currency," or;
- "Bitcoin is gonna be worth $200,000 someday and it will be the most valuable asset ever!"
These contradict each other. If Bitcoin is going to be the most valuable asset, why would anyone ever spend it? If it's the future of money, why are there only 21 million of them in the whole world? Money needs to be spendable; people have to agree to exchange it and accept it as a form of payment. Bitcoin is illiquid, hard to access, and of mysterious origins -- I don't see it replacing the U.S. dollar anytime soon.
4. I don't invest based on FOMO
Fear of missing out (FOMO) is a bad reason to invest in anything. I truly try not to envy my friends or worry about what the loudest voices on social media are bragging about today; investing is a long-term marathon and I'm just trying to run my own race.
If I bought Bitcoin back in 2016? Yes, that investment would be worth a lot today. But even if I did buy Bitcoin early, I probably would've been one of those people who forgot their password and got locked out of their Bitcoin account. (Bank accounts don't do this! If you forget your online banking password, the bank doesn't delete your life savings!)
5. Bitcoin might never regain its all-time highs
Past performance is no guarantee of future results. "Bitcoin recently reached all-time highs" only means that Bitcoin was a good investment to buy in the past -- but it doesn't tell us anything important about what Bitcoin is going to do in the future. Lots of investments, individual stocks, housing markets, and entire countries' stock markets reach all-time highs and then plummet, never to return to those high levels for many years. Today's hot investment can be tomorrow's embarrassing memory.
Bottom line
Investments go up and down in value for complex reasons. There's no inherent reason why any single company stock or currency or cryptocurrency is going to be the inevitable, invincible future of the global economy. And who knows: maybe the Bitcoin true believers are right, and Bitcoin will defy all previous knowledge about how investing works, and how human behavior works, and how the global economy works! But I'm not going to make that bet.
