A 70% drop in two years: The one investment you can't afford to get into
I told you, I told you, I told you. Bitcoin is terrible and you need to avoid it!
Last year, I wrote about how bitcoin was on its way to failure. And, the trouble for this currency continues to stop its ability to grow.
Guess what the worst performing currency against the dollar was last year? Bitcoin! The crypto-currency peaked in late 2013 trading at around $1,150. Since then, it has swiftly fallen to $256,78 - that's over a 70% decline.
So now I hope you listen to me this time.
Here's why Bitcoin is on the road to disaster…
The short lived "break-through"
The driver behind Bitcoin is to allow two parties to exchange money with each other, without an intermediary. As you know, this is all done digitally.
Conventional money needs third parties to handle the cash-flows. And, essentially needed some kind of central authority (like the reserve bank) to issue it. But you see, Bitcoins only exist as entries in a big electronic ledger knowns as the Blockchain. This records all Bitcoin transactions.
The worst part is Bitcoin lacks any complete structure – nobody actually owns this system as there are many copies around the world.
Its main function of anonymity encourages criminal activity – making this alternative investment very risky to own.
Another dubious concept behind Bitcoin is that the supply is tightly controlled – only "mined" when computers solve mathematical puzzles.
This means that the rate at which bitcoins can be mined declines as existing stock grows. But, even more significantly, Bitcoins have an overall cap of 21 million Bitcoins, meaning supply is limited.
There are plenty of less risky alternative investments with good value
I don't think anyone wants to hold an alternative investment that has massive risk and depreciating value.
Unlike gold, bitcoin has only been around for a few years. Over this time, the confidence in this currency has dropped, because of the collapse of one-exchange after another, (Poloniex, Flexicoin and Mt. Gox).
Even though, the gold price fluctuates, it's still a great alternative investment to have in your portfolio.
But I'm not talking about only owning gold, there are plenty of other alternative investments that are much safer.
To find out more – check out the February issue of The South African Investor
, where we delve in to various alternative investments that could make you a fortune.