I read last week that Elon Musk, CEO of Tesla cars, Space-X and Starlink, has just purchased a billion dollars worth of Bitcoins. So I wondered if perhaps I should buy a few myself. Then I learned that one Bitcoin is valued at $64,000, so maybe I will hold off. Besides, the purchase price is $72,000, quite a bit higher than the value.
Bitcoins are one of 4,000 cryptocurrencies available, which is amazing, as there are only 180 standard currencies worldwide. One of the advantages Bitcoin has, it is universal and can be used in any country. This becomes a real benefit, because the currency of third world countries is often not recognized anywhere.
We are fortunate to live in Canada, and when you order from Amazon you can pay in Canadian dollars. That is seldom the case if you live in a poorer country, outside of North America, Australia or Europe. For those countries, Bitcoins are quite beneficial.
But what can you buy with Bitcoins? Sure, you can use them to pay for your new Tesla, buy stuff through PayPal and maybe a few other suppliers, but for the most part they are an investment strategy. The question is, is it a wise one?
If you buy a stock or mutual funds, you are hoping the fund will increase in value. You then reap the profits along the way, using that money to buy more investments. With Bitcoin that is not the case. If you buy 1 Bitcoin then you own 1 Bitcoin, and whatever that value is when you sell it, is what you get. There are no dividends along the way. Unless it is part of a cryptocurrency mutual fund, buying them on your own is risky as there is a great deal of volatility and uncertainty surrounding it.
I suspect the price of Bitcoins is soaring because many people suffer from FOMO (Fear Of Missing Out). There is a gigantic lack of understanding how Bitcoins work. Interestingly, the creator of Bitcoins is a mystery. No one seems to know who it was.
Along with cryptocurrencies, investors are now purchasing digital artwork, at a rate of 2 and 3 million dollars for each piece. The world is changing; I hope I can keep up.