Is Bitcoin A Good Investment? (What I REALLY Think Of Bitcoin)

just a few weeks ago i got this text from my parents and it really got me thinking is bitcoin for real this time this is their retirement money after all or is bitcoin just another speculative bubble just like it was in 2017 only to come crashing right back down again just like the first time around there are a lot of people jumping on the bandwagon right now hoping to get rich quick so if you are going to jump on the bandwagon i would at least like you to understand why you're doing it and to understand the risks in this video i'm going to give a brief overview of what bitcoin is and how it works then i'm going to talk you through how to evaluate for yourself whether it's a good investment or not and finally i'm going to leave you with some do's and don'ts if you decide to buy bitcoin for yourself if you already know what bitcoin is then just skip ahead to the second part of this video you can find the timestamp for the second part right below in the description okay so first off what is bitcoin i know it can be hard to wrap your head around because it's 100 digital and it's so new but it's really important that you understand the technology and what it is and why it's so revolutionary before you invest in it bitcoin is a form of digital money that runs on what's called distributed ledger technology although bitcoin is still very new distributed ledger technology has actually been around a really long time for centuries in fact hundreds of years ago on an island in micronesia called yap the widely accepted form of money on that island were these large heavy stones made of limestone and literally these stone coins were so heavy that they just sat in places all around the island but they were never moved even when the owners of the coins changed if they bought and sold things everyone on the island knew who owned which coin so it was public knowledge and whenever two people wanted to transact they would basically just announce the change in ownership to everyone on the island everyone would then update their mental notes their knowledge of who the coin belonged to so imagine there's this huge 500 pound stone sitting somewhere on a beach on that island one person gives it to another person but the actual stone doesn't move it's just that everybody on the island knows that the stone has a new owner so the islanders of yap this is like centuries ago they were using a distributed ledger everyone had a real-time record of coin ownership at all times and whenever something changed in the ledger meaning coins were transacted everyone knew about it so rather than having just one person or one entity on the island to keep track of coin transactions everybody on the island kept track that way it was more trustworthy even if one member of the tribe died or lost their records no problem because there is still plenty of other people on the island who have copies of the ledger either written down or in their memory now imagine if instead on the island of yap it was all up to just one person this would be called a centralized ledger problem is that person could make a mistake change the ledger to make themselves richer you know lie about it they could get sick and die or whatever very unreliable because that would only be one point of failure versus many points of failure not only this but if only one person was keeping track of the ledger they would have too much power it would essentially be a monopoly and they might start charging fees and just abusing their powers the modern day centralized ledger is the bank so think about it if you have x amount of dollars in the bank it's the banks that keep track of that you know like if you buy a coffee for five dollars the bank will update their ledger five dollars out of your account five dollars into the coffee shops account so it's one central entity or a centralized ledger problem is banks are vulnerable to fraud it happens all the time actually and they also tend to charge really annoying fees for their banking services so the main benefit of a distributed ledger versus a centralized ledger is strength in numbers it gives power to the people versus to one centralized entity it has many points of failure versus one point of failure so back to bitcoin imagine if instead of these big stones being used as money we used this digital thing called bitcoin because if you really think about it those stones they were just an idea they didn't even have to move or physically change hands if everyone knows that they're there and they agree that it's there then it's there so substitute the stone coins for just this digital idea called bitcoin just like these big stones there's a fixed supply of bitcoin in the world and instead of villagers on the island of yap in micronesia hundreds of years ago keeping track of who owns what nowadays with bitcoin it's hundreds of computers all around the world or thousands of computers i don't even really know i send you one bitcoin all the ledgers in the system will update their records one bitcoin less for rows one bitcoin more for you as you can imagine if everybody is doing transactions left and right that's a lot of data moving through the distributed ledger now there are different ways to process all this data all these transactions and blockchain is one of them basically blockchain is a type of distributed ledger where the data is bundled into blocks and each new block of data is chained to all the previous blocks hence the name blockchain blockchain is the technology underpinning bitcoin and many other cryptocurrencies so bitcoin runs on a distributed ledger technology and the type of distributed ledger it runs on is called blockchain so that's my bitcoin 101 hopefully that was helpful now let's talk about whether bitcoin might be a good investment or not bitcoin is a mind-blowing world-changing revolutionary invention that is for sure just the very idea of distributed ledgers and blockchain is already changing the world and the financial industry as we know it but is it a good investment at its core bitcoin has the potential to serve two purposes first as a form of money and two as a storehold of wealth so to evaluate whether bitcoin is a good investment or not we need to ask ourselves how well bitcoin serves these two purposes it's all about supply and demand we already know the supply of bitcoin there's a finite amount of bitcoin out there and we know what it is it's the demand side we're still not sure of yet if bitcoin can truly serve a useful purpose the demand will be huge if not then bitcoin is just another speculative bubble just like the dutch tulip mania in the 1600s dutch tulips served no useful purpose they were just trendy for a while and people speculated on it and bought it and gambled and hoped that they could just sell it for hire but because there was no real demand for the tulips as opposed to speculative demand when tulip prices crashed they never recovered again so for there to be real demand for bitcoin like long-term real sustainable demand it has to become a viable medium of exchange and or store hold of wealth so let's look at each of these one at a time for bitcoin to become a widely accepted medium of exchange such as us dollars it would have to be really convenient to send and receive and also have stable purchasing power these are the requirements of a good medium of exchange in terms of being convenient to send and receive bitcoin definitely checks off this box someone in i don't know like south africa can send bitcoin to someone in korea within minutes without paying expensive wire transfers through the bank and waiting like three business days or more for the funds to arrive so in that regard bitcoin is already better than us dollars or traditional paper currency as a medium of exchange where bitcoin is still totally unproven is the stable purchasing power part on any given day bitcoin goes up or down 10 or more in 2018 bitcoin lost 75 of its value in 2020 bitcoin gained 300 in value in 2021 who knows what's gonna happen could go way down way up when you never know how much purchasing power your currency is going to still have in the future it's really difficult for it to become a widely accepted medium of exchange imagine you're you know a coffee shop owner and you start accepting payments in bitcoin but your rent and your expenses are all in dollars still and you don't know how much dollars the bitcoin will be worth in a month from now when the rent comes due that makes it really hard to actually start accepting bitcoin so in the sense that has a very unreliable purchasing power it's still not there yet in terms of becoming a medium of exchange that's why you can't pay for your coffee at starbucks with bitcoin you can't pay for your groceries at whole foods at least not yet but given how much more convenient it is to transact in bitcoin and the fact that some businesses are already starting to take payment in bitcoin i can definitely see bitcoin eventually replacing the us dollar and other paper currencies now for bitcoin to become a legitimate storehold of wealth which is the other purpose that bitcoin can serve it would have to be a place where people can preserve or increase their purchasing power over time that's the purpose of a storehold of wealth now gold is the classic example of a storehold of wealth lots of people including central banks and institutions keep their reserves in gold because of their finite supply bitcoin and gold are often equated with each other in fact bitcoin's nickname is sometimes digital gold as of now there is a huge need for gold like assets why because central banks are printing money like crazy i think this gif very accurately portrays what central banks are doing right now there is so much money and credit in circulation in the world and all that money needs to go somewhere as money becomes less and less valuable because there's more and more of it the supply of assets and storeholds of wealth that that money can pour into is still fixed there's only so much that can go into stocks and bonds and real estate and gold so now it's spilling over and going into bitcoin and other cryptocurrencies what's attractive about gold and bitcoin is that it's a form of money that can't be manipulated by the powers that be fiat money or paper currency can be printed in unlimited quantities devalued and controlled by the government there's been plenty of times in history when the government actually screwed up big time and the people had to pay for it for example in 1990 when the brazilian president fernando coyor literally confiscated the savings accounts of all brazilian citizens in an effort to contain inflation or in germany the weimar republic in the 1920s when the government printed so much money to pay for the war that paper money became so worthless that it was more valuable as kindling for fire than his actual currency so for centuries gold has been the go-to protection against the dangers of fiat money dangers of fiat money it can be printed in unlimited quantities it can be manipulated and controlled by the government and it can and will get devalued as more and more of it gets printed so the question is can bitcoin truly become the new digital gold can it be an alternative to real gold as of now the market cap of bitcoin is approaching 1 trillion that's still very tiny compared to the market cap of gold which is 13 trillion and by the way market cap means the total value of assets outstanding so as a percentage of gold outstanding bitcoin is only at seven percent that means if bitcoin truly becomes a widely accepted alternative to gold then a big portion of the 13 trillion dollars invested in gold right now could move right on over to bitcoin or other cryptocurrencies making them go even higher however there's one big obstacle to bitcoin obtaining that storehold of wealth status that gold has which is regulation we live in a country where the government can shut down any business operation with one law or just one little change to the tax code since bitcoin is decentralized and it's not controlled by one entity it could actually be pretty hard for the government to shut it down but at the same time i wouldn't want to underestimate the power of the us government right now having control over the monetary system gives the us government a huge amount of power and people don't typically want to just give up their power easily they put up a fight so i find it hard to believe that the government will just sit back and let bitcoin replace the us dollar and disrupt the existing monetary system as we know it maybe it'll happen but i don't think they're going to make it easy also there are legitimate concerns about how cryptocurrency is used at a speech she recently gave president of the european central bank christine lagarde said bitcoin is a highly speculative asset which has conducted some funny business and some interesting and totally reprehensible money laundering activity there has to be regulation so regulation is coming that is for sure how it will affect bitcoin and whether it will be good for bitcoin or bad for bitcoin that remains to be seen because on one hand having rules and regulations makes things more legitimate and trustworthy and orderly and that actually could encourage large financial institutions to start investing in bitcoin because a lot of them haven't already because a lot of them are still sitting on the sidelines so in summary regulation will probably increase not decrease and whether that's going to be good or really bad for bitcoin still remains to be seen there's other risks too for example even though the supply of bitcoins is finite the supply of cryptocurrency is actually infinite there's new coins being invented every single day sure they're not as proven as bitcoin is but if some amazing new coin comes along that has better technology than bitcoin bitcoin could become obsolete it's a stretch given bitcoin's 10-year stellar track record but at the rate of disruption and innovation that's happening these days it's certainly not impossible so what's the verdict is bitcoin a good investment i think it is but only as a small portion of your assets my approach to bitcoin can be summed up in two words skeptically optimistic there's still a really wide range of outcomes at this point on one extreme bitcoin becomes a universally accepted medium of exchange and storehold of wealth and alternative to gold and it goes to the moon on the other extreme if lawmakers shut it down or some other new cryptocurrency with better technology wins over bitcoin could go to zero both actually seem plausible at this point that being said the payoff can be huge because if you're right you could become very rich richer than you ever would have become if you'd invested in gold stocks or other more established asset classes so i think the smart way to invest in bitcoin is to treat it like a high probability lottery ticket for all the reasons we discussed it has huge potential and it looks very promising so it's not quite as reckless as a lottery ticket you know there's still a lot of things that are in its favor but it's still like a lottery ticket because it also has the possibility of becoming worthless so you don't want to put all your life savings into it but you could put say 10 of your money into it and the rest into more proven assets like stocks bonds real estate gold so stick with what's proven but put maybe 10 or less aside into bitcoin kind of like a high probability lottery ticket that way if you win you'll be rich but if you lose which could also happen you're at least not going to be out on the streets now i have a friend who invested half a million dollars into cryptocurrency back in 2017 but that was a fraction of the money he had like not even one percent of the money he had like uber rich so for him half a million in bitcoin made sense like i think he literally forgot about it he wasn't even watching the price or obsessively worrying and now it's way above his purchase price and he's even richer than he was before i know life is so unfair right but seriously for you maybe it's only a couple thousand bucks or maybe it's just a couple hundred just be smart about it don't bite off more than you can chew now this is a perfect segue into the final part of this video some do's and don'ts first things first if you decide to buy bitcoin do it in increments versus all at once the price is so volatile and you could very well crash right after you buy it so do dollar cost averaging i talk a lot about dollar cost averaging when it comes to stocks but it's a really good strategy no matter what you're invested in check out this video to learn more about dollar cost averaging it's in terms of stocks but it can still apply to stuff like bitcoin you can use a service like swannbitcoin.com now this isn't a sponsored video it's just what i'm using my friend told me about it and i found it to be really easy to use they let you connect your bank account and just make recurring purchases daily weekly or monthly so i've diverted some of my weekly savings out of my savings account into you know us dollars into a bank and instead rerouted a little bit of that into bitcoin via swannbitcoin.com i've also set up recurring purchases in the past with coinbase so that's also very easy and intuitive to use so i would say between swanbitcoin.com and coinbase.com those are the best ways to first of all purchase bitcoin with us dollars and then to set up recurring purchases then once you have some cryptocurrency it's time to store it somewhere safe you can of course keep it with swan or coinbase and you know trust them to store it for you but that's actually not very safe these online places get hacked or they can get hacked so for large amounts of crypto you need to get something called a hardware wallet it looks like this and you can store your cryptocurrency here if you're thinking what if i lose this hardware wallet then no worries because your hardware wallet actually comes with a really long password that you can use to restore your cryptocurrency if you ever lose this little thing as long as you have your really long password which is often called a seed phrase your crypto can be recovered now if you want me to make a step-by-step tutorial on how to use a hardware wallet just type tutorial in the comments below and i'll make a video for you in the next few weeks because it took me a really long time to figure out and i would love to help you guys out too next don't buy unless you have steel conviction as a fun little story i bought a bunch of ethereum back in 2017. i didn't get it at a great price i bought it around 900 and in the years following it went down a lot like as low as 83 so obviously that really sucked but even throughout it all i still really believed in cryptocurrency's potential to change the world and like i mentioned before i viewed it as sort of a high potential lottery ticket so i was willing to hold on to it to see what would happen as of today ethereum is back up well above what i paid for it thank god and the only reason i was able to stick it out this long was because i had conviction and to be honest i also kind of forgot about it and i wasn't looking at it and obsessing about it because it was a small portion of my overall assets like i said under 10 so moral of the story don't buy unless you have steel conviction and you can really hold on to the bitter end let's say you buy bitcoin now at a price of say forty thousand dollars then you have to be ready for it to go back down to like ten thousand and still hold on like hold on for dear life you know it's such an unproven asset still it's still in its infancy and there's a long way to go until it becomes some sort of widely accepted institutionally accepted asset that everyone can invest in so until we get there i would say just plan on holding on which is why i want you to only buy an amount that you're okay with potentially losing it will help you keep a calm head as you ride the bitcoin roller coaster okay and finally i want you to educate yourself this video is a good start but there is so much more to learn about cryptocurrency and even though i understand the basics pretty well i still have a ton of stuff to learn myself if you're looking for a good book to read in order to start learning about bitcoin the first book i ever read on the topic was called digital gold by nathaniel popper i've included the link below in the description it's a super entertaining read it reads like a mystery novel yet it'll help you understand the technical side of bitcoin without making your eyes glaze over also according to my friend kristen who knows a lot about bitcoin shout out to you kristin another really great resource is the bitcoin standard i started reading this as well and so far so good so the more you know the better there's a lot of good books and resources out there because knowledge will serve as a reality check against fomo greed and other really tempting gambling behaviors the crypto space is constantly evolving and there is a lot to monitor so as i get more educated i'll be sure to pass along my findings to you in another video i'd also love to start doing guest interviews on my channel so maybe i can bring on a crypto expert too because i really don't know that much compared to everything there is to know about this topic and i would love to bring in some outside expertise unlike during the run-up of bitcoin and other cryptocurrencies back in 2017 this time around it feels a little different this time around there's buy-in from big names like arc investments elon musk paypal etc whereas before the early adopters were more like nerds like computer coders anarchists and just it was very non-mainstream now more and more bitcoin is being recognized by prominent thoughtful people as a possible alternative storehold of wealth to quote ray dalio the founder of the hedge fund bridgewater associates it seems to me that bitcoin has succeeded in crossing the line from being a highly speculative idea that could well not be around in short order to probably being around and probably having some value in the future so once again probably being around and probably having some value in the future it's still not a sure bet but the fact that ray dalio hasn't completely dismissed bitcoin is definitely encouraging so i'm not counting on it by any means but i'm putting myself in a position to benefit somewhat if bitcoin does become what everyone thinks it's going to become like i mentioned before skeptically optimistic now i want to hear from you are you planning to buy bitcoin or any other cryptocurrencies why or why not let's start up a discussion in the comments as always thank you so much for watching i appreciate you i post new videos every wednesday about money and investing so be sure to subscribe if you haven't already and i will see you next week same time same place bye for now [Music] you

Channel: Rose Han

Views: 146,611

Keywords: bitcoin explained, is bitcoin a good investment, should i invest in bitcoin 2021, should i invest in bitcoin now, bitcoin 101, cryptocurrency, bitcoin for beginners, is cryptocurrency a good investment, investing in bitcoin, investing in bitcoin for beginners, investing with rose

Id: SNN7D3h1iVE

Length: 23min 13sec (1393 seconds)

Published: Wed Feb 17 2021