Don’t Be Bitcoin’s Greater Fool
It made zero sense to me…
Last year, El Salvador became the first country to make bitcoin an official currency.
I don’t know what they were smoking, but it looked like a dumb idea to me.
A year later … and the bitcoin experiment is a big flop.
Bitcoin is not even accepted by most businesses in El Salvador.
The country spent a lot of money on “digital infrastructure.”
Another bonehead move considering the country was already running a deficit.
El Salvador spent money on…
- More than 200 bitcoin ATMs.
- Digital pre-loaded wallets for citizens with $30 bitcoin for each.
- And a $250 million bitcoin trust to convert cryptos and dollars…
If they thought that would get their citizens to use it as currency … think again.
After they spent their free $30 of bitcoin, people stopped using the app.
In addition, digital wallets were hacked.
And it took up to six hours to simply deposit $20 in bitcoin.
So this was the future of currency that bitcoin zealots were touting?
Gimme a break.
Then, to take a terrible idea and make it worse, bitcoin’s price plunged.
The price of bitcoin plunged 62% since it became an official currency.
Not a good look for a “currency” that could lose more than half its value over such a short span of time.
The way I see it is simple: Bitcoin is not a currency, store of value or digital gold.
It doesn’t produce any earnings and its price is not based on the underlying value of anything.
Bitcoin’s price is based on a “Greater Fool Theory.”
The prices go up because people are able to sell it overpriced to a “greater fool.”
Bitcoin only serves one purpose: speculation.
Why the heck does it make any sense to replace the U.S. dollar as the world’s reserve currency?
And like all speculations, this one will end.
When it does, a lot of naive people who bought bitcoin, thinking they were investing, won’t be having a happy day.
That’s why I never invested a nickel in bitcoin or any of those other silly cryptocurrencies.
I’ve been watching bitcoin since 2010. I speak to some of the smartest people on Wall Street.
Every year or so, I call them up and ask: “What am I missing about cryptocurrencies?”
And so far the responses have all been the same: Nothing, it’s another form of speculation.
Stupid Is Stupid
People once thought: The world is flat … people will never fly … bitcoin is a currency.
Just because a million people believe it, doesn’t make it true. Stupid is still stupid.
At the height of bitcoin’s popularity, naysayers sound like the prophet Jerimiah.
When I look at bitcoin … well, I still don’t get it.
I called it silly and stupid back in September 2017 before its peak.
But I don’t get FOMO — fear of missing out. At least not when it comes to investing.
Investing should be based on facts and analysis.
Even after bitcoin plunged, then soared to $68,000 in 2021, I held strong to my convictions.
The key to becoming a smart investor is…
You have to think independently and not be influenced by the madness of crowds.
You can see that in action over the past few years in the pages of Alpha Investor.
I never fell in love with the flavor of the day… In 2020, we avoided pandemic stocks — they were way overpriced.
In 2021, we avoided innovative disruptors — they looked even worse.
And we’ve always avoided bitcoin — the king of stupid.
Instead, we invested in real companies that made real profits and not on hype…
- CarMax (up 10%) over Carvana (down -45%).
- Charles Schwab (up 88%) over Robinhood (down -70%).
- Arista Networks (up 196%) over DocuSign (down -27%).
All our recommendations are showing positive returns since we added them to the portfolio.
As Alpha Investors, we don’t follow the crowd. We stand apart from the crowd.
Our objective is not to speculate and find the greater fool. It’s to make money and sleep better at night.
If you’re on the same page, check out how to invest like an Alpha Investor today.
Founder, Real Talk