It’s official: Bitcoin’s total market value has surpassed the $1 trillion mark.
Last Friday, the cryptocurrency’s price surged above $55,000, following the upward trend it’s been on since the beginning of last year.
And while bitcoin’s backers are thrilled, we are less than impressed.
For us, it’s simply too early in the game to come to a conclusion about the digital currency and the blockchain technology it relies on.
Since it’s not a traditional asset — and because it’s widely misunderstood — bitcoin is very hard to assign a value to. It’s also not yet accepted as a currency in most places. That means any investment at this stage is a speculation … which is not what we do at American Investor Today.
So, while many believe that blockchain could be revolutionary in its own right, the jury’s still out on bitcoin. No one knows where it’ll go next.
In fact, my colleague Annie Stevenson talked about this issue with the cryptocurrency back in December. As she put it then: It doesn’t count as a currency until you can easily buy a cup of coffee or pay your rent with it.
So, despite bitcoin’s surge, our position at American Investor Today remains the same.
We want to buy into companies that pass through the filters of our investment-assessing process…
Our 3-Step Test
When it comes to the stock market, there are three steps you need to take before making an investment…
No. 1: Understand the investment.
No. 2: Assign a value to the investment.
No. 3: See whether the market is overvaluing or undervaluing the investment — and act accordingly. Buy when it’s undervalued, sell when it’s overvalued.
For a real-world example, think about the process of buying a house…
When you tour a potential home, you take many things into consideration, such as location, size and necessary renovations.
If a house checks off all your boxes, you can begin to value it properly. Taking everything into account, is it overpriced, fairly priced … or underpriced?
If the house is listed for way more than you’re willing to pay for it, chances are, you’ll walk away. But if it’s listed for less than you’re valuing it for, you just might make an offer!
This process keeps investments the way they should be: simple.
As my boss, Charles Mizrahi, has told me: “If you can’t understand the investment, you can’t value it. And if you can’t value it, then you have no business investing in it.”
Bitcoin could be the next big thing … but, as of right now, it just doesn’t check off our boxes…
No. 1: We don’t understand bitcoin as an investment — it isn’t widely used as a currency yet, and it’s too volatile to be a store of value. In other words, it is little more than a speculation today.
No. 2: We also can’t assign a value to bitcoin. Is it really worth $55,000? We doubt it, but until it has an actual market — like other currencies — we can’t know either way. So it can’t tick this box.
No. 3: And lastly, since we can’t see what the value of bitcoin is, we certainly can’t tell if the market is pricing it fairly. With this technology, it’s still too early to tell.
That’s why we’re not recommending this cryptocurrency any time soon.
Instead, we’re sticking with what works…
Take the Guesswork out of Investing
This isn’t the first time we’ve seen a bubble in bitcoin.
My mentor Charles Mizrahi is a 40-year veteran of Wall Street and has seen the ups and downs of nearly every type of market.
Back in September 2017, near the last peak in bitcoin, Charles wrote this:
Based on my research, Bitcoin appears to have some currency-like characteristics, but is currently trading in a bubble…
Just be aware: The laws of gravity have not been repealed, and Bitcoin is no exception.
Prices can and will fall. And trying to time when it will happen is the hard part.
He compared it to the 1999-2000 internet bubble. And as he said, the mania around bitcoin in 2017 felt a lot like what was happening before the dot-com crash.
After bitcoin’s price peaked a few months later, the cryptocurrency went on to crash 68% in six months.
Instead, he recommended his readers sit tight and let their investments work for them. He had all the experience he needed to know a solid investment from the hype.
Charles uses a tried-and-true approach to investing, focusing on the fundamentals of a business before buying in. He only ever wants to bring you the best of the best.
That’s why in his Alpha Investor research service, he’s been telling readers about a new frontier in technology … one that he really knows how to trade. It’s not a speculation, it’s an intelligent investment in the future of technology. Click here to see his presentation … you’ll find out about a trend that could mint new fortunes, without all the risk of crypto.
Leave bitcoin to the speculators. Get in on stocks that can grow your portfolio the smart way.
We know you won’t regret it.
Assistant Managing Editor, Alpha Investor