Bitcoin has been hailed as the future of money, a hedge against inflation, and even “digital gold.” But I’m not convinced. While I’m open to new technologies, I don’t see Bitcoin as a good investment or as something that adds real value to the financial world.
Bitcoin Is Not an Investment #
When you buy stocks, you own a piece of a company that generates profits. When you buy bonds, you earn interest. Commodities like oil or even gold have practical uses. Bitcoin offers none of this.
Bitcoin produces no cash flow, creates no products, and provides no utility beyond existing as a number on a screen. Its worth comes solely from the belief that someone else will pay more for it later. This is the classic definition of a speculative asset, not an investment.
Bitcoin Fails as a Currency #
Bitcoin was originally envisioned as a peer-to-peer digital currency but when measured against the qualities that make a currency useful, it fails badly:
- Stability: For a currency to be useful, it must hold relatively predictable value. Bitcoin’s extreme volatility makes pricing goods impossible.
- Transaction speed and cost: Everyday transactions require speed and low fees. Bitcoin transactions can take an hour or more with costs that spike during congestion.
- Adoption: A currency is only as useful as the number of people who accept it. Bitcoin is still niche.
- Durability: Lose your private key, and your Bitcoin is gone forever. You can store it at an exchange, but Bitcoin exchanges are not FDIC or SIPC insured and many have been hacked or shown to be fraudulent over the years. That’s not a reliable system for ordinary people.
In short, Bitcoin doesn’t function well as money. Why would one want to use Bitcoin as a currency over USD when USD functions better in practically every way? The USD does decline over time due to inflation but it does so slowly and predictably so at least one understands what their money will buy in the future. Other cryptocurrencies might address these shortcomings, but Bitcoin itself hasn’t.
Bitcoin Is Not Digital Gold #
Another popular claim is that Bitcoin is “digital gold.” The analogy doesn’t hold up under scrutiny. Gold has preserved value for thousands of years. It’s a scarce, tangible asset with real industrial and cultural uses from jewelry to electronics. Bitcoin, by contrast, has only existed for about 15 years. It has no physical utility, and its value is entirely belief-based. Until it survives centuries of economic cycles, calling it “digital gold” is premature.
Bitcoin Relies on Speculation and Hype #
Bitcoin’s growth has been fueled by a feedback loop: people buy in, prices rise, and early adopters encourage more buying. This is the classic hallmark of a bubble.
The bubble may last decades, but that doesn’t change the underlying dynamic. Bitcoin has only existed during times of relative global prosperity; it hasn’t been tested through severe downturns or wars. When people need cash for food, rent, or shelter, Bitcoin will likely be among the first assets sold.
Bitcoin Behaves Like a Risk Asset #
Empirically, Bitcoin behaves like a high-risk asset similar to tech stocks or emerging market equities. It tends to rise during risk-on environments and fall during risk-off periods. This is the opposite of a safe-haven asset like gold or government bonds, which tend to rise during market turmoil.
Conclusion #
In summary, Bitcoin falls short in multiple dimensions: it’s not a reliable investment, fails as a practical currency, lacks the qualities of a proven store of value, and is driven more by speculation than fundamentals. Its behavior as a high-risk asset further underscores its limitations as a hedge or safe haven.
While I’m not opposed to innovation and recognize the potential of blockchain technology in other areas, Bitcoin itself does not inspire confidence as a long-term asset. For these reasons, I remain skeptical and choose to not to invest in it.