Bitcoin’s value is rocketing back from the decline it suffered after Jamie Dimon, chairman, president and CEO of megabank JPMorgan Chase called it a scheme, and China stated it would clamp down or end Bitcoin trading (which it now seems to be reconsidering).
Before Dimon and China, I argued that there is a clear psychological reason to own Bitcoin—as a defense against looking back, ten years from now, and thinking you could have made millions of dollars. That’s right: It’s worth $500 or $1,000 or $5,000 to not feel like you missed the boat—if Bitcoin happens to repeat its past performance.
Remember, $1000 invested in Bitcoin in 2010 years ago is worth about $35 million now.
Here’s what I had to say, before the brief slide in Bitcoin value. And, I think the same thing now. Funny how the truth has a way of remaining the same:
WHAT THE DOCTOR ORDERED: BUY A LITTLE BITCOIN—NOW
Here’s a fact that I didn’t know, until a few weeks ago: An investment of $1,000 in Bitcoin in 2010 is now worth $35 million.
That’s right. Bitcoin is up 35,000 times, or 3,500,000 percent in the last seven years.
Did that get your attention? It certainly got mine.
For those who don’t quite understand what Bitcoin is, think of it this way: Bitcoin is a digital currency or “crypto-currency.” Each Bitcoin has a unique code that defines it—codes which an increasing number of merchants will accept for their goods and services. Another way to think of Bitcoin is as a universal coupon that can be used to buy things or that can be cashed in (on a Bitcoin currency exchange).
The software that powers Bitcoin allows “miners” to use computers to go looking for new Bitcoin codes, by solving complex mathematical problems. They then own the Bitcoin they uncover. Once all the Bitcoin that the software allows to be generated has been mined, no more will be available. This is projected to occur in the year 2140.
That means Bitcoin is inherently scarce. And Bitcoin is also quite flexible. Each Bitcoin can be broken into tiny fractions—say, one ten thousandth of a Bitcoin (or even 1/1,000,000th) —to buy something or to trade for U.S. dollars, or any other currency.
Some governments are resisting crypto-currencies. China just made it illegal to invent and sell new ones. But some governments are embracing them. Japan, for instance, recently legalized Bitcoin as a means by which its citizens can pay for anything and everything.
So, here’s my prescription for anyone with any disposable income, whatsoever: Buy as much Bitcoin as you can afford to lose, without any real worry. Some experts suggest that you hold about 1 percent of your total net worth in Bitcoin. If you have assets worth $100,000, that would mean you would acquire $1,000 of Bitcoin.
I bought some at http://www.coinbase.com. I plan to keep it for several years, minimum.
I believe every human being with the means to buy Bitcoin should do it. Why? Because no one can say, with absolute certainty, whether Bitcoin will be nearly valueless in the future—say, if most governments around the world make it illegal—or whether it will go up another 35,000 times, in the next seven years.
I just don’t want to take the chance that Bitcoin keeps going up and up. See, psychologically speaking, it would be far more painful for me to realize, in seven years, that I could have profited $34,999,000 from a $1,000 investment in Bitcoin (but didn’t) than to realize that my Bitcoin account is valueless. I’m covering my psychological bases.
It’s time to cover yours, too. There’s a chance—a real chance—that the most money you will ever make in your lifetime—by far—will come from putting 1 percent of your net worth into Bitcoin right now. And I believe that that makes it almost irrational to not do so.
Keith Ablow, MD