My personal thoughts on Bitcoin (why you should avoid bitcoin) #bitcoin #cryptocurrency

When I very first heard about Bitcoin and blockchain in the beginning of last year 2016, it was only about $400+. Now price is about $17,000. Needless to say, it's a crazy surge with all the hype. It made the mainstream news.

Being an investor and trader, Bitcoin will definitely catch your eye.

Whether you believe in it or not. I think most investors and traders will sort of envy Bitcoin's surge...while they've been either making much less in the stock market or even losing money.

I saw on Straits Times they interviewed an unemployed uncle on why he bought Bitcoin. He compared it to TOTO, saying that TOTO hard to win but Bitcoin surging everyday.

From such an example, we can sort of know why so many people are going in on Bitcoin: it's more of gambling.

I am not so much against gambling, but I believe that the line between gambling and investing/trading is increasingly blurred in the case of Bitcoin.

Right now everyone's saying that it's a big big bubble, don't buy don't buy. Other than being a bubble, there are also some other risks to consider before you buy Bitcoin or any other cryptocurrency:


1) Counterparty risk: there's a very high risk of transactions not being fulfilled because many of the crypto-brokers are unregulated, at least by the Singapore government. This means you might have problem selling Bitcoin.

2) Broker risk: If you're afraid to invest/trade through custodian accounts in SG, like Stan Chart, this will be a nightmare because many crypto-brokers are unregulated. Imagine you want to cash out, but it isn't that easy.

3) Not fully understanding blockchain technology: even now after reading about blockchain technology for about a year, I still do not fully understand what it actually it and how it can help the economy or society. Personally, if I don't understand something, I wouldn't touch it. Unless I'm gambling.

4) There are too simply too many coins. If blockchain was such a great, universal and omnipotent technology as claimed to be, how would creating many different versions of coins be actually useful? Wouldn't it cause further fragmentation of the market?

5) Exiting is much, much harder than entry. From my humble experience trading, I have learnt that exiting a trade is in fact, much much harder than entering a trade. I have problems knowing when exactly to take profit. This in my opinion is even harder than stop-loss actually. 

6) There is no underlying asset to support the prices. I find hard to comprehend why I should buy 1 bitcoin when I do not know the true value of what it can really do, nor can I see or touch it. What I only know is that there is a resell value.

That being said, you can certainly make money in a bubble. I'm sure those who've traded crypto before have made money.

But the more important question is....are retail traders and investors able to cash out in time? How far is that resell value? What's the benchmark for it?

With all the risks associated with cryptocurrencies, I've decided not to touch Bitcoin. But some of these risks can be mitigated if you buy Bitcoin ETFs like GBTC. But still won't touch because I feel it's a true bubble.

I'm also afraid that trading Bitcoin will severely distort your trading/investing acumen. Because it's so easy to make money. Whatever experience or knowledge you've learnt from investing/trading stocks doesn't matter anymore. Soon you'd be thinking to yourself, might as well I put all my money on Bitcoin. Greed will probably creep up and that's the number 1 killer for retail traders and investors. Of course, you can always use newly released Bitcoin futures to hedge, but it wouldn't change your mindset.

These are just some of my personal opinions on cryptos and Bitcoin. No doubt you can definitely make money trading bitcoin, but the risks are too much for me to take. Hence I will stay away from Bitcoin and focus on stocks instead.

I've also attached an interesting infographic on Bitcoin that everyone can take a look at it.

Feel free to comment below on what your thoughts are on cryptos and Bitcoin! We're all here to learn from each other in this community.

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48 likes 39 comments
jerrenjee

It’s not an investment it’s juz a bet on the future no sheer win but sure risk always prepare urself for kallang river but if u have a life jacket on it’s ok

gingwien

https://www.investingnote.com/posts/352225

Here is an article posted for InvestingNote to help people get started with understanding Bitcoin and the Blockchain.

For something that seems to have taken the world by storm, it’s certainly worth investing some time to learn and understand about it.

Certainly like all things that go parabolic, it likely won’t end well. That will shake out a a lot of people.

Then when the bubble burst and this crazy is over, who will be he survivors? And those perhaps might a great investment.

Don’t touch anything you cannot understand. But I do encourage the community learn more about it. It is perfectly fine not to touch it as an invest, but do keep in touch with regards to the development of what may become a new asset class.

bitssg

I'm no expert in cryptocurrency although I did acquire a few myself early last year and am having fun watching my portfolio go from 100% to 1000% and am still waiting and seeing what will happen in a few years time. Having said that I'm no speculator either. My investing strategy had always been rather conservative and based on fundamentals. I do strongly believe in keeping an open mind and wonder how many of the financial expert naysayers today will join this list (https://www.forbes.com/sites/robertszczerb...) and eat their words like Steve Ballmer "There’s no chance that the iPhone is going to get any significant market share."

bitssg

Reply to @bitssg : I'm still of the belief that an open mind is critical at this stage with cryptocurrencies. I don't harbour any view that they are in a bubble nor that they are in any way an asset, a commodity or otherwise. I'm not in cryptocurrencies to trade. I'm in it to learn. Just like no one knew if Apple will succeed with the iPhone in the 1990s, I highly doubt anyone can state in confidence that cryptocurrencies will survive or evolve to be in any form for the next 1, 5 or 10 years. I am in no position to make any prediction about bitcoin or any cryptocurrency or even begin to hazard a guess who Satoshi actually is. If he really is Elon Musk, then for anyone to say he's the next Steve Jobs won't be too far from the truth. I don't want to make a statement now only to have to eat my words later because I'll be the first to admit I don't know enough.

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RetiredYoungMan

i too, believe that bitcoin is a big bubble with no underlying asset
companies and bonds pay dividends, these are real assets
bitcoin is building castles in the sky, eventually it will crash when the bubble bursts

YokeMing

Reply to @RetiredOldMan : yup...India also just declared bitcoin is a ponzi scheme. http://www.businesstoday.in/current/econom.... MAS also recently asked investors to be careful: http://www.straitstimes.com/business/econo...

Spartan

Buy buy Bitcoin!! Pump money in!! It will go up forever!! lol...

wellhandy

I heard there are brick and mortar shops in malls leased out to retail #bitcoin to uncles aunties. Lol

lionellim

In a typical cryptocurrency transaction, there are only one sender and receiver each with no counterparty or broker involved. Hence your statement on counterparty and broker risk is factually incorrect. However, there is an exchange risk where cryptocurrency holdings held in crypto-exchanges are subjected to risk of loss through exchange hacking such as the Mt Gox case. This exchange risk can be mitigated through the use of cold wallet to store the private key offline during a cryptocurrency transaction.

lionellim

Reply to @lionellim : To add on, based on what you have shared, I believe etoro platform for cryptotrading is performing similarly to the role of an exchange i.e. providing bid-ask spreads quote for crypto-trading pairs. Unless they are taking the trading quotes and liquidity from crypto exchanges and add on incremental spread on the trading pairs as their ‘commission’.

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sumkong

Agreed with what you said. But i will go in and out quickly without sinking too much. Had make quite a bit recently and everytime sell when there is a surge up. Have liquidated all my initial cash and with surplus free money to trade on this silly bubble. If all lost still ok since it is virtual money accumulated for free.

YokeMing

Reply to @sumkong : yup! my problem was always the exiting...so I have to control haha

wellhandy

what a long infographic, i just scroll down, like and bump only.

derenceho

I will buy when bitcoin can pay for food at hawker center. to me bitcoin just a speculative voucher. lol.

YokeMing

Reply to @derenceho : yeah man. don't think people would actually use it as a currency... it's fiat money anyway. everything would be inflated too.

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