I purchased $250 in bitcoin. Here’s what I heard.
Many people today kill time at the airport by simply browsing duty-free shops. I decided to shop for bitcoin.
But first, there are two things you should know about me: I have a tendency to be almost as afraid of losing money investing as I’m of flying. On a certain level, I guessed one fear could cancel out the other.
So last Thursday, while waiting for a trip to Nashville, I pulled a popular application called Coinbase that may be used to buy and market bitcoin. The digital currency had struck $10,000 for the first time a few days before, before withdrawing somewhat.
For 15 minutes in the airport, I refreshed the amount of bitcoin over and over, watching because it gained and gained hundreds of dollars in a couple of minutes. I called out the price fluctuations breathlessly for my spouse, who softly encouraged me not to be an idiot, before returning to her magazine.
She was in good company. JPMorgan Chase CEO Jamie Dimon recently called bitcoin that a "fraud" and proposed individuals who buy it are "dumb. "
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And yet bitcoin has increased over tenfold since Buffett’s warning. He said he expected it would be worth enough one day to buy a home.
When I saw the amount of bitcoin autumn to $9,500, I pressed buy, defying the wisdom of 2 finance titans and my spouse. (A couple of days later, I purchased an additional $150.) From the time we got to our resort, my bet had gone up 10%. 1 week later, it was (temporarily ) up 100%. My wife’s opinion of me has allegedly decreased by the same amount.
What is happening?
Bitcoin cracked $1,000 on the first day of 2017 . By this week, it was up to $12,000, then it took off: The price topped $17,000 on several exchanges Thursday, and read full report $18,000 on at least one. Other cryptocurrencies have observed similar spikes, though they trade for much less than bitcoin.
There’s a long list of variables individuals may point to in an effort to describe this. Regulators have obtained a hands-off approach to bitcoin in certain markets. Dozens of new hedge funds have launched this year to trade cryptocurrencies like bitcoin. The Nasdaq and Chicago Mercantile Exchange strategy to allow investors trade bitcoin futurescontract, which may attract more professional investors.
Yet an integral reason the price of bitcoin keeps moving up is, well, since it keeps moving up. Little traders like yours truly have a fear of passing up a chance to get rich quick. When the value of your bitcoin doubles in a week, as it did for me personally, it’s easy to think you’re a genius. But you can get burnt assuming it’s going to keep skyrocketing.
Some traders have likened the bitcoin hype to the right-wing bubble. Others, for example Dimon, have said it’s even "worse" compared to Dutch tulip mania in the 1600s, considered among the most well-known bubbles ever.
As Buffett put it back in 2014, "the idea that [bitcoin] has a massive intrinsic value is merely a joke in my view. " Bitcoin isn’t backed by a business ‘s earnings, or the strength of a government and rule of law. There’s also no dividends or interest.
Why would anyone want or need to use bitcoin?
Bitcoin serves as a new type of currency for the electronic era. It works across international boundaries and doesn’t even need to be backed by banks or governments.
Or at least this was the guarantee as it was created in 2009. The volatility and spike of bitcoin this season may be perfect for people who spent early, but it threatens bitcoin’s viability as a currency.
Right now, I can use my bitcoin holdings to pay for purchases in Overstock ( OSTBP ), or reserve a hotel on Expedia ( EXPE ). But if I use bitcoin to buy $25 worth of socks Overstock now, and the amount of bitcoin quadruples following week, then I’ll feel like these socks really cost me $100. Then again, in case bitcoin crashes, then at least I’ll always have the underwear.
Instead of a currency, bitcoin has been treated more as an advantage, with the hope of reaping great returns in the future.
So is there anything genuinely valuable about bitcoin?
Yes, the technology behind it.
Bitcoin is developed on the blockchain, a public ledger containing all of the transaction data from anyone who utilizes bitcoin. Transactions are inserted to "blocks" or the hyperlinks of code that comprise the chain, and every transaction has to be recorded on a block.
Even bitcoin critics like Dimon have said they support the use of blockchain technology for tracking payments.
Is there a valid and legitimate approach to invest in bitcoin?
Bitcoin exchanges have a checkered history. Mt.Gox, once the largest exchange, closed down 2014 after dropping hundreds of millions of dollars worth of bitcoin following a hack.
Now, the top exchange is supplied by Coinbase, a startup that has increased over $200 million by a number of top tier venture capital firms. Square ( SQ ), the payments service, can be rolling out a bitcoin product.
There are also bitcoin ATMs in scattered bodegas and convenience stores around the country, through businesses like Coinsource. The ATMs let you swap bitcoin for cash, or vice versa by scanning a QR code in the electronic wallet application on your mobile phone.
With Coinbase, you must first give the app permission to connect to your bank account. Much like other stock trading applications, you pay a small charge for every trade, buying and selling. But the trade can take considerably longer.
My first $100 bitcoin buy won’t formally be completed Coinbase before Friday, over a week following the trade. The price I purchased it remains the same, however I won’t be in a position to market at the earliest before Friday.
No socks for me.