Should You Invest in Bitcoin?

Hey, what's up everyone and welcome to the School of Personal Finance. In today's video, we're going to talk about Bitcoin. Now, this is actually the first video that I've made about Bitcoin for good reason, because I am not an expert when it comes to Bitcoin. I'm not a very technical person, but you know, the more I talk to people about it, the more I realize that most people are not very technical and most people don't understand Bitcoin and they're afraid to invest in it because of that. So I have personally invested, I am invested in Bitcoin, so I thought it might be helpful for you to hear from me the reasons why, the possibilities that I see with Bitcoin, how you could get started learning more about it and investing in Bitcoin and just an overall discussion around money and assets and value and wealth. So I hope that you get something out of this video today. All right, let's get to it. All right, so real quick, make sure to check out my education center over at schoolofpersonalfinance.com. I'm doing a soft launch, one-time fee, $97, gets you lifetime access. I'm creating a ton of courses in there, a ton of resources. The only goal is to help you become great with money. So go check that out. All right, so let's start with an attempt at a simple explanation of what Bitcoin is. So it is a decentralized digital world currency. So what the hell does that mean? So decentralized meaning that there's not one government behind it. There's not one financial institution behind it. It is decentralized throughout the entire world. There is not one point of contact that could blow up Bitcoin. We have thousands of different computers all throughout the world that are running the Bitcoin network and keeping the network secure. So now the fact that it is a digital currency, all that means is that there's no physical coins, right? It's all in cyberspace. It is computer code. And there are only 21 million Bitcoin that will ever be mined. So there is a finite supply of Bitcoin, which is very different than the current fiat system where the US is just printing paper dollars like it's going out of style. So at a very high level, that really is what Bitcoin is all about. It's having a decentralized world currency that nobody can manipulate. Nobody could print more. Nobody can restrict. Nobody can take your Bitcoin from you. It is a network. It is a system that is running full force. And at this point, it cannot be stopped. So yes, there could be some government regulation. I'll talk a little bit about the risks in Bitcoin. But it's a network that is humming. And there are thousands of miners that are keeping the network safe and secure and continuing to go. And another term that you might have heard is blockchain, which is basically just a digital ledger of all of the transactions that occur in Bitcoin. And it is on a peer-to-peer network. So it's basically impossible to change or to hack because it is distributed to thousands and thousands of computers. So if you change a transaction on one computer, it would have to be agreed upon across the whole network. So it is basically impossible to change anything or hack the system, which is why Bitcoin is very safe and secure. So let's start with a few of the negative things about investing in crypto. The first one is for us non-tech people, it's intimidating. So just the process of buying and holding your crypto could be a little bit confusing, right? So the easiest way to probably do this is to just open an account with a crypto exchange like Coinbase is probably the most popular one here in the U.S. You send your U.S. dollars over to them, and then you can go ahead and buy Bitcoin or Ethereum or whatever crypto that you want to invest in. And then you could just keep it with them. They will be the custodian. They will hold on to your crypto for you. And whenever you want to sell it, you could go ahead and sell it on the exchange and then get your U.S. dollars back. So from that standpoint, it is pretty easy, but there are some risks with that as well. You are then dependent on the third party, on the custodian, right? You are subject to whatever rules that country might have if they want to impose restrictions. If something does happen in the world, you don't have complete control of your cryptocurrencies when they are on the exchange. And also you have to worry about it getting hacked. So you've heard horror stories about exchanges getting hacked and people just losing all of their cryptocurrencies and being out of luck. So to me, that is definitely a worry. You could take it off the exchange and hold it in cold storage, but then you run the risk of losing your device or forgetting your password or whatever it is. And that's a risk as well. So for those, they're a little bit intimidating for somebody who's not in this space and doesn't really understand how all of it works. The second negative is that it's just very volatile. So as far as an investment option, you have to go in with the understanding that there is a good chance that you could lose, if not all of your money, you could lose 80% of it a month later. It does happen. And especially depending if you're buying smaller like altcoins, where they're just so volatile that you just don't know what's going to happen in the future. So when you're investing in these things, you want to take a long-term time horizon and you want to understand, you know, basically what you're in for, the volatility of how it could work. People who bought Bitcoin at $68,000 back in November, they, you know, basically got kicked in the gut and they lost 50% of their money over a couple of months. So it is a rollercoaster ride and you have to go in with that expectation. Now, I do believe that over time as the adoption grows and more and more people are holding crypto and investing in crypto and Bitcoin, that the volatility levels will definitely go down. But we are still in such the infancy of all of this that it is very speculative. And we've learned over the last couple of months that Bitcoin and crypto in general, it is following like the risk assets. So like people are now comparing it to the NASDAQ and it's following the NASDAQ a lot in technology companies. And it has looked that way for the last few months. Now, a third downside to investing in Bitcoin right now is just we have no idea what's going to happen as far as regulation goes. And if these countries are going to accept it or if they're going to fight it, like China banned all of Bitcoin and cryptocurrencies. But it'll be interesting to see how the US continues down the path with crypto and if they completely embrace it or what happens. But regulation, that is definitely a wild card in all of this. I mean, I do believe that regulation is good because it's going to invite corporations and the big money players to really start adding Bitcoin to its balance sheet. And that could have such a dramatic impact on the network and the price of Bitcoin going up. So we want to see some kind of regulation where everybody feels comfortable owning Bitcoin, investing in Bitcoin and using Bitcoin. So regulation, even though it's a huge wild card, I do think that it's a positive as we start to see more regulation happen in the space. My quick disclosure on all of this, none of it is financial advice. Do not listen to what I'm telling you. Do not take action on what I'm telling you. You need to make your own financial decisions when it comes to this stuff. Crypto, Bitcoin, it's all very risky. So proceed with caution. All right. So let's shift now and talk about the vision of Bitcoin and why I've decided to invest some of my money into it. So now a digital world currency. If you think about it, we always had a world currency. It was gold, right? The golden rule, the one with the gold makes the rules. But then in 1971, when Richard Nixon took us off the gold standard and no longer were dollars redeemable for gold, we have now been on a 50 plus year experiment of just having paper fiat money where you are no longer trusting in a thing having value, meaning the gold itself. But you are now having to put your full faith and trust into the government keeping the value of the currency. And as we've learned throughout the years that the governments that control the currency, they are able to print more of it and debase the currency, devalue the dollars or the currency for that government. So throughout history, when trying to figure out what to use as a medium of exchange, as money, there are certain characteristics that it needs to have. So like being durable, right? It has to be able to stand the test of time. So that's a characteristic that money needs to have. Portability, where you could move it very easily so that you could spend The visibility is another one, right? You can't use a gold bar to go in and buy groceries at the grocery store. Uniformity is another one. And then the two big ones, limited supply, which we do not have here with the government printing money like crazy, and acceptability, right? The money has to be accepted everywhere for it to hold its value. So those are really the characteristics of money. And for hundreds of years, gold was the best thing, even though it didn't hit on all of those. It's very hard where if you want to travel and you want to take all of your wealth with you, it is very hard to transport that gold across oceans, right? Or if you're fleeing a country and you want to carry your gold with you, if they're patting you down and looking for things that you are taking with you, it is very hard to hide that gold. So it's not the most portable thing in the world. And divisibility as well. The US dollar, obviously it fails big time with the limited supply. When you can just turn on the printers and now it's just even just hitting a button and create money out of thin air, then how is that good for all of us when they just create money and they debase our currency? So there hasn't been anything that has been perfect when it comes to the characteristics of money. But now Bitcoin, it's here to kind of change that. And even though Bitcoin is nowhere near there yet, that is the potential, is that there's only 21 million that could ever be created so that you know that it's not going to be deflated away, that they're not going to continue to debase the currency. It is capped at 21 million. So that is a big advantage over Bitcoin in the long term, in my opinion, compared to the US dollar, which is just going to continue to be devalued. The biggest hurdle out of all those characteristics right now for Bitcoin is acceptability. It just hasn't been widely accepted yet. But that is changing. Like we are in the infancy of this. But as far as all of the other characteristics, it really is pure. It has the chance to be pure money, a global reserve, a global currency where it's just going to be very easy to use. Everything is digital. Everybody has cell phones now. If you have internet access, you can transact in Bitcoin. You could send money. You could receive money across the world. And it takes seconds. So it's very portable. It's very easy to carry with you. Think about people trying to flee Ukraine right now, right? What do you do? You pack up your truck with all of your wealth and try to bring it across the border. It's not going to happen. But if you have it in cyberspace, if you have it digitally secured, then it's just very easy to take your wealth with you wherever you go. And people are starting to realize this, especially with the geopolitical stuff that's going on out there. And now it's for good or for bad. So you might hear that in Russia, they're able to use Bitcoin to get away from these sanctions that are being put on them. So it's just not controlled by anybody. So it is decentralized. But that's really the benefit to it, even though we could look at negative use cases, like if Russia is using it for those purposes right now. But at the end of it, doesn't everybody want a decentralized money, a decentralized system where there's no one person or one government in control of your entire wealth? Bitcoin is a solution to all of that. It is a way to store your wealth where nobody could confiscate it from you or put restrictions on it. Even with Ukraine right now looking for donations, they posted their crypto wallets where you could just go ahead and you could send them Bitcoin, Ethereum, even the Tether, which is the stable coin that is tied to the U.S. dollar, where you could electronically send them these cryptocurrencies to help them fund their defense. So that wouldn't be possible without this decentralized network and the blockchain and cryptocurrencies. So we're in a whole new world right now. And again, we're in the infancy of it. So if you really start to imagine of what it could eventually turn into, I think that it could really change everything. And that is why I'm investing in it, even though I don't fully understand it and who knows what it's going to turn into. I want to have a piece of it. I want to be involved in it just in case it really does become a store of value for the world, which I believe that it definitely could. Or if it does become the world reserve currency, this might be, you know, tens of years away. It could be a hundred years away. Who knows? But it's just going to keep on growing. The network is continuing to grow. Adoption is continuing to grow. These use cases are opening people's eyes to the possibilities of what it could be in the future. So why not allocate a small piece of your net worth, of your portfolio, just to be a part of it in case it really does turn into something amazing. Just think about how many people in this world don't have access to banks and financial institutions and loans and the opportunities that those provide. What if they could actually start to store their value and build their wealth in the cryptoverse using cryptocurrencies. And they're able to take that with them whenever they want to go. They're able to get loans and hold their crypto as collateral. It just opens up a whole new world for everybody out there. So my advice, if you want to start learning more about crypto and investing in crypto, is to just buy some and start very small and very slowly, right? Enough that it makes you interested in following it, right? If you just throw a couple hundred dollars in there and you buy some Bitcoin, it's going to force you to learn about it. You're going to learn the process of opening the account, actually purchasing it, and then it's going to get you more interested in it. So getting some skin in the game, in my opinion, is always the best way to learn. All right, everyone, that is it for this one. Like I said, I do not know a lot about this stuff. I am learning as I go, but I do hope that you found this somewhat helpful. Please let me know down below if you currently invest in Bitcoin or any cryptocurrencies and your thoughts about it. I'll see you again in the next video. Thanks.