I will be blunt, honest, and probably insulting…and no doubt rude in this article. I am going to approach this from two angles, crypto-currency as 1) a personal investment, 2) a preparedness item. I will use “Bitcoin” as the example of choice. Yes, that means there are more, but not for this article…too many to list and all basically the same. I will use facts, historical charts, experience, and common sense. If you don’t like any of the above…then don’t read the article!!!
Personal Investment –
Let’s look at the historical price chart of Bitcoin to gain the big picture…
As we look at it we see that from 8/22/2014 – 7/17/2017 it went from $400 – $2,730…a 582% gain, almost 90% annualized gain. VERY good indeed!! Especially considering the consistent trading volume. But that was only the start. From mid-July 2017 to mid-December of that year it jumped another 600%!!! Sweet, to say the least. So, had you purchased a single Bitcoin in August 2014 for $400 you would be looking at that account value being just about $20,000…in 3-1/2 years. Hey, does it get any better than that?
Before I go too far…do you remember the old saying, “If it is too good to be true, it usually is”?
Another example: You were cautious of Bitcoin until December 2017, but you liked what you saw in its historical performance…and you bought a single Bitcoin in December 2017 for $20,000. You are going to strike it rich!!! In the spring of 2019 you decided to buy a new house with the Bitcoin profits…paying cash for a house. So you sell off your single Bitcoin…for $3,673. Oh my! A 82% loss…YUCK!
So let’s spin the wheel again: You decide to not sell your Bitcoin and not buy a new house in 2019…you hang on to it. In the spring of 2021 you decide to review what your Bitcoin is worth…over $60,000! That is really nice…and now you are thinking a mansion vs just a puny new house. You decide to wait on the mansion for awhile and being smart, you buy another Bitcoin to take advantage of a no-lose investment. Now you are the proud owner of two Bitcoins worth $120,000…you are a sure winner in this crypto-lottery. Now it is the end of 2021 and you need money for a serious issue in the family…you sell your Bitcoins…and pocket $98,400. Yes, a loss of over $20,000 in just 8 months. Oooopppppsssss!
Not an issue you say to yourself…I only had invested $60,400 total and got back $98,400. That is still a net gain of $38,400. Not too shabby…63% gain over 7+years. You are very, very proud of yourself…that is 6.92% annual return on your total investment spanning 7+ years!!!
Silly me…My S&P 500 index mutual fund investment only yielded 14.9% annual return during that same period of time.
Now, granted that original Bitcoin that you paid $400 went to $48,200…and that is nothing to sneeze at. And hopefully you are very lucky! Because if you aren’t so lucky your Bitcoin was stolen along with the over 4,000,000 other Bitcoins that have been stolen since the beginning…12 years. That is $192,800,000,000…yup, as of today that is 192 billion dollars’ worth of Bitcoin stolen. That’s $16billion per year on average. Oh, and FYI…an additional 20% of all Bitcoins have been lost by their owner’s and are not recoverable according to a 2019 research article. And then again…in 2020 the Federal Government seized $1,000,000,000,000 (1 billion dollars) of Bitcoins from Silk Road, a website that used Bitcoin in their currency wallet. And no, the Feds have no interest or intent to find the actual owners of the Bitcoins.
So if your Bitcoins weren’t stolen, or you didn’t lose them, or the Feds didn’t seized them…you are in great shape. Notice the operative word “if”!
And no problems…there are always more Bitcoins to buy, right! And Bitcoins are a wonderful investment because they have fantastic intrinsic value. Bitcoins are made through mining…the process of creating new bitcoin is by solving a computational puzzle via computer(s). Yup, computers create Bitcoins out of thin air! Oh, and there is no licensing for Bitcoin miners…and no regulations, no oversight, no tracking, no nothing for Bitcoin miners or how they go about their mining.
And now let me introduce you to a couple of very successful Bitcoin miners, just to instill confidence in you of course…
They are Aanya and her brother Ishaan, 9 years old and 14 years old respectively. They are making in excess of $30,000 per month “mining” Bitcoin and two other cryptocurrencies. So that should lead you to the question of…What value does Bitcoin actually have?
There are two ways to determine Bitcoin’s value; 1) intrinsic value, 2) market value.
Intrinsic value means the value the item has in and of itself, or as its own property. Silver for instance has intrinsic value because it can be made into a wide range of marketable items. Silver is used for jewelry, electrical and electronics parts, solar panels, aircraft parts, medicine, tableware, water purification, and monetary coins…just to name some.
Market value is what other people are willing to pay for the item you have, the value is strictly determined by the other person’s willingness to purchase what you have. Real estate is a good example of an item that has “market value”. A person who wishes to purchase your home is willing to offer a certain amount of money…hence, that is what your home is worth on the open market. But, a home has additional capacity to have intrinsic value as well. The wood, block, copper, appliances, trim, flooring, etc. also have intrinsic value.
Now, back to the question… What value does Bitcoin actually have?
Bitcoin has absolutely no intrinsic value at all, none whatsoever. There is ZERO intrinsic value in Bitcoin because there is no physical property, real value, that represents Bitcoin. However, Bitcoin has market value…but that is all that it has. Bitcoin is only worth what someone else is willing to pay you for it. If no one is willing to pay you for your $20,000 purchase price Bitcoin…then it is worth nothing. If they want to pay you $100 for that $20,000 Bitcoin then that is exactly what it is worth and nothing more. Market value is strictly determined by other people.
So let’s look at that for a minute in a little more detail…the old “how much someone is willing to pay you” thing…
Reviewing the historic price chart of Bitcoin you can see a whole lot of times that Bitcoin’s price dropped 50% – 60% of its value. Those and other drastic drops occurred on a regular basis…nice, right? So you can see that under normal market conditions the price people are willing to pay for Bitcoin varies dramatically with huge loses often occurring. So for me…that doesn’t sound like a good personal investment option for my wife and me. Just saying…
Oh, and one more thing…Bitcoin’s history…Bitcoin only been around since 2009. That’s only 12 years of history! Yeah, about the average age of the Bitcoin miners mentioned above. So, tell me…how much faith would you put in a 12 year old to handle your money correctly?
Preparedness Item –
Putting Bitcoin into perspective as a preparedness item requires us to look at its value in relationship to the three basic events to prepare for; 1) emergencies, 2) disasters, & 3) grid-down. To be considered a preparedness item worth stocking up on Bitcoin must prove itself to be of value during all three of the above event types.
To be clear, Bitcoin must:
- Be widely accepted for goods & services during those events.
- Be readily accessible.
- Be easily transportable.
- Be easy to set a value to for bartering and payments.
- Preferably be non-traceable.
To determine the preparedness value of Bitcoin compared to those five requirements.
- Be widely accepted for goods & services during those events – Bitcoin is not even widely accepted as payment for goods and services under normal social conditions. Currently Bitcoin has extremely limited ability to pay for anything day-to-day. There is no indication under any emergency conditions where it would be any more widely accepted than it is now. Actually, the exact opposite is true…every indication is that under any emergency situation Bitcoin would be virtually unacceptable as payment to any person or company.
- Be readily accessible – Bitcoin is only accessible via computer and through the Internet via service providers. During a grid-down event, and most other events, it is widely agreed upon that there will be no Internet and no service providers. And depending on the event itself (i.e. EMP, solar flare, etc.) there may be no functioning computers either. Although a note must be made here that 20% of users, under normal conditions, cannot access their Bitcoins at all, lost forever. And since there have been hundreds of millions of dollars in Bitcoins stolen and over a billion dollar of Bitcoins seized by the US government, there is ZERO guarantee that a person’s Bitcoins would even be there to begin with, let along accessible, in any foreseeable emergency.
- Be easily transportable – Bitcoin is easily transported when electronics and the Internet are available and accessible. However, those Bitcoins may not be easily transferable to another person during an emergency due to computer failure, inaccessible Internet, etc.
- Be easy to set a value to for bartering and payments – Since there is NO intrinsic value to Bitcoins there is no way to establish a baseline value to them. And since their value is only based on what someone is willing to pay, there is NO way to anticipate that Bitcoin would be of any value at all during anything other than normal times. Bitcoin’s difficulty in transporting and accessing could negate them having any value at all under any emergency circumstances.
- Preferably be non-traceable – Bitcoin is transferred via the Internet through service providers. Hackers have fairly regularly stolen Bitcoins, therefore hackers have traced them. The US government has seized them, therefore the government has traced them. Bitcoin is electronically mined and added into the system, therefore there is a traceable path for all created Bitcoins. All transactions have an electronic pathway, therefore all transactions are traceable. All that being said…Bitcoins are 100% traceable by the wrong types of folks.
The way I see it Bitcoin has no value whatsoever when it comes to emergency preparedness…NONE! And that is especially true when compared to precious metals. If you remember I have written extensively concerning precious metals and their place in emergency preparedness.
However, when compared with other preparedness items such as food storage, water purification capability, medical supplies, and defensive means…then Bitcoin really and truly has no value at all in any way, shape or form. Bitcoin (and ALL other crypto-currencies) are worthless in terms of emergency preparedness and have NO place in this arena…PERIOD!!
I hope I’ve made myself perfectly clear in this matter of Bitcoin…or any other crypto-currency. If not, let me try this one more time…
1) As a personal investment I can’t imagine a more speculative, volatile, and dangerous way to go. Yes, you could make a whole lot of money…as in a pyramid scheme, but your chances of it losing value, having it stolen, having it confiscated by a government, losing access to your wallet, losing access to it via the Internet, or having it hacked makes it just plain stupid. Then there is the whole fact that it has absolutely NO value of its own…nothing, ZERO, zip, ZILCH, nada…ensures that it is worthless in the long term as an investment. If I had ALL my preps done for a 7 year period, had a fully funded 401k and/or IRA, had a year’s supply of cash for expenses, had ALL my debt paid off, and nothing else to do…with a mindset to lose every cent that I put into Bitcoin…then I would do it. Otherwise, I wouldn’t touch it with a ten foot pole…wait, make that a 10 mile pole.
You want to read something interesting…read about the “The Dutch tulip bubble of 1637” and then ponder that at least tulip bulbs can grow flowers and can be held in your hand. That is FAR more than Bitcoin can claim.
2) As an emergency preparedness item I can’t, in my wildest imagination, on my worst day, in the throes of stupidity, see Bitcoin or any other crypto-currency as having any value at all. I also couldn’t fathom why anyone for any reason would have crypto-currency as part of an emergency plan of any kind. When it comes to emergency preparedness, Bitcoin is utter fantasy!
So there…now you have absolute clarity on my crypto-currency opinion. An opinion based on facts and 45 years of emergency preparedness experience, more than 30 years of that being professional real-life experience with emergencies and disasters.
And here is a great endorsement for Bitcoin and crypto-currency. If you believe in this guy, if you trust this guy, and you think he has all the answers…then believe him by all means!
FWIW…what easier way for an authoritarian government to control the entire economic system of any country or the world???? Controlled via something 100% controllable by the same governments…the Internet. And what is virtually 100% dependent on the Internet? Crypto-currency! Good luck with that…you’re going to need it.
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