Bitcoin dangerous

Census Bureau finds there are Even if we just counted businesses that have an employee, that's 2, out of 7. That leaves about Bitcoin has no path to game-changing utility. No matter how much bitcoin enthusiasts want to equate bitcoin to gold, it's never going to be a store of value.

Store of value assets usually have identifiable relationships to government-backed fiat currencies, and they aren't all that volatile. For instance, gold has an identifiable inverse relationship with the U. Bitcoin doesn't have any identifiable relationships to government-backed fiat currencies. Enthusiasts would like you to believe that an inflated U. That's not how store-of-value assets behave.

Bitcoin bulls are also quick to point out how bitcoin's blockchain is revolutionizing the payment and settlement process. While it's true that blockchain offers plenty of intrigue, buying bitcoin doesn't give token holders any ownership in the underlying architecture that might actually be worth something. What's more, it's foolish small f to assume that bitcoin's blockchain is superior. Bitcoin may have first-mover advantage, but there are hundreds of ongoing blockchain projects that offer possibilities beyond the financial space.

It's also important to note that the cryptocurrency space has virtually no barrier to entry. All it takes is some time and money to develop blockchain with or without a tethered digital currency. There are exactly zero guarantees that blockchain will be adopted on a broad scale, or that bitcoin will be in any way necessary. There are a number of blockchain projects in development that may work with fiat currencies, or without a digital token at all. Keep in mind that owning bitcoin isn't the only way you can gain exposure to this dangerous investment.

This cryptocurrency stock issued debt just to buy extra bitcoin. Put plainly, bitcoin is dangerous. It's driven by short-term emotions, technical analysis, and misinformation about its scarcity, utility, and long-term potential.

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It's the one investment you should strongly avoid in Investing Best Accounts. Stock Market Basics. Stock Market.

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Industries to Invest In. Getting Started. Planning for Retirement. Retired: What Now? Personal Finance. Credit Cards. About Us. Who Is the Motley Fool? Fool Podcasts. Here are 10 reasons you should avoid bitcoin like the plague.

Is Bitcoin in a Dangerous Bubble?

First of all, bitcoin is only as scarce as its programming dictates. Whereas physical metals, such as gold, are limited to what can be mined from the earth, bitcoin's token count is limited by computer programming. It's not out of the question that programmers, with overwhelming community support, could choose to increase bitcoin's token limit at some point in the future. Thus, bitcoin offers the perception of scarcity without actually being scarce. The king of cryptocurrencies also has a utility problem.

Is Bitcoin in a Dangerous Bubble?

To date, only Even considering the fact that fractional token ownership exists, roughly 10 million to 11 million tokens in circulation aren't going to go very far. There's minimal utility here. Bitcoin may enjoy first-mover advantage at the moment, but the barrier to entry in the cryptocurrency space is especially low. All it takes is time and coding knowledge for blockchain -- the digital and decentralized ledger that records transactions -- to be developed and a digital token to be tethered to the network.

There's nothing unique about bitcoin's underlying blockchain that other businesses couldn't one-up. Another beef with bitcoin is that there's no tangible way to value it as an asset. For instance, if you want to buy shares of a publicly traded company, you can scour income statements, its balance sheet, read about industrywide catalysts, and listen to management commentary from recent conference calls and presentations.

In other words, you can make an informed decision. With bitcoin, there is no tangible data for investors to wrap their hands around. There's transaction settlement times and total circulating token supply, but neither of these figures tells us anything about the value or utility of bitcoin. I believe investors are also placing their faith in the wrong asset.

Disadvantages

Over the long term, blockchain technology is where the real value lies. Blockchain can be used to reinvent supply-chain management and expedite overseas payments.

But when folks are buying into bitcoin, they're gaining ownership in digital tokens with zero ownership of the underlying blockchain. To build on this point, companies are also testing blockchain that's tethered to fiat currencies. A sixth issue is that blockchain is still years away from gaining real relevance.

Three years ago, when blockchain companies and cryptocurrency stocks were the hottest thing since sliced bread, it was expected that blockchain technology would be quickly adopted. Little did investors foresee the Catch that would arise. Specifically, no businesses are willing to make the costly and time-consuming switch to blockchain without the technology being broadly tested -- yet companies aren't willing to make this initial leap to test the technology and prove its scalability. By no means are cryptocurrencies the only asset to be hacked by thieves, but there are serious fraud and theft concerns that accompany bitcoin.

Banks and asset managers are increasing exposure to cryptocurrencies.

For instance, novice bitcoin investors may not understand the need to store their tokens in a digital wallet, thereby leaving them susceptible to theft by hackers. Additionally, it's been hypothesized by numerous blogs and publications that North Korea has turned to bitcoin mining and theft to funnel money into its isolated economy. Bitcoin is commonly viewed as the "currency" of choice for criminal organizations.

Bitcoin is also an unregulated asset. Though this lack of regulation is actually a selling point for today's crypto investors given that it provides some degree of anonymity, it's bad news if something ever goes wrong.

Since the majority of cryptocurrency trading and transactions occur outside the borders of the United States, the Securities and Exchange Commission is very limited in what it can do if your digital tokens are ever stolen. The Internal Revenue Service expects you to report capital gains and losses tied to investment activity, as well as gains and losses associated with purchasing goods and services. It's a gigantic headache. Last, but not least, all next-big-thing investment bubbles eventually burst. No matter how excited investors are about bitcoin and its underlying blockchain, history suggests it won't be enough to match lofty expectations.