Bitcoin proponents

The same is true for bonds.

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Bonds spit out cash usually twice a year. With a bond, you usually get back your original investment, plus interest. The same applies to real estate.

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Rental property can appreciate or depreciate in price. But, either way, rental property exists with the goal of generating cash for the investors — cash above and beyond the costs to maintain the property. These sorts of investments do not generate cash. Instead, investors can only hope they rise in value with the price of inflation.

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Not only must your investment appreciate at the rate of inflation, but it must also go above and beyond inflation to make up for the transaction costs. Trust me when I say this is rarely the case. Most commodities increase at the rate of inflation. On average, economies grow. A growing economy can raise the demand for goods and services.

This can cause prices for said goods and services to increase. Moreover, entities issuing currency usually "print" more currency. This devalues that currency, requiring more of the same currency to be required for the same good or service. These two factors — a growing economy and the printing of more money — can cause inflation.

Therefore, an investment in currency, by its nature, should not be able to grow with inflation.

Bitcoin proponents make the case that bitcoin will indeed grow above inflation. Of course, with only a short timeline since bitcoin has been around, it may be hard to make that case definitively. This is unlike stocks, which have been around for centuries. In short, bitcoin and similar investments are at a big disadvantage when it comes to generating an investment return. Mean reversion is a fancy way of saying: What goes up, must come down — and vice versa.

All investments are subject to mean reversion, and bitcoin is no exception. As mentioned and shown in the graph above, commodities provide an investment return at just about the rate of inflation — before fees. Moreover, commodities depend upon price appreciation alone to provide an investment return. This is because commodities do not generate cash. Try thinking of investing in bitcoin as you would buying a lottery ticket. It only costs a dollar, but you could win big.

The best thing you can do is limit your investment to an amount you can afford to lose, then brace yourself for a long and bumpy ride. Yes, bitcoin is a volatile investment that may very likely be a bubble. For that reason, you could lose most all? But, in addition to bitcoin being a risky investment for all the reasons that investments can be risky i.

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Instead of the usual investment risk of your principal decreasing in value, with cryptocurrencies, you may lose your crypto assets entirely. In addition to price volatility, investors in crypto assets have lost money because of:. To see the original version of this article, click HERE. In addition, Schulte hosts The Stay Wealthy Retirement Podcast , teaching people how to reduce taxes, invest smarter, and make work optional.

Bitcoin slides in worst weekly drop since march amid selloff

The Bloomberg Dollar Spot Index is up 0. Earlier this week, Microsoft Corp.

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