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Ask a Fool: Is Bitcoin a Good Long-Term Investment Now?

By Matthew Frankel, CFP® - May 10, 2019 at 2:59PM

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Now that its price is more stable than in previous years, is bitcoin a good long-term investment?

Q: I've stayed away from bitcoin and cryptocurrencies, mostly because of the wild price swings that had been taking place. However, it seems like the price has stabilized recently. Should I take another look?

It's true that bitcoin has been far more stable in 2019 than in previous years. In 2017, bitcoin's price rose from about $1,000 to almost $20,000 before ending the year at about $14,500. In 2018, bitcoin plunged from that level at the beginning of the year to less than $4,000 by year's end. So far in 2019, bitcoin has steadily risen to about $5,700, and there haven't been many major swings one way or the other.

However, I wouldn't go so far as to call it an investable asset. There are two big reasons why.

First, nothing substantial has changed with the investment thesis. Institutional investors haven't yet started to put money into bitcoin on a large scale as was widely predicted, and the number of places you can spend bitcoin hasn't really changed much in recent years. In fact, Cboe Global Markets recently discontinued bitcoin futures, presumably due to lack of investor interest.

In other words, if bitcoin was being widely adopted as a method of payment, or bitcoin was showing promise as a widely used store of value, my answer might be different.

Second, although its price has stabilized, its value is dictated solely by supply and demand. It doesn't generate income like stocks or bonds do, doesn't pay interest, and doesn't have any intrinsic monetary value.

So while I'd concede that bitcoin isn't quite as volatile as it used to be, it remains a highly speculative asset, and you still shouldn't buy bitcoin with any money you aren't prepared to lose.

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