14 Mar 2024
Cryptocurrency: Bitcoin
- Posted by Dejan Pekic BCom DipFP CFP GAICD, Senior Financial Planner
The printing of vast quantiles of money (issuing I-owe-you paper called notes, bills, bonds) by Central banks around the World has been the key driver behind Bitcoin and associated cryptocurrencies but remember that Bitcoin price relies on The Greater Fool Theory.
The Greater Fool Theory is where a purchaser/investor buys an item/asset in the belief that the next purchaser/investor will buy it from them at a higher price.
That fact about Bitcoin is that only 21 million can be mined in total and so far 19.6 million have been collected which makes it rare and as long as there is a group who want to trade in this limited edition rarity (think of it as a collator’s item) there will be a price.
Once there is no longer a group that wants to trade in this collector’s item the price will evaporate.
Don’t know how cryptocurrency will end but we do know what Benjamin Graham taught and that was to not speculate. Instead remain invested according to your appetite for volatility and when fear and panic take hold, react by buying more quality assets at discounted prices.
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