Bitcoin and other cryptocurrencies have become one of the most popular get rich quick schemes in the last year. I have written a couple of posts about the dangers of Bitcoin:
Warren Buffett on Cryptocurrencies
Warren Buffett recently gave an interview with CNBC where he discussed his opinions on cryptocurrencies. Not surprisingly, he is not investing in them and said
“I can say almost with certainty that they will come to a bad ending”
“When it happens or how or anything else, I don’t know”
If you won’t listen to me, at least listen to one of the greatest investors of all time. Buffet famously stayed out of the internet bubble of the early 2000’s. He watched as many people became paper millionaires, speculating in stocks that they knew nothing about. You know what though? After those stocks all cratered and the paper millionaires lost all of their gains, Buffett ended up becoming an even richer billionaire.
What about the argument that this time is different? Yea, I’ve heard that a lot from people who want to convince themselves that cryptocurrencies are going to take over the world and they might as well speculate now. That’s what people say everytime there is a bubble! They said it with the tulip craze, and the internet bubble, and the housing bubble. When people are buying something that has no intrinsic value only because of the Greater Fool Theory then there is a big problem.
Bitcoin and other cryptocurrencies may continue to increase in value for some time, but it’s not worth potentially losing all or most of your money. There are no risk free, get rich quick investments. The best way to become rich is to invest in high quality value producing assets and let the power of compound interest do its magic. Check out my post on How Long Does It Take To Become A Millionaire? to see the magic of compound interest in action.
I will leave you with one of my favorite quotes that Warren Buffett lives by:
Rule No. 1: Never lose money. Rule No. 2: Never forget rule No. 1