Is Bitcoin a good investment?
Looking at the past, some people would go like, “I told you that Bitcoin was a great investment”, “I knew I should’ve bought it,” “I knew it deep within, in fact, I told everyone else to buy it.” But all these statements result from hindsight bias.
Hindsight Bias is the tendency to perceive past events as having been more predictable than they actually were.
Firstly, if we make this decision, in fact, if we make any decision by looking at the past, we fall trap to biases. Naturally, by looking at the past, bitcoin seems that it would’ve been a good investment. But deciding whether to purchase bitcoin based on nothing else but the past is dangerous. Investors who’ve made money without any fundamental understanding of bitcoins just got lucky.
To decide whether or not to buy a bitcoin, we should ask ourselves these questions:
1.) Do I understand the fundamentals behind bitcoin?
2.) Am I buying bitcoin because of the sudden surge in price, expecting to get lucky? If yes, you shouldn’t buy it!
3.) Do I have insights that others don’t have? Or, do I know something that the others don’t?
4.) Am I buying this because a friend/relative of mine has asked me to buy it? The majority of the day traders lose money because they don’t understand what they’re buying
5.) Do I know a lot about bitcoins? If yes, Why? Where have I learned about what I know? Are the sources credible?
By asking yourselves some difficult questions, you truly learn how much you know about something. There could be times where you invest without knowing anything, and you still make money. But this isn’t considered a good investment. You would’ve just got lucky.
Never judge a decision based on its outcome; make a judgment on the thought process. Remember, A good decision can sometimes lead to a bad outcome.
If you continue investing without knowing any fundamentals, you might just get lucky. Using this process, you’ll continue making your future investments. In the long run, this will lead to multiple bad outcomes ruining everything you’ve made. Strengthen your decision-making process.
An intelligent investor has sound principles, strategy, and thought processes. Do not be swayed by the temporary fluctuations of the market.
If my answer doesn’t fit well with the short-term investor and if you still want to buy bitcoins (or anything you don’t understand). Go ahead and purchase not more than 5% of your net wealth.
If you wish to learn more about the bitcoin, investments, and the stock market you can check out: Roundups