Okay, so Bitcoin made it back to $100,000 already for the first time. I get it. You're seeing headlines, your grandkids are talking about it, and maybe, just maybe, you're thinking about dipping a toe in. But first, let’s have a very real discussion. It’s the kind your financial advisor would be too polite to do in person.
Euphoria or Fool's Gold?
Let’s stop acting like Bitcoin’s meteoric rise occurred in a bubble. The recent trade agreement with the U.K. is a major example being touted as a big driver. Honestly, that’s not a realistic solution. It’s like putting a Band-Aid on a broken leg. Great Britain makes up a small dime’s worth of U.S. trade, and we have a surplus with them already. It's like celebrating getting a discount on a yacht you can't afford. The real boost would come from the deal with a key Asian trading partner with whom the U.S. had a trade deficit.
Don't get me wrong. It's exciting to see Bitcoin hit these milestones, but it's important to keep your excitement in check. What I’m seeing though is those institutional investors and those ETFs. That's what's giving me pause.
I remember the dot-com bubble. I remember Enron. I remember 2008. And I think of that last Bitcoin peak back in November of 2021. Now, this isn’t to suggest that Bitcoin is doomed to a path of self-destruction. But history does rhyme.
Retirement Funds and Digital Tulips
Now, you might be thinking, "Sophia, I'm not trying to get rich quick. I just want to diversify my portfolio." I hear you. Inflation may be a beast, but interest rates are … look, interest rates just aren’t what they need to be. But hear me out: Bitcoin is not a substitute for responsible, diversified investing, especially if you're nearing or in retirement.
Think of it like this: Bitcoin is like that fancy sports car you always wanted. It’s sexy, it’s cool and it may even go up in value. Keeping it up can be expensive, and it just constantly collapses. Sure, you might use it for weekend picnics, but you absolutely don’t want to rely on it for your work trip home.
Compared to stocks, bonds, and even gold, Bitcoin is a total wild card. It’s an asset class that’s more volatile, less regulated, and frankly, still largely misunderstood.
The historic pattern of Bitcoin has been one of a cycle approximately every four years, correlated with Bitcoin “halving” events. In the past, such halvings have been followed by about a year or more of bullishness—which on average lasted between 12 and 18 months. The last halving was in April 2024. Well, if history is any guide, we may be approaching the last stages of this bull run.
| Asset Class | Risk Level | Potential Return | Liquidity |
|---|---|---|---|
| Stocks | Moderate to High | Moderate to High | High |
| Bonds | Low to Moderate | Low to Moderate | High |
| Gold | Moderate | Moderate | High |
| Bitcoin | Extremely High | Extremely High (and Low!) | Moderate |
In what kind of world do you get to reap profits without any risk? Often, a "blowoff top." A time of extreme bubble-mania, followed by an inevitable bust that crashes all the greater fools, leaving them holding the bag. Remember November 2021? That bag was heavy.
Halving Cycles and Blowoff Tops
Today, corporate treasury players such as MicroStrategy are loading Bitcoin onto their balance sheets. Good for them. They can afford to take the risk. Are you MicroStrategy? Probably not.
Look, I’m not trying to say Bitcoin should go to zero. In 5-10 years, it could be a permanent fixture in our financial system. All I’m trying to advocate against is going after a flashy $100,000 headline without really realizing the risks that you’re incurring and that’s really a recipe for disaster.
I’m watching the Motley Fool recommend buying other stocks. Whatever the reason behind that drop, it’s a great indicator that folks are exercising caution and doing their own research.
Don't Be the Last One In
So, what's my advice? Do your homework. Understand the technology. Assess your risk tolerance. And for the love of all that is good, don’t invest your hard-earned retirement savings in something you do not understand. Sure, maybe bitcoin is the future, but it’s not a sure thing either way and definitely not a sure route to wealth. It’s indeed a highly speculative asset, but one that needs to be approached with respect, caution, and a healthy dose of skepticism.
Remember, slow and steady wins the race. And over the long haul, that’s what counts most of all.
I do not hold any positions in Bitcoin. This is not financial advice. Do your own research.
Remember, slow and steady wins the race. And in the long run, that's what really matters.
Disclaimer: I do not hold any positions in Bitcoin. This is not financial advice. Do your own research.
