Hi. This is Scott Carter and I’m in Manhattan Beach, California, one of the most beautiful beach cities on the planet. I knew it was going to happen, just a matter of time. Last night, my three adult children called me and they said Dad, we want to invest in Bitcoin. I said Well, and they asked me what do you think about that? I paused like I just did with you and said didn’t want to kill their dream, but I wanted to give them sound advice. I said investing your money is ultimately your decision, but I said when you make an investment, at least know what you’re investing in. Before you invest in Bitcoin or ask my opinion I want to ask you a couple of questions.
The first question is do you know where Bitcoins come from? Do you know the product that you want to invest in that’s trading at 15 to $18,000 each time you buy it? Do you know how it’s created? Because it would be good to know the product that you’re buying, how it’s created. They hadn’t, they didn’t know. I said now, if I told you that there was an application software that you put on a server and that software solved a complex math problem, very complex math problem that takes a lot of time and effort and a lot of computing ability, but if your software solves that complex math problem, you get awarded something for it, do you think has value? They said well, yeah, it might have some value, but it sounds like solving a math problem.
I said that’s what it is. At a very high level, I said Bitcoin is basically that. It is software that goes onto a computer server, solves a complex math problem, and for that software or that server that solves that problem, they are awarded Bitcoins. That’s how you mine Bitcoins. It sounds a little crazy, really, when you think about it because the Bitcoin is just been fundamentally made as a currency, but it’s mined by a data application and it’s a reward for solving a math problem. They looked at me and they said what? I said do more research. That was just very high level. I don’t pretend to know a lot about it, but I have read that much. I said do the research, read about Bitcoin, find out what product you’re buying.
Then, I said secondly, read about tulip mania, which is in the 17th Century, and what’s known today as the tulip bubble. I want you to read about that because it’s really about human psychology and investing. Now, for us as investors, you’ve got to know what you’re investing in and you’ve got to understand it. Why invest in a product or a company and you have no idea what the product does, who buys it, or what the market is? Investors love to jump on the bandwagon and they get excited about the mania. I hesitate to say it, but I think that is exactly what Bitcoin is. Everyone’s excited about being a part of something that is a “get rich quick scheme”. There really is no product there.
Now, the Blockchain technology underneath it is interesting, but Bitcoin, itself, is just one component on top of that technology. When you’re buying Bitcoin, understand that you’re not buying into necessarily technology, what you’re buying is something that is a derivative of that technology. Does it have value? Does it have long term staying power and it is something that you want to take your shekels and take a risk on? Understand your product, know what you’re investing in, and then if it still makes sense, jump in. That’s what I told my kids. Hope this helps you. Talk to you later. Bye.