Bitcoin Forum

Sell Bitcoin, Buy Gold

Bitcoin is all the rage these days—we've even heard it said that bitcoins are better than gold. With the price of the two equalizing, with bitcoin going up and gold going down, even some of our readers are wishing they'd bought bitcoins instead of gold.

Given that you could have bought a bitcoin for less than $10 in 2011 and sold it a few days ago for over $1200, we can understand the regretful thinking.

Further, the reason they are so popular is that they are beyond government control; Helicopter Ben and his ilk cannot inflate them away. We know that appeals to a lot of our readers. My own research associate bought a few bitcoins on a lark a couple years ago, and is now cashing them in to cover airplane tickets to South America for himself and his wife.

So, even though we never recommended buying bitcoins, as a sort of public service to those among our readers who are long bitcoin, we have a recommendation:

Sell bitcoin.

And we do not just mean taking profits: Liquidate your entire position.

Why? Because the things have absolutely no intrinsic value whatsoever. The government may not be able to inflate their supply, but hackers who break into the system sure could. Bitcoin is a fad. Their apparent value will disappear faster than water poured on hot desert sand the moment word gets out that some clever programmer has broken into the system, or that a government has hijacked the system.

These silly things have gone vertical on their chart, and absolutely nothing in the financial world can sustain that rate of growth. A major pullback is so highly likely, we wish there were easy ways to short bitcoin. We are looking at a Dutch tulip phenomenon in the making. Unfortunately, there's no ETF, or similarly easy vehicle for shorting. Alas, it was not to be, but as above we do know that some readers are long bitcoin, so we urge you not to get too greedy. You've made a ton of money, so take it—and laugh all the way to the bank.

What if we're wrong? It doesn't matter in the least; if you have 1,000% gains on something with no intrinsic value whatsoever, that's plenty good enough. Just sell 'em. Could they double again from here, or quadruple? Sure they could—but they could also drop to zero in a day, the moment the system gets hacked.

Back in 2011, bitcoin fluctuated from $30 to one penny in intraday trading on news of a bitcoin intermediary being hacked. That could happen again, and we're certain that at some point it will. In this sort of circumstance it's better to pocket your terrific gains, without any regard it's all for any "lost gains" you might incur if bitcoin continues rising for a time. It is absolutely better to exit a day, a month, or a year early, than an hour late on this one.

It's fascinating, however, that the bitcoin fad has caught on so quickly, and attracted so much money. It's even more amazing than the "pet rock" fad of the 1970s. But it does tell us something important: People all around the world do not trust governments with their money.

And that is no passing fad.