The hottest investment in 2014: Bitcoin
The virtual currency is here to stay and can make you money. Here are 3 reasons it's gaining fast.
By Jamie Dlugosch
The hottest investment in 2014 will be the virtual currency Bitcoin.
Take it to the bank. In fact, I wouldn't be surprised if Bitcoin doubles in value or more next year.
Sure there are those who say it's nonsense, that Bitcoin is a raging bubble not unlike the "tulip craze" of the 1630s. Blah, blah, blah.
It is not. In fact, it is far from it. Bitcoin is not only here to stay, it is something that if you get in now can make you rich. It is simply the most exciting financial story to come along since the dot-com boom.
I know what you are thinking. The dot-com boom ended in disaster. Indeed, it did. The dot-com boom was indeed a bubble. But before that bubble popped there were many that profited handsomely and did so over a long period of time before the implosion.
Exactly the same thing is going to happen with Bitcoin. Yes, the story will end, perhaps even badly, but before that occurs you have what I consider to be one of the best investment opportunities of 2014.
Bitcoin is not even close to being the same as the Dutch tulip craze. Here are the reasons:
Bitcoin is gaining credibility, and fast
The number of financial commentators and investment managers commenting on Bitcoin has grown substantially over the last few months. That mere fact is giving credibility to the virtual currency.
For the concept to take hold and sustain the market needs that credibility. If you aren't convinced of that credibility, perhaps you might take a gander at the Bitcoin smartphone apps now available. Bitcoin is seemingly everywhere. The sheer number of headlines on major financial site results in more and more people buying into the story. It is spreading like wildfire and likely to spread even more in 2014.
Now, regulators are picking up on the interest in Bitcoin, watching closely to make sure there are no shenanigans going on in this new virtual currency. Put it all together and the credibility for Bitcoin use is growing by the minute. That growth is sure to result in more buyers and investors jumping on board.
Demand is insatiable
To truly understand the power of Bitcoin, one must understand the psychology of the buyer or investor of this new virtual currency.
The promise of a currency not tied to a central bank has enormous power in certain parts of the community -- think Tea Party here. The lack of trust in centralized governments has a huge following and Bitcoin suits these folks just fine. These are the same folks that drove gold prices to soaring heights. My bet here is that those former gold buyers are slowly but surely giving Bitcoin a try. Why not? The appeal is quite similar and like gold, Bitcoin has no real utility.
I can imagine many people disgusted with the Federal Reserve might enjoy taking it to the man by propping up Bitcoin. It won't take many investors to push Bitcoin higher. I can think of plenty of sources for that demand making it almost insatiable as the Bitcoin phenomenon takes flight.
Supply is limited
Basic economics suggests that insatiable demand results in higher and higher prices, but what if we add into the mix limited supply? The prices are going to go through the roof.
That is the situation with Bitcoin. The beauty of this new virtual currency is that supply is limited. There will be no printing of funny money. What’s available is available. At the moment there are some 12 million Bitcoins in circulation.
How is a Bitcoin created? Without getting too technical, there are complex formulas that "miners" can use to unleash new Bitcoins on the market. The maximum number of Bitcoins that can be harvested is 21 million. The race then is on for miners and hoarders alike to accumulate Bitcoins. That puts even more pressure on the price as new buyers will be forced to bid up the price in order to acquire what can only be viewed as a rare virtual currency.
More from Traders Reserve
- 5 mighty small-cap stocks for 2014
- 6 high-stakes tech stocks for 2014
- 5 big reasons why markets will rally in 2014
All the makings of yet another fad,and the one who buys the most loses the most.
It it sounds to good to be true, it is not true., and if you haven't been sucked yet, don't get sucked in, that is how these things work.
Basic Ponzi scheme.
And who makes or controls Bitcoins...??
And where are they really at...?
Copyright © 2014 Microsoft. All rights reserved.
Serious issues like drought and the deterioration of the developed world spell opportunity for this industry leader.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.