Bitcoin might be buzzing, but you won’t catch me buying it any time soon.

Yup, I know what you’re thinking … But Tim! Bitcoin is hot and only getting hotter! Get in now!

In my opinion? This type of FOMO is exactly what makes fools of traders.

Yes, Bitcoin’s been getting a lot of press lately. For one thing, it’s been spiking like crazy.

For another, the President recently trash-talked it publicly. But that didn’t bring down public opinion (or more importantly the price) of the most famous cryptocurrency.

It’s almost like his anti-Bitcoin tweets actually reinforced the idea that Bitcoin matters and even more people started buying.

True, there are traders out there who are successfully investing in Bitcoin — some of my students are among them. And I think that’s great! But personally, I’m not interested.

Why not?

What Is Bitcoin?

Bitcoin is arguably the most famous cryptocurrency out there.

What’s a cryptocurrency? Well, let’s start there…

A cryptocurrency is a type of digital currency that’s regulated via encryption techniques. Thanks to the magic of encryption, the units of digital currency and transfers can be operated without the involvement of a central bank.

Cryptocurrencies are maintained through a sort of ongoing digital ledger that records all cryptocurrency transactions. It’s called a blockchain.

The blockchain can’t be changed, and every purchase and transfer is recorded without the need for external verification. It’s a way to cut out the middlemen. And this system has the potential to revolutionize and change the banking system forever.

The History of Bitcoin

Bitcoin is kind of shrouded in mystery. Here’s a brief synopsis of its unusual beginnings:

In 2008, the domain name bitcoin.org was registered, and soon after, a paper detailing the bitcoin software called “Bitcoin: A Peer-to-Peer Electronic Cash System” was released by someone named Satoshi Nakamoto. Soon after that, Bitcoin software debuted in January 2009.

The weird thing? To this day, nobody knows who Nakamoto actually is. He was a big online presence with Bitcoin at its inception. But then in 2010, he handed over the source code to someone else and basically… disappeared.

Did he go off-grid because of CIA pressure? Could it be that it’s not even a real person but a group of people? Is he actually Banksy?

There are plenty of theories, but not much that we really know for sure.

Even without Nakamoto, Bitcoin gained traction. Early adopters were black markets — famously the dark web site Silk Road.

While Bitcoin as a payment method didn’t, and still hasn’t, become the norm, it’s created some huge moves in the market.

Bitcoin Trends

There’s a trend with Bitcoin: peak, then crash. It follows this pattern over and over.

In the early days, you could buy a Bitcoin for about 30 cents. But once the idea of a decentralized currency caught on, Bitcoin’s value went up in a BIG way. By 2013, it reached a price of over $1,000 for the first time.

And then it crashed in 2014 following a hack, and the prices remained low for a few years. But in 2017, it started to explode.

In January of 2017, Bitcoin was selling in the $900s. On December 17 of the same year, it peaked at over $19,000.

But not everyone was ready to embrace Bitcoin. For example, China banned cryptocurrencies in 2017.

Then, a series of hacks from crypto exchanges brought prices down due to fear. In the first part of 2018, there were a ton of crypto thefts. Even though they weren’t from Bitcoin, they left investors shaken. Prices dropped.

If you look up any chart tracking the price of Bitcoin over time you can see the spikes and crashes.

But now, Bitcoin mania is back. Several of my students have been trading it, and for some, it’s considered the hottest momentum play in the market.

My Historical Take on Bitcoin

Bitcoin has definitely been a hot asset class. But it’s also surrounded by plenty of controversy.

In 2017, the mania was spurred by people convinced it was the future of currency. But just as many people thought it was a scam or at least overvalued. That indecisiveness can cause volatility.

There’s also a lot of fear-based decision-making when investing in bitcoin. For example, after a series of massive crypto hacks in 2018, the price of Bitcoin went down — way down.

Honestly, I think that Bitcoin can be a lot like penny stocks. A lot of what happens with Bitcoin feels like a large-scale pump and dump.

But Tim, you may be thinking, you love penny stocks! So if Bitcoin is like a penny stock, why not jump in?

Based on Bitcoin’s past performance, I’ve got 5 good reasons why I’m not inclined to buy in.