Bitcoin is NOT an Investment

Bitcoin has staged a huge rally this year. I’ve discussed a few times how Bitcoin does NOT meet ANY of the three criteria for a currency. (And I’m still waiting for someone to tell me something I need Bitcoin for… that is legal.)

There is no fundamental reason for the rally. In fact, it’s clear at this point that Bitcoin is not an investment, but just a trading tool – a true casino game.

In the figure below, I graph the percentage of all Bitcoins that trade each day (light blue light, left axis). Currently 20% of all Bitcoins trade EVERY DAY. In other words, the average Bitcoin is held…. 1 week. This transformation to a pure speculative game has occurred during the price rise this year (dark blue, right axis.)

As a comparison, I also chart the percentage of shares outstanding that trade each day for 5 popular stocks. As you can see, these stocks trade orders of magnitude lower than Bitcoin. In fact, the average share of Coke is held 1 year.

Bottom line: If you want to gamble, buy Bitcoin. If you want to invest, look elsewhere.