bitcoin, digital currencies

Bitcoin was the Worst Investment in 2014

December 18, 2014         By: Michael Foster

Bitcoin has some of the most passionate advocates. Thanks to the cryptocurrency’s promise of almost complete privacy, security, and freedom from any one government, it has attracted a legion of ardent supporters who have called it a solution to many of the world’s ills.

The passion behind the currency has led to a lot of mocking by tech executives, economists, academics, and pundits. Now investors are joining the fray, since bitcoin is so far the worst investment of 2014, with a 55.9% decline for the year as of December 17th, even as the ruble has fallen to a little over 52% loss in recent days.

There were a lot of losers in 2014, but the biggest losers were the ideologically driven who saw energy scarcity, BRIC emerging dominance, a cryptocurrency revolution, or hyperinflation.

The much duller and less ideologically extreme strategies fared much better; large-caps are up a little over 6 percent with dividends, and U.S. stocks are up about 10 percent with dividends, even after recent declines. Municipal bonds and U.S. Treasuries did even better.

In other words, if you were boring with your money, you did much better than the doom-and-gloom crowd.

There is no way to tell how this will influence bitcoin’s performance in 2015.

Turnarounds are not uncommon in the financial markets, but the volatility from bitcoin has made it very unattractive for people looking for an easy and reliable way to send money electronically.

On top of that, the growth of mobile payment solutions like Apple Pay, Alipay, and the synergy of messaging and payments apps is limiting the need for bitcoin in all but the shadiest of situations. There are still a few merchants who accept and support Bitcoin, like WordPress, Reddit, and Overstock.com.

But the currency hasn’t seen any other major adopters recently besides Microsoft. Consumer adoption is tantamount to the survival of bitcoin and digital currencies at large. While merchants have major benefits in adopting bitcoin, volatility may be a major detraction for both merchants and consumer interest in digital currencies.