While I’ve profited handsomely off of the immense surge in Bitcoin’s price over the past few months, I feel it is worth stepping back and looking at things from a broader perspective.

The fundamental goal of Bitcoin is for it to be an immutable currency without a centralized authority that can control/manipulate it. I think we can all agree that so far, Bitcoin has proven very successful in this regard.

However, this aspect of Bitcoin (which is undoubtedly it’s cornerstone; you can read Satoshi Nakamoto’s paper for yourselves to confirm) is not what attracts the vast majority of new users.

To the average Bitcoin buyer, the cryptocurrency is not a currency at all, but a store of value: closer to gold than to a banknote. Herein lies the great deception most new market participants fall for.

People, who have the capacity to save, divert their weekly paychecks to Bitcoin in lieu of traditional investments like buying stock, but in doing so they admit that to them Bitcoin is an asset, an investment vehicle.

This, in my opinion, is wrong. Bitcoin is not an asset and should not be treated as one. Holding Bitcoin doesn’t represent a stake in the underlying system, nor does it entail any future cash flows. In fact, the only reason people buy (and hold) Bitcoin today is because they think that someone else will buy it from them in the future.

In other words, the monetary value of Bitcoin is based entirely on speculation.

This doesn’t mean that the Bitcoin network isn’t valuable: far from it, the network is an absolutely amazing way of transferring value (i.e. a currency). But, the Bitcoin tokens themselves are not inherently valuable.

Think of it this way: the only tangible asset behind Bitcoin’s current $100+ billion valuation is the network of nodes that maintain, record and improve the blockchain. The fact that you hold Bitcoins doesn’t give you a stake in this system. The only stakeholders in Bitcoin are the miners, because they profit off of the system by earning fees for facilitating translations.

By holding Bitcoins instead of spending them, people are essentially engaging in baseless speculation, if not downright gambling.

This doesn’t mean that a wise man would immediately dump all his coins for fiat money; quite the contrary, I myself am holding my coins. The reason behind this is important though: I’m not holding because I think Bitcoins have value, I’m holding because I think the clueless masses currently pumping the price up day after day will make my current holdings more valuable in the future.

I would not call this investing, however, because it is not. It’s 100% gambling, and eventually someone will be left holding the bag. Probably won’t be years until the speculative bubble finally bursts, but I am convinced that it will happen eventually. Sooner or later, there won’t be enough newcomers to keep raising the fictitious price. One by one, holders will sell out and move on, and once this process reaches a tipping point, the price of Bitcoin will crash and never recover. It will still be worth something, but no one will look at it as a store of value once the truth finally catches up to people’s current mania.