Dave Ramsey is one of the most popular TV & radio financial advisors in the US. He gives fantastic advice about getting out of debt, managing a budget, and living a life free of economic insecurity. My wife and I have been listening to him for years and we owe part of our financial security to his teachings. And even though Mr. Ramsey has excellent financial advice, he VASTLY underestimates the value of Bitcoin.
After reading this post from Ramsey Solutions, and listening to several of his podcasts regarding Bitcoin, I will critique some of his opinions that Bitcoin is an “unreasonably risky” investment.
To be fair, his overall attempt and explaining what Bitcoin is conveys well to the beginner. Plus, he gives accurate information about Bitcoin, its origin, function and adoption. But his concluding opinions leave much to be desired:
Figure 1
https://bitcoincharts.com/charts/bitstampUSD#tgSzm1g10zm2g25zl
“The biggest and most obvious risk of investing in bitcoin is its volatility. Sure, it sounds great to have your money grow by 300% in a year, but how will you feel when the bottom drops out? And based on the past performance and volatility it most likely will.”
Volatility is inherent in any capital market. It's not unique to Bitcoin, the NASDAQ (2000 Dotcom Bust), the Nikkei (1990 Japanese asset price bubble bust), or US Real Estate (2008 Housing Crisis).
Dave Ramsey has made tens of millions of dollars from real estate volatility. He's said that he made his money buying property from people that had to sell on the low’s (low property values). Those “low's” imply volatility. Did that stop him from investing in real estate?
And the "300% in a year" comment. The chart (Figure 1) above represents BTC over the last 9 years, with many years of significant growth. Bitcoin is not a "one year wonder," it is a long term appreciating asset with an obvious track record.
Figure 1 (again)
https://bitcoincharts.com/charts/bitstampUSD#tgSzm1g10zm2g25zl
“I want to invest my money in something I can fully understand—something that has a track record—so I can see how it’s performed over the long-term. I’m not interested in seeing my money grow 300% in a year. I’m interested in long-term compound growth that builds real wealth for my retirement dreams.”
Good advice, you should never invest in anything that you do not understand. And this just adds to my critique of his opinion. If he doesn't fully understand Bitcoin, then why is he giving an investing opinion on it? People who give opinions on something that they admit they do not fully understand, does not add credibility to their argument.
Track Record? I guess 12 years isn't enough...12 years of a decentralized electronic cash payment system that was birthed, persisted and grown in one of the most hostile environments created by humans, cyberspace. I would say that Bitcoin, after 12 years in that environment, has proven its worth and value.
“Bitcoin’s other big red flag? It’s downright mysterious! Bitcoin’s creator goes by the alias Satoshi Nakamoto. No one knows who he or she really is. All the transactions are anonymous, which is really shady. Plus, there’s no basis for a bitcoin’s value and it’s completely unregulated. That adds up to a lot of unnecessary risk in my mind—and I don’t want to take unnecessary risks with my retirement or my future.”
Bitcoin is about the technology not the person. So the fact that Satoshi gave us this gift, and disappeared from the scene, gives Bitcoin more credibility.
Bitcoin transactions are anonymous...and that makes it shady? First of all, Bitcoin transactions are pseudonymous. Details Details. But when is the last time that Chase Bank opened its book of transactions (all of them), or HSBC, or Bank of China?
No basis for bitcoin's value and it's completely unregulated. Well, name one asset that has a “basis” for its value besides people deciding it has value?
Completely unregulated? This is laughable. What about the trillions of dollars of financial products per annum that are traded between large institutions that have little or no regulations or transparency. Derivative markets? Debt markets? Cash markets? Bitcoin and crypto are just an extension of something that already exists, but at least now, we can see it on a blockchain.
https://pixabay.com/photos/fashion-hipster-trendy-style-shoes-2699344/
And his concluding statement:
“Never risk your retirement on an investment that’s too complicated or unreasonably risky just because it’s the new, trendy thing to do.”
“Trendy,” he makes it sound like it's a pair of white summer hipster shoes from H&M. Belittling statements like this wreak of misunderstanding. It's like little Susie calling you a “poo poo banana pants” because she does like the way you look.
“New,” since when is a 12 year old technology new? Not to mention the math and computer science is from the 80’s and 90’s.
“Too Complicated”? Satoshi explained Bitcoin in 9 pages. Try summarizing the Federal Reserve Act in 9 pages. Jesus, that document is longer than… Well, just take a look.
And that’s just one central bank! There are about 200 central banks globally with different rules. Complicated? Fucking forgetaboutit!
In Conclusion.
To be fair, Dave Ramsey did write: “Build your wealth slow and steady,” and this is excellent advice. He is trying to protect people from being scammed and that's why I like him so much.
But Bitcoin is not a scam. It is the next stage in money’s evolution. It is a way for people to securely transact and hold value electronically without a trusted third-party.
And just like all assets, the reason it has value, is because people find it useful, and that is not a complicated concept to understand.
Stay frosty people.
50% allocated to ph-fund.
Basically, invest a portion of your wealth in Bitcoin and hold.
Well said.
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