Bitcoin Enthusiasts Say A 1% Bitcoin/99% Cash Portfolio Outperforms The S&P 500. I'm Still Not Buying Bitcoin.

Let's start off with the following: they're right. Here's why.

Here's a figure that depicts a 1% Bitcoin/99% Cash portfolio outperforming the S&P 500.

Here's the problem.

Bitcoin was worth about $450 back in 2016, and now it's worth >$100,000. So if you look over the last 10 years or really any 10 year timeframe, of course the 1% Bitcoin/99% cash portfolio is going to outperform an S&P 500 portfolio. It's had an insane bull run since inception.

You know what also outperforms a 1% Bitcoin/99% Cash Portfolio? If you spent $2 on a mega millions lottery ticket, you could win $670,000,000 today. This is a 33,500,000,000% return on investment. We should all stop contributing to our 401(k)s. Let's all go buy lottery tickets. LOL.

Return on investment is one thing to consider when deciding to invest, but it's clearly not the only thing to look at.

The S&P 500 includes Google, Apple, Amazon, Visa, Home Depot. Dare I say, everyone reading this has purchased a product from at least one of these companies if not many of them. They have intrinsic value. They produce real goods and services.

Bitcoin has not produced any real value at scale. It's a vehicle for speculation. It's a lot like buying lottery tickets or call options that are very far out of the money (also lottery ticket like odds) - see GameStop before the Roaring Kitty bull run. Let's be real: the incentive of buying Bitcoin is hoping someone else will buy it at a much higher price tomorrow; it's value hinges on the greater fool theory. Basically, the person buying Bitcoin at a higher price is even a greater fool than I.

Bitcoin is not a usable product. I haven't been able to buy so much as a Chapstick from Walmart using Bitcoin. It's not a product; it's not a service; it produces no real value at scale. I think I saw it last in the thesaurus as a synonym for mass hysteria.

At least Tulip Mania had some tangible value; flowers are pretty. For the uninitiated, you may want to google Tulip Mania, the first recorded asset bubble.

What do Alex Mashinsky, Sam Bankman Fried, and Ross Ulbricht have in common? They are in prison, in someway, related to cryptocurrency. There's your use case. Bitcoin is useful for committing crimes - take a look into Ross Ulbricht.

Let's say you bought Bitcoin at $500. How many of you would have sold at $1,000? Many of you I would guess. How many would have held until $10,000? Very few. How many held until $100,000. Almost no one.

Most, dare I say, would have sold (or cashed in their cryptocurrency lottery ticket) along the way - if we're not being dishonest. I'm not here to sell you any investing services or cryptocurrency; I'm not the cryptocurrency scam artists Hailey Welch or Logan Paul, after all.

I write this to be the Yang to the Bitcoin bulls Ying - to be the voice of reason. Is it a terrible idea to dollar cost average and hold a 1% or 2% Bitcoin portfolio? Probably not. Even if it goes to zero, it won't have a large impact on your life. However, is it terrible idea to hold a 20% Bitcoin portfolio - probably. I wouldn't take that bet personally speaking. But that's just me.