As an Investment Advisor and as author of Word on the Street, I pride myself on being up to date on the latest news and trends, but admittedly I was caught off guard earlier this week when I came across an article in the Globe about the Bitcoin. The what now?
So I did a bit of Google surfing and have confirmed the following:
Bitcoin: ฿ | $BCoin | XBT
The Bitcoin is a digital currency that can be exchanged for real money or used to buy goods and services. It’s increasingly being used for internet transactions (notable vendors include WordPress, OkCupid, Reddit, and Chinese Internet giant Baidu), but its value is volatile and subject to speculation. The concept was introduced in a 2008 paper by a pseudonymous developer known as "Satoshi Nakamoto".
Bitcoin has been called a cryptocurrency because it is decentralized and uses cryptography to control transactions and prevent double-spending, a problem for digital currencies. Once validated, every individual transaction is permanently recorded in a public ledger known as the blockchain.
in 2009, a Norwegian man by the name of Kristoffer Koch was researching encryption and became so intrigued with this new form of internet currency that he invested $24 in 5,000 Bitcoins and then promptly forgot about his investment.
Fast forward to April 2013 and our buddy here recalls his tiny investment after reading about the skyrocketing value of Bitcoins in headlines this past spring. It had been so long that he actually forgot his password and spent the day trying to hack back into his own account … well worth the effort – his $24 Bitcoin investment was sitting at $721,464! He immediately cashed out a fifth of his money and bought a condo in central Oslo. Funny how a $24 investment in what could have been considered “fake money” in 2008 has now provided a 685% compounded annual return over 5 years real enough to purchase a condo.
Talk of fake money reminds me of the 221lb gold coin I laid eyes on last night at the Sprott Asset Management office, which included a tour of Eric Sprott’s remarkable art collection. With Gold sitting at about $1,243 per ounce and 16 ounces in a pound, this larger than life loonie (originally purchased for 2 million) is worth $4,395,248 today. OR it’s filled with chocolate. Check out this picture I snapped and decide for yourself.
Stories like these get our “winning the lottery” feelings stirring as we imagine what it would be like to win big – but on the chance that our own version of Koch’s story never becomes a reality, sticking true to your own financial plans will pay off over time through the power of compounding (even if it isn’t at 685%) – as the saying goes, “time in the market makes profits, not timing the market”.
Enjoy the weekend.
D.
Dian Chaaban
Investment & Wealth Advisor
Chaaban Wealth Management Group
416.842.4234