“I wish I had invested in bitcoin before it was too late...”

The first time I can remember hearing this was in the summer of 2011. The price of bitcoin was in the middle of a spike, up to $30 at the top of bitcoin’s first big “bubble”. Over the years since then I’ve literally heard this kind of statement hundreds maybe thousands of times.

“I heard about bitcoin years ago and I didn’t take it seriously. I wish I had gotten in back then before it was too late.”

I’ve been hearing these kinds of statements a lot so far in 2017. It’s a safe bet that anyone who decided not to buy bitcoin at $30 because it was “too late” would like to revisit that choice.

Nearly everyone currently holding bitcoin can tell you a story about how they could have bought sooner but didn’t get it immediately.

Now that bitcoin is trading over $1900 CAD, its easy to view this as very expensive. For people used to seeing bitcoin in the $1–3 range, $30 felt very expensive as well.

Now I don’t mean to say that now is a good time to buy bitcoin, we might very well be in the middle(or at the top) of another bubble. I’d rather that readers consider why bitcoin has become so valuable. I believe we can boil this down to one very simple statement:

Bitcoin is so valuable because it’s very rare and very useful.

In spite of increased transaction fees and network congestion, users around the globe are finding ways to solve real-world problems using bitcoin. As long as bitcoin remains a censorship-resistant store of value and medium of value transfer, it will remain useful. As more users around the world find ways to solve problems using the irreversible nature of bitcoin transactions, bitcoin will become more and more useful. Because we know the supply is fixed, we know they will continue to be rare. The value proposition is clear.

Another thing I’ve been hearing a lot lately is that people are buying altcoins because the prices are more attractive and they feel that they’ve missed the boat on bitcoin as an investment. However, for most altcoins, the long term value proposition is much less clear. Many of these coins fail to solve any real world problems that are not already being solved by bitcoin. Unless bitcoin loses its market dominance, there is no reason to suspect that this will change.

The top 20 altcoins by volume on Poloniex, April 30, 2017.

That’s not to say that there isn’t potential profit to be made by investing in altcoins. As you can see by this chart, many of them are doing really well lately — even against the price of bitcoin.

In fact, some altcoins are attempting to solve really interesting problems beyond those addressed by currency.

However, as of right now, there are no real-world problems being solved on any meaningful scale by any cryptocurrency or token other than bitcoin.

That is to say, none of these coins are currently useful. Most of these coins are not nearly as rare as bitcoin either. Many of them have very large supply schedules while others like Ripple(XRP) even have centrally controlled, flexible supply levels.

Its safe to say that nearly 100% of the price of these coins is derived from speculation. Speculation and investment definitely play a significant role in the current price of bitcoin as well. However, with use-cases beyond investment growing everyday, the underlying demand for bitcoin is very strong and likely growing faster than the supply.

Investing in bitcoin still has to be viewed as a risky bet. The currency is still new and price swings can be dramatic. From a long term perspective though, investing in bitcoin is a far safer investment than putting money into any altcoin. After-all, $1900 CAD might seem really cheap 5 years from now.