Despite a tumultuous 2020, one investment stood head and shoulders above all others: bitcoin.
The largest cryptocurrency in the world by market cap has more than quadrupled in value over the trailing-12-month period through Jan. 17. It’s up a cool 9,310% over the trailing five years. Bitcoin blows pretty much all other equity investments out of the water, in terms of total return, since the beginning of 2016.
Bitcoin enthusiasts continue to point to its scarcity — a maximum of 21 million tokens will be mined — and growing adoption among merchants as reasons for its outstanding performance.
While there are smart ways to get rich from bitcoin, I believe there are also three awful ways to invest in this craze.
There’s no shortage of publicly traded cryptocurrency stocks that rode bitcoin’s astronomical rise to big gains of their own. Cryptocurrency mining company Riot Blockchain (NASDAQ:RIOT) is a perfect example. Riot’s shares have soared over 1,700% in the past year, bestowing a $1.7 billion valuation on the company. But dig a bit deeper and you’ll see that even a tenth of this market cap might be too aggressive a valuation.
As a cryptocurrency miner, Riot uses a system of high-powered computers to solve complex mathematical equations that validate groups of transactions on bitcoin’s underlying ledger (its blockchain). For being the first to solve a