To me, bitcoins look more like tulip bulbs. Andy There are at least three ways, though only one of them looks rational today.

First, you could mine your own bitcoins.

So should you invest in Bitcoin?

Second, you could buy some from an exchange. Third, you could buy shares in a fund that has invested in bitcoins. Please note that answering your question is not a recommendation, and I am not qualified to give advice on investments. However, as electronic payments expert Dave Birch put it to me on Twitter: The problem is that people can make money by buying things that are essentially worthless, such as used postage stamps, Beanie Babies, and historically tulip bulbs.

For example, tulip bulb prices may be insane but they keep going up. I may be a fool to buy them, but I expect a bigger fool to buy them from me. This works until you run out of fools.

Blockchain Basics: What Are You Investing In?

Their prices may vary dramatically, but over the long term, they retain real value. When tulip bulb prices were tumbling, everyone wanted to sell. Does Bitcoin have value? Bitcoin is a digital currency. In reality, you have to balance a range of factors including convenience, security and transaction costs.

But if you are investing, does bitcoin have an intrinsic value, like gold? The price of a bitcoin may increase because, for example, it is attractive to technology enthusiasts, and because we are all reading stories about how people made — or failed to make — fortunes. But, like tulip bulbs, bitcoins could be worthless when the bubble bursts.

Why Invest in Bitcoin?

There is a finite supply. There is no intrinsic value. If anybody is persuading you that it should somehow be related to some GDP or gold … put down the Kool-Aid and back away. However, banknotes are backed by governments that have a strong interest in keeping their value relatively stable. In the beginning, the best way to make money from bitcoins was to mine them with a home PC. However, bitcoin mining becomes more difficult the more miners there are.