This year has not been kind to most asset classes. US stocks are negative for the year, international stocks (particularly in emerging markets) have been clobbered, commodities are down, and even bonds have been unable to provide a positive return. Coming on the heels of 2017, one of the best years for all asset classes, 2018 feels that much more painful.

The financial media’s recent focus has been on the collapse in tech stocks. Indeed, with Facebook, Apple, Netflix, and Alphabet (Google’s parent) – the so-called FANG stocks – down by double digits from their highs earlier in the year, you might get the impression that we are facing the end of an era. It’s important to keep things in perspective, however. These are stocks whose prices had soared over the past several years. If you were a stockholder in any of these companies in 2016 you’d still be sitting on some pretty hefty gains.

Regardless, in my view the award for the worst performing investment of 2018 (at least so far) has to go to Bitcoin.

From January 1, 2017 through December 17, the price of one Bitcoin rose from $821 to $19,783, fueling what became known as Bitcoin mania. By the beginning of 2018, it was still worth $15,127 (having dropped more than 20% in just two weeks). As of this writing it’s continued its slide all the way down to $3,914, a decline of just under 75% year-to-date.

When an investment explodes in value over a relatively short time, prognosticators swarm all over it. I thought I’d share a few predictions made by so-called industry experts both during the run up in 2017 as well as afterwards during the slide:

• Hedge fund manager Michael Novogratz, after successful forecasting Bitcoin’s $10,000 milestone in 2017, predicted that its price could cross $40,000 in 2018. His expectation was based on continued high demand from Asia together with a limited supply of the cryptocurrency. Needless to say, something in his analysis didn’t play out.
• Trace Mayer, the host of the Bitcoin Knowledge Podcast, predicted in 2017 that by February, 2018, its price would hit $27,000, based on its 200-day moving average at the time. This illustrates the difficulty (not to say irrationality) of using historical price movements to predict future prices.
• Tom Lee, co-founder of the market strategy firm Fundstrat Global Advisors, predicted Bitcoin’s price to reach $20,000 this year due to the growth of new bitcoin wallets. He is also on record as stating that its price will reach $91,000 by March 2020, based on Bitcoin’s historical performance after market declines. Despite the failure of his first prediction he appears to be doubling down on his bullish view of this investment.
• Morgan Creek Capital founder Mark Yusko predicted that Bitcoin will be worth $400,000 in the long term. He bases his assertion on the fact that Bitcoin will eventually replace gold, currently worth about $8 trillion worldwide. I find such long-term predictions to be generally worthless. So many unpredictable things can happen between now and then that any specific forecast is really nothing more than a wild guess.

As I wrote last year, one of the worst ways to make an investment decision is to act on the emotional fear of missing out. If you do choose to invest in Bitcoin, you should do it based on some understanding of the drivers of supply and demand that underlie its value. That is the difference between investing and gambling. Remember also that Bitcoin is not the only cryptocurrency available for investment. If you do decide to invest, which one should you choose?

Also keep in mind that there’s always the lottery as an alternative!