Investing in Bitcoin vs Traditional Investments

ForexNewsNow | Published on May 18, 2017 at 9:37 am

Everyone’s talking about the astronomical rise in bitcoin value, and there is no clear consensus on its prospect as an investment tool. The only sure thing is that a bitcoin investment is something every savvy investor should be considering now more than ever. On bitcoin investment, there are different opinions, which is why I only advise that you consider the prospect.

Recent moves in bitcoin value

Bitcoin value rallied from around $1,000 to $1,275 toward the French presidential elections run-off. After dipping down below $1,000 for a while, the rally resumed, this time smashing through previous records. A significant boost came on the 8th of May when Australia removed the 10% Goods and Services Tax (GST) from bitcoin purchases starting on the 1st of July. It was a boost to bitcoin’s demand after Japan accepted bitcoin as legal tender starting May 1st.

BTCUSDDaily

Toward the end of last week, a global ransomware attack hit over 100 countries, affecting both individual computers and institutions. For the individual computers, users were required to pay between $300 and $600 to have their files decrypted. It probably cost institutions more, including UK hospitals and even Russian banks and ministries. There was obviously increased demand for bitcoin over the weekend as a result, and that helped to push bitcoin value higher.

Why you should invest in bitcoin

The obvious reason for investing in bitcoin is that it’s the thing right now everyone’s talking about. That is one of the criteria for choosing an investment, you don’t want to be stuck with something that’s barely moving. Bitcoin is certainly moving, and this year alone it has almost doubled in value from slightly above $900 on the first day of the year to just under $1,800 at the time of publishing. So far this year, there hasn’t been a better investment, and that is definitely why you should consider investing in bitcoin.

Then, as a long-term investment, consider that its applications have only barely been explored, which gives it the potential to be extremely profitable over time. Bitcoin reminds me of Netflix, which, back in the early 2000s, seemed too ambitious and unattainable. Now, conventional TV is being challenged by such on-demand entertainment services. Bitcoin could be just the same. Some years from now, probably, all systems will be based on blockchain technology and bitcoin, or altcoins, will be standard.

Netflix-stats

Some experts have claimed that its value will top $3,000 by the end of the year as high-value investors get in on it. Besides the investors, central banks and governments are getting softer on bitcoin, meaning it may no longer be a passing fancy. The recent legalization of bitcoin in Japan means bitcoin is here to stay, and other countries are considering the same.

Why bitcoin investment may not be the best

On the other hand, you should still have some reservations about bitcoin investment and not put all your eggs in this basket. The highest risk with bitcoin investment is volatility, which keeps bitcoin value shifting rapidly. As mentioned before, bitcoin value has almost doubled in the past months, but it would not take much to wipe off a chunk of its value. When the People’s bank of China investigated bitcoin exchanges, bitcoin value shed 30%; and when the bitcoin ETF was turned down, 15% of bitcoin value vanished.

Bitcoin is extremely volatile and responds very aggressively to news. That can be a good thing, if the news is positive but very bad otherwise. As such, bitcoin investment can be great for speculators looking for quick investment opportunities, but it doesn’t make for the safest investment. This is why many fund managers have still not invested in bitcoin despite the promising returns.

What should guide your bitcoin investment?

If you’re planning on bitcoin investment, keep an eye on the regulations surrounding it. We’ve already mentioned how Australia and Japan have approached bitcoin, but other countries are also doing the same such as Russia and India. What these countries decide to do with bitcoin will affect its value.

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Then there was the dreaded hard fork that was to divide bitcoin into bitcoin classic (BTC) and bitcoin unlimited (BTU). For the moment, BTC is the standard, but it is experiencing problems. Transactions are extremely slow nowadays because of the process required to verify them. Altcoins have stepped into the position to fill that need, and these should be considered thoughtfully. How bitcoin relates to other altcoins is going to affect your bitcoin investment, so make sure you’re always abreast with the goings-on.

The most important thing, though, is to know what you want from your investment. A bitcoin investment is meant for the thrill-seekers who like a lot of action, but not for those who prefer to watch their investment grow steadily. If you’re the former, then this is definitely it, otherwise, consider something else.

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