Many people with all the hype are wondering whether they should invest in bitcoin. A wide variety of issues are raised by the cryptocurrency experts which are worthy to have a look. Some are worried that bitcoin is a bubble, too dangerous to invest in or prone to fraud. The cryptocurrency market has no protection devices, unlike the stock market. In addition, individual investors are hardly able to make decisions in a pattern close to that of institutional investors.
Compared to most investments, bitcoin “is a highly volatile, highly risky investment,” James Ledbetter, editor of fintech newsletter FIN and CNBC contributor, tells CNBC “If you look historically at the price of bitcoin, there have been a number of occasions where it’s really spiked and then comes crashing down really quickly.”
Bitcoin critics argue that as in the past, the tremendous rally in an asset with no underlying economic variables underpinning it is doomed to crash. Some also cite government legislation as a hazard. True, for its asset value, bitcoin is winning appreciation right now. It is still unclear whether the cryptocurrency is a secure asset or a volatile one and it has yet to resolve the bubble controversy surrounding it. For instance below is bitcoin (chart) volatility for one week in early 2021.
“This could be a massive pump before a major selloff in the coming days. The rally we’ve seen is simply astonishing,” said Neil Wilson, chief market analyst at trading platform Markets.com.
The price of bitcoin had already risen three years ago before crashing, harming several individual investors, a note of warning should not be ignored. At the end of 2017, individuals reacted positively to this decentralized currency, but its price plummeted in December and early 2018 after several months of growth. For instance, after rallying to almost $20,000 in 2017, the price of bitcoin plummeted and lost a third of its value in a single day and fell to as low as $3,122 in 2018, wiping out billions of dollars from the overall market value of cryptocurrencies.
Bitcoin bulls, however argues that the 2017 rally was different because it was driven by retail investor speculation, while now the new rally is driven by institutional investors buying the coin.
To conclude, in a short period of time prices will shift between heaven and hell, make sure you don’t invest in something that you’re not prepared to lose.
Join our community to stay on top of the latest insights about blockchain, digital & cryptocurrency news, risk and opportunities. Pre-registration available!
— Fyggex (@fyggexchange) August 12, 2020
Image: Boonmachai Mingkhwun
*Disclaimer: Fyggex, does not give any guidance, advice or recommendations to neither invest or not in any available normal currency or cryptocurrency directly or indirectly via any trading platform, exchange or provider. Our sole purpose is to make you aware of the related real or potential risks and opportunities so that you can make your own research prior to any financial decisions you may want to take. Past performance and position are not a guarantee of risk-free future returns.