Is Bitcoin an Investment?
Most people have heard of Bitcoin, but do not know what Bitcoin actually is.
Bitcoin is one of hundreds of Crypto Currencies (Cryptos) that are now on the market. Bitcoin was the first and has only been around since 2009, after Satoshi Nakamoto allegedly mined the first one the previous year. I say ‘allegedly’, because it is now a common theory that no such person actually exists and is a persona created by a team of IT wizards, who invented Bitcoin.
Crypto is essentially electronic cash that is used as payment on a peer to peer basis and now there are many Cryptos, each trying to develop IT structures that will be able to be used as the payment system of the future. In recent years, large organisations have been looking at their own systems and looking at which Crypto can provide the best service. It is almost like the Space Race of the 60’s when USA and USSR were trying to be the first to land on the moon. This is what is driving the prices up and down in the Crypto market now – as each takes turns in announcing their latest development.
Many think Crypto is a bubble that will burst and others think it will be the way of the future. Esteemed leaders of the world in business and commerce can’t even agree. On one hand, Bill Gates, founder of Microsoft, thinks it will be common place and how most transactions will occur; on the other hand, Warren Buffet, the world foremost investment expert, thinks it will all come crashing down.
When you look at how some of the Cryptos have performed over the last year through the Pandemic period, you can see why there continues to be hysteria. The current 1-year return on Bitcoin is 298.49%. Other popular Cryptos – Etherium 561.17% and even Ripple 30.66%* which is currently under investigation by the SEC and could result with holders losing everything.
For every success story there has been a scam with regards to Cryptos too. The biggest is Bit-Connect which was a Ponzi pyramid scheme and has resulted with thousands of people losing millions. Every day there are teams of geeks trying to raise money through their ICO’s (Initial Coin Offerings) hoping they will ‘strike it big’. Most of these come to nothing and people investing lose all their money.
The initial question was ‘Is Bitcoin an Investment?’ My answer is in the long term I do not know. I would see it as a gamble and would definitely avoid investing significant amounts of a portfolio in Crypto. If you are considering, I would only invest what you are prepared to lose and have a high tolerance to volatility. 2-5% of your overall portfolio would be reasonable if you’re a ‘Speculator’, but I would open a dummy account first and use ‘play money’ to get used to the huge swings. In today’s financial climate it is essential you do everything you can to make sure your money is safe.
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Source ETORO online platform 13/01/2021