Unless you’ve been living under a rock for the past 6 months you would find it hard not to see the constant discussion around the monumeric rise in price of Bitcoin.
Currently the price stands at $2,750.
In 2014 the price was around the $400 mark. If you had bought 100 Bitcon 3 years ago this would now be worth $275,000. That’s an increase of nearly 700%!
Does this mean now is the time to invest or is this a classic case of momentum investing?
The price may be high but it could keep going up. You could be a fool if you buy now but you could be luck and a bigger fool comes along to purchase your Bitcoins at a higher price. 'Buy low sell high' therefore becomes 'buy high, sell higher’.
Is there an actual value to Bitcoin?
So its not a tangible object and therefore there is no intrinsic value. There is also a finite supply.
You could argue that this is the same for bank notes as they don’t have any any intrinsic value either. However the big difference here is that banknotes are guaranteed by governments which last time I checked, don’t feel the same way about Bitcoin
This has lead to alot of volatility in the price of Bitcoin with prices falling by as much as $200 in a single day.
As with any investment, as the level of volitility increases so does the level of risk.
Even if you were able to buy low and sell high, by the time your order had gone through the price may have dropped dramatically.
Generally, for the ordinary retail customer it just isn’t worth the risk.
However if you do still feel that the pros outweigh the cons then make sure you invest only a small part of your overall portfolio so if it does take a plunge, you can afford the loss.