There’s a lot of buzz surrounding cryptocurrencies. While some see it as the perfect investment, others fear the possibility of a currency bubble.
Everybody is talking about Bitcoin. Everybody wants a piece of the action since nowadays it’s supposed to be one of the most profitable investments. After all, the price of a single share of the currency has doubled in the first months of 2017; it went from US$1,200 in January to close to US$3,000 by the end of June.
Why wouldn’t everyone want to invest in this cryptocurrency? Some will but the rest will linger in doubt.
Evidently, there’s more to know about Bitcoin than its impressive growth. Yes, prices have gone up and, while there have been moments of downturn, it is likely that they’ll keep increasing. However, the nature of Bitcoin is volatile. One day, there’s regular growth, and the other, there’s a decrease of US$100. People will catch a good day but by the time they try to sell it, it’s gone. It has happened and there’s a sense of uncertainty about what will happen next in the market.
That sort of behavior is too risky for people who see Bitcoin as the only place to invest. Kerry Close, financial journalist over at Time Magazine, has argued that it’s a bad choice to invest all of your money in this currency. It’s more of an investment that should be shared within a diverse portfolio. In fact, as Close notices, the investment should be a small part of your whole portfolio.
The main argument against Bitcoin could be the most easily debunked. For the general public, there are serious doubts about the certainty and safety of the market.
However, there are two main reasons to feel safe about investing in Bitcoin: first, it appears that the prices are not easily manipulated. The market is not centralized and, therefore, it doesn’t depend on the action of one agent. Second, there’s a limited supply of 21 million coins.
Clearly, there are still chances of suffering from fraud with cryptocurrencies. Due to the increasing popularity of Bitcoin, the chance of losing money because of hacks is bigger. Also, because of its increasing demand, there’s also a higher interest in security measures. If people are careful and make use of security apps –such as Google Authenticate–, the dangers will decrease exponentially.
Is it a good idea to invest in Bitcoin? The pros and cons are clear. The market is volatile and hard to predict. For people with risk aversion, is better to stay away from investing. However, if the portfolio is diverse, it’s not a bad idea. Now, is it safe? Analysts seem to be on the fence about it, but the safety measures are getting stronger.
LatinAmerican Post | Juan Sebastián Torres
Copy edited by Susana Cicchetto