There were times where Bitcoin’s value climbed dramatically, and this crypto token gave its investors tons of profit in a short span of time. Some of the early investors made tons of money after holding on to their Bitcoins for a couple of years.
These days, Bitcoin isn’t as promising an investment as it used to be, and there are a few reasons why that is. Whether you are looking to invest in Bitcoin or any other kind of cryptocurrency, the points in this article will be applicable almost across the board. What applies to Bitcoin for practical investing advice applies in at least some small degree to other crypto assets.
A Risky Venture
The crypto market has always been one where there is no guarantee of a payoff. Like any kind of financial trading, there is inherent risk involved because no one knows exactly what the market will do from day to day. It could plummet one day and shoot up sky high the next. It’s easy enough to look back and say, “Oh, that’s why that happened,” but it’s much harder to look at all the factors and say, “Such and such is going to happen.”
This holds true of any kind of asset trading, really, including stocks, foreign exchange, or cryptocurrency. What makes crypto riskier than other types of financial ventures, though, is that it isn’t typically backed by any real-world assets. The bottom could drop out at any time, and the value is often arbitrary. We know what factors increase or decrease the value, but to say that a digital token has any kind of value is a type of communally agreed self-deception.
Volatile Market
Because the value is somewhat arbitrary, this makes buying from the crypto market or buying up Bitcoin volatile ways to spend your money. Imagine that every time you went to the grocery, the value of your money changed, so the price of goods would vary from one minute to the next. There would be a mad dash for the register whenever the price went low on certain items, and that’s what happens with crypto. The price changes quickly and sometimes dramatically, and that can come unexpectedly at times.
It’s hard to say how the market will react to changes in the environment. For instance, there could be talk by the US government that inflation may increase in the next few months. That can drive people away from crypto investments, even though no actual change has taken place in the value of their money. A lot of the value changes happen because of expected economic changes, and then real-world changes do have an effect on the value of crypto tokens too.
How Close to Watch It?
Another problem that makes Bitcoin tough to recommend as an investment for most people is that it takes a lot of time to watch the coins and see if they are changing in value. Some investors will take a swing trade position, meaning that they just keep an eye on Bitcoin every so often, perhaps as much as once a day. Then, they will make their trades when the price changes dramatically and there is clear profit to be had. Or they may buy up Bitcoin when the price is very low.
There is another common position investors will adopt, known as the day trader position. This means that they are watching the coin throughout the day, keeping a close eye on the price changes as they happen. They may be monitoring their coin’s rate every few minutes. As you can imagine, that makes it hard for them to stay focused on the real world. They have to sink a lot of time in their trading, so they are constantly distracted. They may have trouble finishing projects or doing a good job with whatever tasks they have during the day. They may not sleep well at night either.
With all that investment, they may need other people to do some of their routine tasks, like hiring cleaners for their housework or hiring a babysitter for their kids. They may buy food already made rather than take time to make it themselves. This kind of lifestyle affects everything they do and can negatively affect the quality of their life.
The Value of Bitcoin
We have seen this year that the price of Bitcoin has dropped substantially. It is no longer achieving those all-time highs we saw last year, and that has seriously eroded the public’s confidence in this digital asset.
Bitcoin has dropped from a price of $47,649 at the beginning of the year to the current value of $18,879. That’s a decrease of 60% in nine months, so there are obviously a lot of people who invested in Bitcoin last year when the price was much higher who are very unhappy with this coin now. Those who thought the rate might turn around sometime later this year have been sorely disappointed as well. They are not seeing a return on their investment, and they wonder if they ever will.
The good news is that Bitcoin is very cheap, so new investors may be able to get a good deal and have that pay off for them in the long run. Or maybe they can be day traders and find some minor profit in the short term.
The bad news is that because Bitcoin has been trending down (going bearish, as they say in the industry), it may not climb back up to its previous heights above $40,000 or even $30,000. It might not do that for a while, or it may never do that. With more countries than ever cracking down on crypto and making it harder to purchase these coins or conduct business with them, this has been a tough year for the industry.
Bitcoin isn’t considered a good long-term investment right now, but there is some short-term value to be had there.
Founder Dinis Guarda
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