Should we invest in Bitcoins?

by Harneet Bahri Founder of The Buzz Stand

Bitcoins are all over the news lately. You would have heard about staggering return given by bitcoin in 3 months, in which it just doubled the amount people had invested in Bitcoin. As bitcoin prices dominate headlines, you might be wondering whether you should invest in the popular cryptocurrency. And then again, when China banned Bitcoin exchanges in the country it witnessed a sharp fall of more than 30%. This shows how volatile Bitcoin is.

The virtual currency is known for its volatility. You might have seen that in 2013 it was around $1100 and in Aug2017 it was valued $4500. Now it is back to $3000. I would say that when you are investing your hard-earned money, it is better to stay away from Cryptocurrencies.

According to research Bitcoin is 5 times, more volatile than S&P which means you can lose your money much more quickly if trade doesn’t go your way.

Even if you are buying Bitcoin at low prices, there is no guarantee it will go down further. Also, Bitcoin has no fundamental value attached to it which makes it even more difficult to judge its price. On the day it crashes, there will be no one who would look to buy it. History has never been kind to assets which have no fundamental backing and justification for its price. In the long term they come to zero.

You would have heard about the Tulip Bubble. In 1500’s price of Tulip petals went up like crazy. But, after years people realised it had no fundamental value and price crashed and came to 0.

However, Bitcoin can be an attractive option for those, who want to move their money across borders.

There are security concerns, which are prevalent. There are Bitcoin exchanges which had to declare bankruptcy and shut down just because the entire, Bitcoin they held were stolen. So, you are never sure if your money is safe. It has happened to Mt. Gox, which was the biggest exchange. It accounted for 70% transactions when it was there. But, one day 85000 Bitcoins were stolen and it had to declare bankruptcy.

With Bitcoins, you are never sure if your government will allow it. Many countries either don’t have laws or are not in favour of it like China or Venezuela. If you belong, to one of those countries you are never sure that when the government can ban Bitcoin and your entire money would turn to zero.

There are lots of assets and opportunities available to generate better returns. Make use of them, instead of investing in Bitcoins. If you are looking to generate higher return, equity is a good option and you have more reliability as well. If you want stable return you have fixed income assets. If you can’t manage portfolio yourself, there are asset management companies which can do that for you and help you generate higher returns.