Bitcoin, the so-called cryptocurrency on the radar of investors as well as tech-savvy millennials, continues to climb in value. Since it doesn’t follow any of the established models for currency, the value of bitcoin remains unpredictable. It’s not tied to a company or a country; it’s instead the result of moment-to-moment demand.
Of course, many investing in the currency don’t fully understand the inner workings, preferring to think of it as a get-rich-quick scheme. Is it? Prices have been rising rapidly… should you convert your money into bitcoin before the exchange rate rises?
What is bitcoin?
Ignoring complicated specifics about wallets, mining, forks and the blockchain, Bitcoin is, in essence, an unregulated, decentralized currency whose value fluctuates wildly. It can rise and fall by a few hundred dollars over 24 hours. This volatility makes it appealing to those who’ve been watching its price increase. Despite daily fluctuations, the general trend has been an upward climb, and many have been pleasantly surprised by large returns on their investments. Of course, the big problem is that no one really knows where bitcoin will go next.
There are political disagreements as to the future of bitcoin. Critics argue that the cryptocurrency may not be a solid investment. Roadblocks and gaps in legislation will need to be handled. Bitcoin is new and exciting, but it’s also little-understood and highly speculative.
So what are people saying?
Recently, the Saudi prince and billionaire Alwaleed bin Talal spoke out against the cryptocurrency, denouncing it as a trend that will not last. He questions the circumstances behind the skyrocketing price, (bitcoin jumped $5,000 this year alone) and therefore believes that the unregulated currency is a dangerous investment.
In the opposite camp is Steve Wozniak, known best for his time at Apple. He feels that bitcoin is a safer bet than gold, given that bitcoin’s status as a finite resource (there will only ever be a certain amount produced) puts it in a different category than traditional money or gold, which can be continually produced.
Takeaway: Should you buy?
Only if you’re willing to lose some money. The most important thing to be aware of is the unpredictability. You’re essentially gambling. In 2011, bitcoin was priced around $11 a coin; it’s now been hovering around $6,000. No one six years ago could have predicted that a $50 investment in the currency would turn them into a multi-millionaire by 2017… and it’s that fear of missing out that’s driving more and more people to throw their money into the cryptocurrency.
Buying bitcoins in the hope of achieving vast wealth through little effort is incredibly appealing, but you should keep in mind that there’s a real chance the price could plummet just as far as it’s come. This probably won’t happen for a while, but there’s no way to predict the whims of bitcoin. Proceed at your own risk.
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