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Is everyone buying Bitcoin? Why you should think twice before doing the same.

Everyone is talking about Bitcoin. Ten years ago, you could buy a ‘bit’ for less than 10 cents. At the start of 2017 it was valued just over $1,000 a coin since then it has made headlines across the globe with price of a coin reaching £19,800 in mid-December (IQ Option, 19th December 2017). With such a surge in value surely there is plenty of reason to jump on the bandwagon and start investing. But here are 4 reasons you might want to think twice.

Bubbles always burst

Experts are predicting a Bitcoin market crash. Jeremy Grantham from investment management firm GMO, who has predicted the last two major market crashes, suggests bitcoin may well crash before the broader cryptocurrency market peaks (CNBC, December 12th 2017). China’s regulatory clampdown has been likened to the pin that will burst the bubble as it could have potentially global consequences.

The fear of missing out

What appears to be one of the main drivers of Bitcoin’s value is the fear of missing out. Despite the negative press and the condemnations of the unregulated currency, the numbers speak for themselves and investors don’t want to miss out on such a lucrative deal (Independent, 9th January 2018) . Bitcoin relies on the notion that cryptocurrencies will at some point in the future become mainstream and money as we know it will be filtered out. It’s hard to predict if this would happen, let alone when.

Warren Buffett, one of the most successful investors of all time, believes it is driven by this basic fear of missing out and it looks like he won’t be investing any time soon. Buffett’s investment strategy includes buying into a company when the intrinsic value is more than the market price. At this point it is impossible to predict Bitcoin’s value.

Stay away from it. It’s a mirage basically. The idea that it has some huge intrinsic value is just a joke, in my view.” – (AOL – 7TH December 2017)

Understanding your investments                                       

It’s simply sensible to understand your investments. Understanding Bitcoin is difficult.  The volatility of Bitcoin plays a large part in this, which can be seen in the recent surges and plummets over December and January. (BBC, December 23rd 2017). The uncertainty in its long-term market suitability and sustainability make it hard to value. Though the media coverage has added to the intrigue of Bitcoin, the questions remain the same over its real long-term value and how countries across the globe may react to its rise in popularity.

Warning signs

One of the early warning signs could be considering China’s move to ‘clampdown’ on cryptocurrencies. This could have a massive impact on the value of currencies like Bitcoin. Authorities have been instructed to force bitcoin mining operations to make an ‘orderly exit’ (RT, 9th January 2018).

You many have decided by now that Bitcoin is, or isn’t, for you. If you would like to discuss your investments options or management of your investments please give us a call on 01302 244 977.

*Note : Bitcoin is not regulated and this article should be read for information only and should not be taken as advice.

Publish date: 17th January 2018

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