|By Nathan Young|
November 27, 2017
With Bitcoin nearing a record $10,000 per coin, many people are comparing this movement to that of the tech bubble of the late 90’s and early 2000’s. If you take a quick glance at any chart, you will notice the price of Bitcoin has moved in a parabolic manner, which many investors know could be an omen of what is to come. For those unaware, Bitcoin is a cryptocurrency that is used to pay for goods and services, as well as being traded. The technology behind a cryptocurrency, blockchain, is what people are excited about.
Bitcoin Could Be the Next Bubble but It May Not Be as Impactful as You Think
People worry that Bitcoin could be a bubble and they certainly have every right to believe that. Drastic price movement and the ability to purchase Bitcoin on credit cards has the making for a disaster. However, it may not affect the markets as much as one might think. Certainly if price were to tumble there would be vast amounts of wealth wiped out. But people are not talking about Bitcoin in the same context as the whole stock market, which is for the better.
The last few bubbles have pulled the market down with them, but since Bitcoin is not an equity and has been labeled as highly speculative, should the price of Bitcoin fall, people may not be scared to enter the stock market.
What also is worrying people is that Bitcoin has no value except for what people are making it have. Not many retailer accept Bitcoin as a form of payment and right now it is being used as a trading vehicle. Until then, it will be looked at as a trading instrument more than a currency.
Going forward, it is important not to chase the market. Many of the news outlets are covering Bitcoin more and more due to its supposed success. Chasing the market is the wrong way to go about making money with Bitcoin. Instead, now would be the time to wait for the market collapse and let the scared money leave. If this is a solid asset, it will rebound with time and wealth can be created again.
Secondly, be sure not to lose sight of the blockchain technology that is behind the cryptocurrency. This is what many of the large financial institutions are interested in and it has practical applications to our current financial system.
This certainly looks like a bubble, but it may not be as bad as you think. Bitcoin acts as its own asset and does not move with market conditions. That being said, it could continue to rise and fall drastically, creating and destroying wealth quickly. If you want to invest, treat this as a highly speculative investment and use money you don’t mind losing. The potential is here but with the media and people pumping the cryptocurrency up, it may lead to a fall that is equally as drastic.