Bitcoin is back…or is it?
In recent weeks Bitcoin has surpassed $19,000 per coin, sparking a frenzy of commentary and speculation as to where the price might go – one investment analyst even suggested that a valuation of $300,000 by the end of 2021 was ‘not out of the question.’
The easy conclusion to make is that, following a similar run in 2017, Bitcoin is back and that for investors it is a runaway train you would not want to miss.
But is it?
Trust and understanding
Fundamentally, from a consumer perspective I would argue that question marks around the trustworthiness of Bitcoin currently undermine its ability to be a viable investment for the majority of retail investors.
Those that are pro-Bitcoin would likely scoff at this, pointing to Bitcoin’s fundamentals as decentralized – unfettered by central banks – and its public distributed ledger which means it can’t be tampered with without others noticing. This may well be true, but trust is built on much more than technology and buzzwords.
Trust is also linked to understanding. I like to think of myself as financially and technologically literate – after all, it is integral to my job – but do I fully understand Bitcoin? What its value is based upon? How to access it? How to use it? The simple answer is no; and I am sure that I am not alone in this.
So would I – and others like me – be willing to trust Bitcoin to the extent that we’d invest meaningful amounts? On the whole, probably not.
There are two obvious rebukes to this point. Firstly, many people have, with the number of people investing in Bitcoin steadily increasing.
And secondly, lots of people invest in products, assets and opportunities they don’t fully understand, and in some cases don’t necessarily need to. From the next big property scheme your mate down the pub mentioned to CFDs and your pension fund, many of us take the plunge where we don’t appreciate the full picture. And yet, rightly or wrongly, Bitcoin feels like an even greater leap of faith into the unknown.
The fear of missing out is surely the greatest weapon in Bitcoin’s arsenal.
As the price continues to rise, more and more commentators, influencers and column inches whip up a self-perpetuating frenzy and it’s easy to get caught in the Bitcoin bonanza. For instance, The bitcoin & crypto bull run is just getting started! exclaimed a recent byline in City AM. The more people read and see such content, the greater the sense of missing out.
I would still ague that while the fear of missing out would drive people to invest in regulated stocks such as Tesla, on the whole it will not be enough to overcome Bitcoin’s current trust and understanding barriers.
With any form of investing, time will be the real judge. Bitcoin may become a mainstream asset and it may vindicate all the early adopters, with those like me left red-faced. But right now, I’d rather not take the chance.