Bitcoin is back, and the price has once again broken through $ 10,000 (although Bitcoin pulled back below $ 10,000 at press time), it never actually disappeared.
Those who remain confident after the world's most famous cryptocurrency collapsed from an all-time high of nearly $ 20,000 in December 2017 felt their insistence proved to be correct, as its price broke through five figures.
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However, skeptics still do not believe that they believe that Bitcoin and other cryptocurrencies such as Ethereum, Litecoin, and Ripple are still of little practical use and mainly play their own volatility.
So how should you treat Bitcoin? Does it play a practical role in your portfolio, or do you still need to avoid speculative bubbles?
The first thing is that the price has almost tripled from around $ 3,250 to about $ 12,000 at one time compared to last year, and then returned to around $ 7,000 at the end of 2019. Bitcoin is still very volatile, and you can pay a heavy price if you invest at the wrong time.
However, there are still many bulls in Bitcoin. Clem Chambers, chief executive of the stock and equity website ADVFN, listed Bitcoin as the number one investment option he currently ranks in the world.
Chambers has no objection to issuing a risk alert. Two years ago, when Elon Musk's wealth was at its lowest point, he listed Tesla as the number one stock, and his bold appeal has since been proven.
He insisted that Bitcoin does have practical uses and was a safe haven for people to make money during times of political turmoil. Chambers said:
"In an emergency, it's better than gold. You can take $ 1 million in bitcoin across any airport and no one can stop you."
If your country is in a meltdown, Bitcoin is a great place for you to accumulate wealth. He added:
"The global fear of coronavirus is also generating demand, which is one of the factors currently driving prices up."
Chambers expects bitcoin demand to increase, especially after what is called a "half" in May, which will reduce the reward for mining bitcoin from 12.5 BTC to 6.25 BTC, reducing supply and driving up prices.
Matt Weller, head of global market research at Gain Capital, suggests that traders who liquidate bitcoin after bitcoin's sharp decline may join again. Weller says:
"Cryptocurrencies have quietly emerged from the ruins of despair."
He added that the key word was "quietly," and few people knew about the latest rally, which prevented the recurrence of early mania.
However, Weller advises caution, as the current rally may take a breather. He says:
"The indicator shows signs of stagnation in overbought areas."
Others have suggested avoiding cryptocurrencies altogether. Paul Donovan, chief economist at UBS Global Wealth Management, points out that despite rising prices, interest in Bitcoin has actually plummeted.
Google Trends showed a surge in online search around December 2017, when the world was fascinated by it, because the price was close to $ 20,000, and some hot heads said that the price of Bitcoin is expected to reach $ 100,000 or even $ 1 million. Donovan said that the initial excitement has passed. "Our own customers have asked this question before, but that interest has almost disappeared in the past 18 months," he said.
Does it have a place in a balanced portfolio? Donovan had the same views as Chambers, but took a negative view: "Of course not."
He believes that a balanced portfolio should consist of assets:
"These generate future revenue by serving as a requirement for future production capacity or having intrinsic value."
This can include fiat money that can be used to purchase goods and services and meet tax obligations. "Cryptocurrency cannot do anything. It is not an asset, it is not currency, and it cannot be used to pay taxes," Donovan said.
He added that cryptocurrencies are valuable simply because others are willing to buy them:
"Cryptocurrency is a type of computer code designed to find a reason to exist, designed by someone who understands mathematics but not economics or money."
The advantage of this is that investors should not fall into another bubble. "When the price of Bitcoin approaches $ 20,000, the real concern is that informed private investors are buying cryptocurrencies in an unregulated market and their savings are being lost to bubble sellers. This is what makes me and others Many economists are so angry. "Donovan said.
He added that given the declining interest, the possibility of recurrence is unlikely. "If people want to gamble on price fluctuations and accept everything they might lose, then don't worry."
Others believe that cryptocurrencies do have practical uses, such as so-called digital gold.
Richard Galvin, CEO of Digital Asset Capital Management, said:
"It's out of the traditional market, where you can protect and protect your wealth, and the earnings are almost irrelevant."
Calvin said this would eliminate volatility in a balanced portfolio and act as a "risky" asset during uncertain times.
The underlying blockchain technology is also beginning to show its practical use. "The growth of the decentralized financial industry is incredible, and the field is primarily built on Ethereum, providing more than $ 1 billion in collateral through various platforms," Calvin said.
With the launch of Facebook's Libra and many central bank digital currencies, Calvin sees a once-in-a-lifetime opportunity of "early technology transactions moving fast in a rapidly changing market." He recommends a cautious portfolio approach to minimize risk.
Victor Argonov, an analyst at online trading platform Exante, said Bitcoin could be a great safe haven for gold. "Physical gold is extremely difficult to buy, sell or trade across national borders, and it is almost impossible to use it as fiat currency. Cryptocurrencies can be freely traded across borders, and they are increasingly used as fiat currencies," he explained.
When Turkey, Argentina and Venezuela experienced sharp devaluations, Bitcoin proved itself a defensive asset in 2018. "Although citizens of these countries have previously bought dollars under similar circumstances, many people have turned to cryptocurrency this time," Argonov said.
Please note that Bitcoin's postulated value store is highly volatile. He says:
"Crashes are commonplace and there is no guarantee that your funds will not be halved in a month."
Argonov said that the current volatility may indicate that the cryptocurrency is still in its infancy and may stabilize over time.
The only thing that can seriously undermine its rise is a comprehensive ban by leading nations. "But this seems unlikely. Every year, more and more influential financial communities join the cryptocurrency market and they don't want to leave it."
Should you invest? Fabian Chui, global head of ADSS front desk in Abu Dhabi, said that cryptocurrencies do provide an opportunity for suitable investors: "This is an emerging asset class that will diverge opinions, which will cause a certain degree of speculation and volatility, and conversion For trading opportunities. "
The price of Bitcoin is consolidating as investors see it as a store of value and diversification. Chui added: "Whether it is worship or not, this is an exciting area."
If you have less exposure to Bitcoin, you will find it tempting, but most ordinary investors should be careful.
Like now, resist buying when prices rise, as it is more vulnerable to the next crash.
On the other hand, it takes courage to buy after it is dropped and forgotten, which means that most people will buy at the wrong time.