Could Bitcoin Be A Ploy to Unsuspecting Investors? Where to Put Your Hard-Earned Money?
- A writer from CCN said that investing in Bitcoin “is for suckers,” blaming volatility.
- Bitcoin has risen 2% in the last 24 hours.
Bitcoin has been around for the last ten years, creating the currency cryptocurrency market as we know it and has spurred the launch of many other digital assets. However, it has constantly been criticized by the traditional financial market, as many opponents have come up against it. In a recent article by CCN, writer Lawrence Meyers launched his own attack, breaking down the disadvantages of the cryptocurrency market.
The article starts off fairly bold, saying that Bitcoin and the rest of the cryptocurrencies of the world are part of a massive bubble, adding that this industry is one of the “dumbest places” for investors to get involved. He picks apart one of the biggest issues that plagues the crypto industry – volatility.
When investors get involved with Bitcoin or any other investment, there is going to be a risk, and this author points out that the only way to compare Bitcoin with the stock market is with this risk included. The article offers a chart, which outlines a year’s worth of volatility of various investments, though Meyers says that cryptocurrency should be considered “gambling” more than any other type of activity. The chart provided directly compares Bitcoin to all other assets, represented by the blue line. However, it is worth noting that Bitcoin goes through periods of less volatility around 2013 and from 2016 to 2018.
The article then dives into volatility’s impact on Bitcoin, explaining that this risk is examined with “standard deviation.” For example, during the last five years, a major player in the stock market – S&P 500 – offered a return of about 11.5% each year, and 11.25% for its standard deviation. To break it down simply, there is a 95% chance that the S&P 500 will offer a return from -11% to +34%.
Comparatively, the Grayscale Bitcoin Investment Trust has seen a 60% average annual return in the last five years, seeing an 81% standard deviation. Breaking down this statistic as well, there is a 95% chance that the fund will provide anywhere from a -100% to +222% return. This means that any year presents the opportunity to lose all of an individual’s Bitcoin investment or tripling it. The stock market has a smaller risk, leaving investors with the chance of losing only 11% of their investment from year to year.
Meyer then asks his readers –
“Why on earth would anyone sell something in exchange for Bitcoin, when the value of that cryptocurrency literally changes moment to moment?”
Clearly, this is the perfect opportunity to take a jab, bringing up when Bitcoin dropped by over 80% from its highest value at nearly $20,000. While it is hard to ignore the climb that Bitcoin has been making in 2019 so far, this fact is ignored.
He concludes the article with the same statement he makes in the title –
“Bitcoin is for suckers. Fight me.”
Bitcoin proponents and other interested investors would probably be quick to point out that Bitcoin is presently valued at $8,693.67, with almost a 2% gain in the last 24 hours.
When the article reached Twitter, there were some people on his side, as one user joking to consider himself “a vacuum,” while others pointed out how wrong he was.
Bitcoin is for suckers?
Then consider me a vacuum.
— Łitecoin Hodler [ŁTC] (@litecoinhodler) June 2, 2019
This is wrong on a number of levels. Currency has value because people own it/trade it, and believe it has value. Also, most currency is volatile when it is in the early days. Volatility will slowly wear away as adoption increases. Buy in now before it is too late
— McNyale (@Mcnyale) June 2, 2019
However, other users appeared to be on his side, saying that the purchase of a crypto asset is
“a bad deal.”
True, volatility is risk, so according to that buying any cryptocurrency is a bad deal.
— Fahd Alghazzi (@fahoude) June 2, 2019
Only time will tell how good of an investment Bitcoin is when it has been around for the next couple of decades. Perhaps, by then, one of these sides with a reign as victorious.