Bitcoin, everyone’s favorite cryptocurrency, hit a new milestone this weekend. On Saturday, May 20th, a single bitcoin was worth $2,000 — the currency’s highest valuation ever. Original Bitcoin investors who bought it at pennies are now thousands, if not millions of dollars richer than before, as their investments increased by over 77% in less than a single month.
While any investment making 77% more in a short period of time sounds great, it’s also kind of troubling. While you could stand to make a decent chunk of change with the world’s biggest cryptocurrency, but you could also lose a hefty amount, too. In fact, there are several reasons why new investors might want to avoid Bitcoin altogether.
77% in a single month is pretty high.
Like some stocks and securities, Bitcoin is a highly volatile investment. In fact, it might be one of the most volatile investments you can make. The price of a single Bitcoin can increase and decrease so rapidly that its value after you purchase it could be significantly different in a matter of seconds.
Bitcoin was worth around $1250 last month. It’s currently worth $2,193 as of this writing. That’s a price increase of over 77% in the last month alone. Due to Bitcoin’s high volatility, the cryptocurrency could potentially lose 77% of its value in the same period of time, if not more. So, times are good right now, but due to the rapid change in Bitcoin’s pricing, things could get pretty hairy later.
Last time Bitcoin shot up this quickly, it crashed just as fast.
— Rob M. (@StonewallSolutions) May. 22 at 12:55 AM
In 2013, Bitcoin’s price rose at an accelerated rate. By the end of November 2013, Bitcoin was worth nearly $1,100. By the middle of December, it was worth $618.90. Bitcoin kept changing in price, usually in a downward trend, until it was worth around $200 by January of 2015.
The cryptocurrency’s value lingered around the $200 price point for a bit until it started picking up steam later in 2015. That increase in 2015 went on to create today’s record high. Yet some analysts fear Bitcoin’s price will hit a ceiling and mimic the 2013 crash yet again.
No one knows how Bitcoin will perform in the future, and that’s scary.
The stock market is over a century old with just as much historical data to help determine possible future outcomes. Bitcoin, on the other hand, is only eight years old with a tiny bit of data to suggest what might happen. For all we know, the cryptocurrency could keep going up forever (which is highly unlikely). It could also crash and become worth less than its 2013 value. Bitcoin could even erase all gains it made in the last two years. It is a highly volatile and unpredictable investment with little evidence to support trends and give warning to crashes. If you’re making a first-time investment, you might want to consider less risky securities first.
If you really want to invest in Bitcoin or any cryptocurrency, you could always do so with exchanges and wallet apps like Coinbase. Before you buy bitcoins, however, it’s worth noting that most popular exchanges have buying and selling limits, along with the occasional withdrawal limit. This means that you can only sell a certain amount of your cryptocurrency per week and withdraw a portion of those funds (in U.S. dollars) from your account. You could end up holding on to more ‘coins than you want to if you’re trying to cash out, which could mean bad news if there’s ever a crash.