The rise of Bitcoin this year has been more than spectacular, going from USD 968 to a current price of USD 17,020 (as at December 20th, 2017). It is no wonder everyone has begun talking about it and we are being asked more and more questions from our families, clients and friends. Is it a bubble, will it go to USD 100,000, or will it replace all other currencies as we know? Clearly, we don’t have these answers and, as ever, we also don’t believe anyone else has either. But what we can say with certainty is that what goes up, can also go down.
Last time we saw a phenomenon like this was in the late 1990s and there certainly seem to be a lot of parallels between the internet and the cryptocurrency hype. I remember vividly when a Spanish pizza delivery company started using an online ordering system and the valuation of the stock increased by a factor of 10 overnight, without selling a single additional pizza. And for all the Amazon’s or eBay’s, most investors that bought in at the peak never recuperated their investments, not even when the stock markets recovered to the same heights some 15 years later.
So, is this a new paradigm and are things different this time? Maybe, but then again we still don’t know which of the cryptocurrencies will be the standard of the future, if at all. I would also argue that governments and central banks will have their say in how to control global monetary flow and we could see everything change once laws and regulations are introduced. But what has me worried the most, are the countless enquires we are getting by hapless opportunists selling us crypto investments, including “risk-free” lending to other traders.
Can Bitcoin go to USD 100,000? Sure, it can probably go to a million. But it could also go to zero. And therein lies the risk. Whatever you are willing to invest, be prepared to lose. Happy hunting!