Why it may not be the best time to buy Bitcoin
Bitcoin is blowing up, literally. But is it the best time to buy right now? Probably not. Here’s 5 reasons why.
Have you heard about Bitcoin? With all the media attention on this asset class, more people are waking up to the fact that cryptocurrencies are here to stay. If you have never heard of Bitcoin until recently, then it may look like a very attractive option. However, don’t be fooled by the mania that surrounds Bitcoin. Here are four reasons why you may want to put off that cryptocurrency purchase for a few months.
The Benefits of Bitcoin
Before we get into the reasons why not to buy Bitcoin right now, let’s look at the counter argument for it as a stable currency.
The fact is that our lives are controlled by our country’s government and the legislation that governs us. This includes your freedom of access to your money and even your travel. RFID chips monitor your movements every time you push your card into an ATM, run it through a magnetic card reader at a point of sale, or run through a passport scanner as you leave, or enter the country.
The technology in Bitcoin allows you to circumvent any government legislation regarding currency and capital controls. This means that Bitcoin is a truly sovereign currency that is not under the control of a central bank or government. Instead, Bitcoin pricing is determined by the factors of supply and demand in the marketplace.
All of these factors make Bitcoin look great on the surface but could there be something you are missing? Before you head over to an exchange and buy your piece of the Bitcoin mania, read these four points first.
Bubbles eventually burst
Bitcoin has experienced price bubbles twice in the past since its creation in 2009. The first bubble occurred when the ‘Silk Road’ website was shut down and the value of the currency collapsed overnight.
The second bubble popped in 2013 as the price sank from over $1200 a coin to $250 in a matter of days. This was due to the failure of a Japanese Bitcoin exchange, Mt. Gox. Mt. Gox was breached by hackers and the exchanges holdings were stolen, leaving the holders of the Bitcoins high and dry.
Experts agree that the current pricing in Bitcoin won’t last and the new bubble created by the Japanese market will eventually pop, forcing the Bitcoin price to consolidate lower. Timing is everything and jumping in right now could end up costing you.
How secure are your Bitcoins?
Bitcoins are stored in virtual wallets. The codes to these wallets can be lost if your PC crashes. There is a story of a man in the UK who lost a hard drive with $30 million in Bitcoin on it. The entire village was out searching the trash dump the very next day. Imagine that, $30 million lies in a trash dump somewhere in the UK.
The rise of competitor cryptocurrencies
Other cryptocurrencies such as Ethereum are steadily encroaching on Bitcoin’s market share. As time goes by, some of these newer cryptos may replace Bitcoin as the market leader.
Dependant on Power
What happens if the power goes out, or the internet shuts down in a period of turmoil or crisis? How will you access your wealth?
The final word
While Bitcoin is an attractive alternative to government regulated fiat currencies, it still has a long way to go to be recognized as a global player.