Bitcoin - Worth A Bet?

By Vinayak on Friday, September 6, 2013 with 1 comment

Bill Gates talked about how digital currency is going to be the next step for money as we know it in the future in an interview with Charlie Rose. Right now, there is one highly popular digital currency - Bitcoin.

This is quite a volatile money substitute though. For instance, it was worth $260 on April 10. Then Bitcoin fell to a $100 on the very same day and it is now trading at $130ish. Bitcoin has been known to bounce around and the time frame can be as little as 60 seconds. This makes it rather difficult to predict.

But is there an opportunity here? A Bitcoin does not technically exist in the real world the way the dollar in your wallet does, and it has no government backing. But what it does have is cult-like followers who garner faith-based support for it.

The important thing to remember, in either case, is that you should never gamble more than you can afford to lose. The official Bitcoin wiki site makes this case when many Bitcoin true believers refuse to accept it:
Bitcoin is a new and interesting electronic currency, the value of which is not backed by any single government or organization. Like other currencies, it is worth something partly because people are willing to trade it for goods and services. Its exchange rate fluctuates continuously, and sometimes wildly. It lacks wide acceptance and is vulnerable to manipulation by parties with modest funding. Security incidents such as website and account compromise may trigger major sell-offs. Other fluctuations can build into positive feedback loops and cause much larger exchange rate fluctuations. Anyone who puts money into Bitcoin should understand the risk they are taking and consider it a high-risk currency. Later, as Bitcoin becomes better known and more widely accepted, it may stabilize, but for the time being it is unpredictable. Any investment in Bitcoin should be done carefully and with a clear plan to manage the risk.

At the same time, Bitcoin may actually become a digital currency we all love. The financial industry has a lot of critics and this is more so currently. But this could be one of those "greedy when others are fearful" moments for discerning investors.



Category: Currencies



Neha Agrawal said...
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