Recently, Elon Musk announced that his company had spent almost $1.5 billion buying bitcoins. This lead to a shoot-in price record of $44,000. The market value also rose to around $800 billion, which is a positive impact on crypto investors.
However, crypto experts have termed it ‘the aging of the market’. The co-founder and Chief Executive Officer of Social Capital, Chamath Palitiya had a lengthy discussion with CNBC. He said, “It’s probably going to $100,000, then $150,000, then $200,000, “In what period? I don’t know. [Maybe] five or 10 years, but it’s going there.” During the Halftime report, Chamath talked a lot about plans for blockchain technology to expand.
At the moment, people are still confused if investing in crypto is still the best option. Bitcoin has been the leading digital coin for almost 12 years now. Many individuals are scared because of the wide array of issues revolving around it. A good number of human beings say that bitcoin is too risky, hence your money can get lost. Other groups talk about susceptibility to online fraud. Lastly, others have referred to bitcoins as a bubble.
Fintech and bitcoin experts from a variety of companies spoke to CNBC Make It about the future of cryptocurrency. It clarified all those concerns and myths revolving around crypto investments. Here are some of the top advice:
Too Risky for an average bitcoin investor?
Bitcoin is indeed risky. All the digital coins are very volatile. The investment is 50% risky for an average bitcoin investor. The editor of FIN’s fintech newsletter and CNBC contributor, James Ledbetter confirm that. “If you look historically at the price of bitcoin, there have been several occasions where it’s spiked and then comes crashing down quickly.”
Let’s take an example: In 2017, a single bitcoin was being sold at $20,000 in all the countries. During the third quarter, it dropped drastically. By the time 2018 arrived, the price of a single bitcoin was $3,122. This led to a loss of billion dollars from the crypto market. Many bitcoin investors complained and lost their savings within three months. Such fluctuations lead to negative returns.
investing in bitcoin is gambling
Investors like Mark Cuban have always related bitcoin as a gambling match. You are not sure if a team will win or lose. He advises people to only invest the amount of money they can lose. It’s risky. Ledbetter continues to say that there is a need to be mentally and emotionally prepared for the worst as a bitcoin investor. Anything can happen within a short or long period of investment. Today you might go in and sell your coin at a price, but tomorrow you lose everything.
The co-founder of Morgan Creek Digital asset, Anthony Pompliano talks about minor investments. Every investor tends to buy as little as $5 of bitcoin. The small fraction is called satoshis. You might prefer that while you are an average bitcoin investor in the crypto world. Start with a small amount as you dig deep into research. Absorb more knowledge.Then, after getting enough knowledge, Pompliano advises people to go for long-term investments. At some point, there is always a shortage in bitcoin supply. As the demand goes high, the price will also automatically shoot. This is the best time to gain profit.
The safety of Wallets
In the middle of the second quarter, Twitter accounts of popular individuals were compromised. There were bitcoin scam bloggers who tweeted about Elon Musk, President Barack Obama, and Joe Biden as victims of that hack. This led to the transfer of fake billion dollars to false individuals. The news brought in some suspension about the safety of bitcoin.
Ledbetter talks of simple advice. “There have been multiple examples of bitcoin theft and fraud that would give pause to the average bitcoin investor,”. If you are going to use a substantial amount to invest, it will be tricky. But these are real and legit fears among millions of young investors.
The heck of hackers
In bitcoin, customers can transact money without giving out their personal information. This potentially makes it easier for fraud to invade your account. All the transactions taking place get recorded in a blockchain ledger. This is the central wallet of cryptocurrencies. The record looks like a series of random numbers arranged accurately. Through such an arrangement, any hack or scammer can be traced with recent transactions.
Pompliano proceeded, “I always remind people that bitcoin has a public ledger,” In general, bitcoin is very hard to hack. The security of blockchain technology is very tight. For a black hat hacker to succeed in the act, you need to take control of all networks. The hacker needs strong personal networks with a supercomputer. This will mean investing almost billions in the name of hacking bitcoin, a report by wsj.
During the early days, a person could compromise the stock account because it was controlled by the brokerage. If you work with brokers, there is the possibility of fraud. Experts say if you employ a trusted brokerage, it would reduce the risk of malicious acts. But all these applications have tight security behind the scenes to ensure the safety of your investments.
Ledbetter says most hacks are carried out by institutions or fringes. It is not easy to manage your way into ledgers. A report by the Federal Trade Commission(FCT), the crypto market has hundreds of scamming news daily. Popularly, people act as intermediaries while a client is transacting the currencies. Most of them come through unknown emails. Furthermore, some people use bogus investment methods to make false talk with real investors. There is nothing like unsafe in bitcoin. You just have to be smart in managing your online wallet.
Conversion of bitcoin to fiat and transfer news
People have indulged in converting their bitcoin currency to fiat. This acts as a US dollar to retain its value. Earlier this year, the Paypal CEO announced the integration of bitcoin technology into their platform. Customers can buy and sell goods using cryptocurrencies on PayPal. This means that before one pays to use bitcoin, the currency is converted to fiat to settle the transaction.
Conversion of bitcoin to another currency is time-consuming. Developers are trying their best to bring the fastest and easiest way to transact money. This is where many fintech industries have come in to find the perfect solution. For any conversion, there is a fee on top. Some company always reduces the fee to attract more customers.
Also when it comes to large transactions, most sellers are afraid. Many of them cannot make large transactions on a digital wallet. The chairman of O’shares ETF, Kevin O’Leary gives hope to sellers about the issue. “I’m sure this could change over time, but not today.”
Pompaliano has promised that innovation in the fintech industry will make it possible for a quicker transfer. There have been solutions to any technological problem. It’s high time to bring more efficiency to have cheaper transactions.
What about bitcoin being a bubble?
An economist at Rosenberg Research, David Rosenberg, said that the move of bitcoin within a short period is an abnormal act. He continued, “bitcoin is the biggest market bubble right now,”. The 2017 rally brought up the bubble issue due to awkward fluctuation that shocked the world. The rally at that time was under retail investors. Currently, institutions have taken the position.
Big tech companies that have invested in bitcoin could save on such matters. Ledbetter says you can discuss with them, and they listen. They control the stock market since they have the largest shares. Popular investors like Stanley Druckenmiller and Paul Tudor have supported bitcoin for years. Companies such as Fidelity, MicroStrategy, Paypal depended on those tycoons to buy some bitcoins. But you have to be keen, most supporters are said to be naysayers.
“In terms of cryptocurrencies, generally, I can say with almost certainty that they will come to a bad ending. ”, said Warren Buffet during an interview with CNBC. But people should not be scared, in the current market, bubbling cannot happen overnight.
Bitcoin being used on inflation
Many bitcoin investors have always said that bitcoin is a hedge against any inflation. This is similar to the US dollar. It gives hope in the sense that it can survive in case of a collapse in infrastructure.
Pompliano speaks about the power of government over the inflation rates of almost all the currency. “And those governments have very small groups of people who make decisions as to what happens to that currency.” But when it comes to bitcoin, everything is under computer control. Although the US government has been having concern about it. It’s the purchasing power of people that controls the market. Bitcoin cannot hedge inflation. It’s only affected by the pressure of selling and purchasing.
Ledbetter comes in to give his peace of mind. “As long as bitcoin is going up, sure, it’s a great hedge against inflation, but it can also go down. Therefore, you’re losing money – you’re not keeping pace with inflation, you’re losing capital.” Despite this, not every person would agree with Ledbetter.
The Cuban finance minister said bitcoin would never be a hedge against any doomsday occurrence. The only thing the government can do is to protect the value of their currencies.