Will Bitcoin Cause An Asset Bubble For Winnipeg Investors?
All the talk in investing and financial circles over the past several weeks has centered around Bitcoin and whether Winnipeg investors should get in while the getting is good, get out, or pass altogether. Many financial analysts are fearful that the Bitcoin might become nothing more than a fad just like any other. But when it skyrocketed from US$1000 to US$11,000 in just one day, that meant that in 2017, Bitcoins were up over 900%.
Bitcoin is a type of digital currency that anyone around the globe can use, which makes it highly attractive. Being able to move money from one place to another without a leaving a money trail is a blessing for some and a curse for others, depending on which side of the financial fence you are on. But will the cryptocurrency be the newest thing to overtake traditional currency or just a flash in the pan, as some suspect?
Adding more credence to Bitcoin is the Chicago-based CME Group, one of the most lucrative trading arenas, which plans to sign a contract to create Bitcoin futures in January. Nasdaq plans to start Bitcoin future trading on its trading platform site in 2018. That has really gotten the attention not just of Wall Street, but of every other trading and banking institution around the world.
The question that most people ask is whether owning Bitcoin stock will be an asset to someone’s portfolio, or will it be nothing more than a bust? Like most things in financials, what goes up must come down - but not many know which way Bitcoins are likely to go.
Bitcoins were created by someone in 2009, but no one is quite sure who. The alias of the inventor is “Satoshi Nakamoto,” and Bitcoins were originally created to allow people to buy things on the internet without having any money trail and without having to use a middleman like a bank. Unlike banks, Bitcoins have extremely low fees for use - and in some instances, no fees at all. It’s a little like phony money: no one knows where the money comes from, and it can be used to buy just about anything someone wants.
Bitcoins are traded on what’s called “Bitcoin exchanges.” The exchange is a marketplace where people can sell and buy different currencies; they are a product of “blockchain technology,” which allows people to store their Bitcoins in a “wallet” or have them exist in a cloud on their computer, with no real or concrete way to track them. Since Bitcoins are completely unregulated, many are wondering how much longer they will exist before the powers that be learn how to impose regulations on them. Since they aren’t tied to any one government or country, they give users free reign without restrictions.
Many believe that Bitcoins are the investments of the future. As paper money is becoming somewhat obsolete, some forecasters believe that there will be a day in the not-so distant future when there will be no credit cards or banking institutions - just free-floating Bitcoins that are exchanged digitally.
Currently, there are over 16.7 million Bitcoins digitally floating around, according to the latest statistics. The cryptocurrency market was close to $300 billion, with Ethereum and Bitcoin adding up to a huge sum. Just like anything else on the internet, however, Bitcoins are not exempt from being hacked; if that happens, then people will likely opt not to use them. As technology grows and can override blockchain channels, Bitcoins might lose their allure. Those who want to put all their eggs in one basket should be careful when it comes to digital currency.
So, should the average investor consider buying into the Bitcoin hype? For now, financial advisors insist that if you have the money to spend, you might want to consider it. However, that is proof of the uncertainty of it. If anyone has the money to lose, then they don’t have to worry about losing it. Since it appears to be on the rise, the best way to deal with Bitcoins is to get in and get out before any bubble has the time to burst.