Investing in bitcoin is not for the faint of heart, due to the high volatility, getting in at the wrong time could lead to a quick, massive loss. Over the last few months, the price has had quick rallies from $6000 to $8000 and then a volant drop back down to the $6000 range.
Even though there are a lot of good things on the horizon with bitcoin and the cryptocurrency space as a whole, the market is still small enough for others to manipulate the price. This means there is a real demand for financial institutions to come in and help with the stability if the Securities and Exchange Commission (SEC) will allow them.
If you are going to invest in bitcoin today, you should be aware of what you’re getting yourself into. Here is the list of some considerations with bitcoin investing that you may not be aware of:
It’s been a difficult task to evaluate which cryptocurrency scams are run by people, but now we have to deal with an army of scam bots. The security software company Duo Security have discovered over 15,000 bots working through automated Twitter profiles coming together to try to perpetuate cryptocurrency scams. These bots are a nuisance, spreading spam and malware, as well as infiltrating online discussions.
All cryptocurrency investors should understand things are not always what they seem. Even the top exchanges may get involved with wash trading. This is a form of market manipulation in which someone with a significant position simultaneously buys and sells the coin to create misleading liquidity statistics.
The ancient philosopher Thomas Hobbes says people will always look for a way to cheat the system if they think they can get away with it. What do you think is going to happen with all of these new unregulated cryptocurrency exchanges popping up? If they think they can cheat the system, they will, and currently, they do.
I use to like Tether, it was a way to move money into fiat currency without actually buying the fiat itself. However, today it seems to be yet another form of manipulation. Tether makes up roughly 1% of the cryptocurrency market, yet somehow it is responsible for over half of the bitcoin trading volume each day. Something does not seem right with that.
Tether is supposed to have one dollar held in a bank for every Tether token out there, but many are skeptical that the creator Bitfinex is playing by their own rules. Bitfinex has been subpoenaed to make light of the situation.
We have several financial institutions trying to get an ETF to market, while thus far all have been shot down by the SEC, the Chicago Board Options Exchange (CBOE) seems to have the best shot to win approval due to their long-term reputation of excellence, new product innovation, and there bulletproof insurance. If any bitcoins get stolen, you can bet the customers are well covered. Many were counting on the SEC approving an ETF this month, but it will likely not happen until the beginning of 2019, but when it does, that’s when the real fireworks will begin.
In addition, we have other financial institutions trying to build up their crypto portfolio while the price is still low. Goldman Sachs setting up a 100% dedicated cryptocurrency trading desk, Bloomberg’s Galaxy Crypto Index Fund, Coinbase’s custodial services now set up for large institutional investors, Susquehanna getting into the mix trading millions of dollars of bitcoin for their wealthy clients, and now Blackrock, the world’s largest investment fund manager is looking to also get into the mix.
Microsoft and IBM have always been one step ahead in the blockchain space, and now we see other companies like Amazon, Google, and Facebook trying to make a footprint as well. These companies don’t move into an area unless they see big potential.
Now there are some serious player brining stability to the crypto markets. On top of the list is the Intercontinental Exchange (ICE), which is teaming up with several companies like Microsoft, BCG, and Starbucks, with a goal to allow everyday people to buy, sell and spend crypto assets.
We Need To Do Something
Despite the recent bumps in the road, bitcoin continues to grow and at an expediential rate, but with that comes some harsh setbacks. There are going to be those who want to take advantage of the momentary disorganization and try to steal or cheat the system. Because bitcoin is not a company but lives in cyberspace, that is just part of the reality of what it takes before we get to where we need to be.
For those who can remember back to the 90s, when the internet first started there was also no shortage of scams, fake professional looking e-commerce sites were popping up all over the place ready to take your credit card payment only never to deliver the product. If you were lucky, that would be the end of it. Otherwise, the less fortunate would have to chase down additional charges placed by the scammer once they had your credit card details.
This gave birth to a whole new industry of business, companies like Verisign were created to ensure sites asking for your credit card details were in fact who they said they were by creating digital certificates that employed encryption to online shoppers. Eventually, most fraudsters were stomped out. The same thing is happening in the blockchain space right now and with it, a whole new industry is taking shape to change blockchain for the better.
By the way, Verisign’s market value exploded from $100 million in 1998 to almost $27 billion in 2000. That’s a 26,900% increase in just two years. The same thing is happening in crypto right now if you know what names to get into.
There is no doubt bitcoin still has issues, which is why we continue to see such wild volatility. Bitcoin wants to move higher, but it keeps getting pulled back down by the fraudsters that want to cheat the system. Things are changing quickly, and for the better, it won’t be long before those scammers get stomped out, and when it happens, bitcoin will be left with little to hold it down.
Bitcoin is a highly volatile investment that can move on investors without warning, but over the long term, the issues it faces are going to be addressed and solved, just like with every other technology this world has ever seen.
I don’t see bitcoin going away any time soon, it continues to get more integration with societies, more companies accepting bitcoin payments, and more users and more transactions as we move forward.
As it sits today, bitcoin is not without its risks, and as it slowly moves pasts its flaws, it inches its way closer to perfection. One day it will get there, the question is will you own it and ride it up or will you buy it and use it once it gets there?
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