Tempted to invest in Bitcoin? Demand for the cryptocurrency is pushing its value to record levels, explains Pie Funds CEO and Founder Mike Taylor.
The cryptocurrency Bitcoin reached its all-time high of over US$40,000 earlier this month, piquing the interest of many. I haven’t spoken about Bitcoin since the last peak at US$20,000 in December 2017 (after which it promptly collapsed to below US$5,000). So what is Bitcoin, and why is it now trading (at the time of writing) at around US$39,000?
What is Bitcoin?
Bitcoin is a digital currency (or cryptocurrency) created in 2009 as an alternative to government-issued currencies. There are no physical Bitcoins - it’s created, traded and stored within a computer system called blockchain technology. It is not legal tender.
View a graph of Bitcoin performance here
Bitcoin is a speculative investment
Demand is driving the value of Bitcoin higher and higher. But to me, Bitcoin is speculative mania and a pure bubble. It was created out of thin air, it’s not real money, and anyone buying it is just gambling on the prospect it will be worth more tomorrow. There are also risks involved such as a lack of regulation, and the systems and people who use them are often a target for hackers and scammers. Of the people I know who are trading it, not one is actually going to use it, if they could, that is. It’s not even that easy to buy. Bitcoin, and any of the other cryptocurrencies, have been created using blockchain technology by those looking to create a way around government-backed fiat money. Perfect for terrorists and the like. Its value, however, thrives on the bigger fool theory.
If you believe in the complete collapse of the financial system, you like to have a punt, or you think I’m completely wrong, then go ahead. But remember for something to be considered money it must be accepted by the general public as a method or medium of exchange, be a unit of accounting, and a store of value. Bitcoin currently fulfils none of these. I can’t use Bitcoin on Amazon, its price is quoted in USD not the other way around, and the value is extremely volatile.
To download our product disclosure statements, go to www.piefunds.co.nz. Past performance is not an indicator for future returns. This information is general in nature only. You may wish to discuss with an expert before relying on it.