Should you invest in Bitcoin in 2017?

In the past few days, the price of bitcoin has been the major subject of discussion in the global market. It began with the rollercoaster surge of the cryptocurrency to a high of $1,153 the first time in three years. It eventually came crashing to $887.47 – more than 11% according to data from the Coindesk Bitcoin Price Index, sparking different speculations the digital currency was experiencing déjà vu.
The sudden drop has been attributed to recent efforts by the Chinese government to boost the yuan plus capital controls across many countries. China controls the majority of bitcoin trade activities, hence has a big influence. The authorities recently announced that it had issued warnings to major exchanges in China or otherwise discussed their practices within a legal context.
However, some analysts including Peter Smith, chief executive of bitcoin wallet Blockchain, remain optimistic that the bitcoin market will stabilize somewhere “in the $850 to $1,000 range”.
The question many potential investors’ may be asking is whether the time is ripe to invest in bitcoin. The simple answer is as Jesse Hallet, Javascript Engineer at Jive Software puts it; depends on whether you are willing to accept the risk involved.
Without mincing words, bitcoin is a very volatile currency. The value of the currency is only as strong as the trust that the bitcoin community repose in it. In other words, it holds an intrinsic value and not a real value like gold, silver or your land in Lagos. The three commodities will always hold value and can be transacted no matter what happens in the world. Whereas for, if the power companies were to cease supplying electricity and all power generators suddenly pack up, the bitcoin on your device will become worthless immediately. The same applies to your paper currency.
In essence, as long as the faith we place on technological advancement continues to grow, the result is the growth of phenomenon like bitcoin and other digital currencies.
Fluctuations in the value of bitcoin in the past have ranged from bitcoin-related Ponzi schemes to a drop in the Chinese stock market. In November 2013, the currency rose to a record $1200 per bitcoin. The value dropped a few weeks later to less than half of its high and further down to $200 in early 2015. It began climbing back up in 2016 and got to its present high.
In the light of this, your decision to invest in the coin is totally personal. If you have the appetite to stomach the risk, then go ahead. There are reasons why it could be a good investment in the long term though.
One reason analysts cites in favour of investing in bitcoin is supply. Bitcoin supply is fixed as there are only 21 million of them in existence. According to Laura Shin, Forbes bitcoin analyst, “once 21 million bitcoin are released (a number that will be reached around 2140), the system will stop creating new coins.” The fact that bitcoins are not released arbitrarily ensures its stability over time. She also noted that over the next hundred years or so, the rate at which the supply of bitcoin increases will slow – every four years, the number of bitcoin being released will be halved, further preserving its buying power.
According to Chris Burniske, author of “Bitcoin: A Disruptive Currency”, “Given its predictable growth and ultimate fixed supply, bitcoin could become a store of value superior to fiat currencies in the long term.”
Another reason to consider in favour of bitcoin is that as it becomes more ingrained in society; individuals, groups, businesses and government embrace and use it for day to day transactions the less volatility the digital currency experiences. Already businesses are starting to pay more attention to the digital currency. Recently the Nigerian central bank partnered with the Nigerian Insurance Deposit Commission to set up a committee to study bitcoin.
Jesse Hallet projects that if bitcoin become stable, as the world economy and the number of coins on the market does not, the value of bitcoin should gradually increase over time. It is however difficult to speculate how much it will increase but if we are to consider Peter Smith’s forecast, the value of bitcoin may not be going back to its 2015 lows.
In general, should you decide to invest in bitcoin, ensure you are not doing so with funds you cannot afford to lose. Decide how you want to invest in bitcoin. Options include buying and waiting for the value to rise before selling. There are several bitcoin exchanges in Nigeria you can patronize.You can buy a select amount of coins, hold on to them and sell when you see the time is right. You may also want to mine bitcoins and generate them that way. Mining takes a longer time though.

 

FRANK ELEANYA