I must confess to being reasonably new to ‘Crytpo’ investing. I have been aware of it as an investment alternative for quite some time but have always been cautious about it as I have no way of knowing what it should be valued at. I would also advise any potential investors of this as well. It is very difficult to know what direction the price will go when there are no valuation metrics. With shares, at a basic level you can value a share as a multiple of it’s annual earnings. Historically on average this tends to be 15 (so a share is valued at 15 times it’s annual earnings) but I am not aware of any metric for Bitcoin. There is some Technical Analysis available where prices are charted over a long period of time but no valuation methods like those used in the more traditional assets such as property and shares.
That said, Bitcoin/Crypto does have a more significant role in the future economy with notable business people endorsing it recently such as Paul Tudor Jones and Elon Musk. In a conversation on LinkedIn with an Irish Fund Manager, he advised me that Bitcoin was too volatile to be considered for mainstream funds in Ireland, but that is changing the US and will likely change here. Demand may drive that as more and more people are interested in Crypto as an investment so the funds industry may have to provide a product to meet demand.
It is unclear if Crypto in it’s current form will be accepted as a mainstream digital currency in the future. Will the likes of Amazon accept a payment which could decrease by 10% overnight? Perhaps Stablecoin will have a greater use in High Street Business
With any niche or specialised investment, I would recommend doing thorough research and limiting your exposure to the asset to 15% of your overall fund/money.
This article is opinion only and does not constitute investment advice.
— 2 Comments —
Some good points in there and I definitely think that it is a high risk strategy at the moment but also high reward given that the whims of an industrialist can cause sharp price spikes. For example Dogecoin is up 800% in one month!!
Done carefully, the risk can pay off though? What do you think?
I agree Amit. I think Crypto has a long term value with some hair raising short term drops! It’s difficult to know what form it will take as Cryto is more used as a store of value instead of an actual currency at present. It’s beginning to change but has a way to go yet.