When I very first heard about Bitcoin and blockchain in the beginning of last year 2016, it was only about $400+. Now price is about $17,000. Needless to say, it's a crazy surge with all the hype. It made the mainstream news.
Being an investor and trader, Bitcoin will definitely catch your eye.
Whether you believe in it or not. I think most investors and traders will sort of envy Bitcoin's surge...while they've been either making much less in the stock market or even losing money.
I saw on Straits Times they interviewed an unemployed uncle on why he bought Bitcoin. He compared it to TOTO, saying that TOTO hard to win but Bitcoin surging everyday.
From such an example, we can sort of know why so many people are going in on Bitcoin: it's more of gambling.
I am not so much against gambling, but I believe that the line between gambling and investing/trading is increasingly blurred in the case of Bitcoin.
Right now everyone's saying that it's a big big bubble, don't buy don't buy. Other than being a bubble, there are also some other risks to consider before you buy Bitcoin or any other cryptocurrency:
1) Counterparty risk: there's a very high risk of transactions not being fulfilled because many of the crypto-brokers are unregulated, at least by the Singapore government. This means you might have problem selling Bitcoin.
2) Broker risk: If you're afraid to invest/trade through custodian accounts in SG, like Stan Chart, this will be a nightmare because many crypto-brokers are unregulated. Imagine you want to cash out, but it isn't that easy.
3) Not fully understanding blockchain technology: even now after reading about blockchain technology for about a year, I still do not fully understand what it actually it and how it can help the economy or society. Personally, if I don't understand something, I wouldn't touch it. Unless I'm gambling.
4) There are too simply too many coins. If blockchain was such a great, universal and omnipotent technology as claimed to be, how would creating many different versions of coins be actually useful? Wouldn't it cause further fragmentation of the market?
5) Exiting is much, much harder than entry. From my humble experience trading, I have learnt that exiting a trade is in fact, much much harder than entering a trade. I have problems knowing when exactly to take profit. This in my opinion is even harder than stop-loss actually.
6) There is no underlying asset to support the prices. I find hard to comprehend why I should buy 1 bitcoin when I do not know the true value of what it can really do, nor can I see or touch it. What I only know is that there is a resell value.
That being said, you can certainly make money in a bubble. I'm sure those who've traded crypto before have made money.
But the more important question is....are retail traders and investors able to cash out in time? How far is that resell value? What's the benchmark for it?
With all the risks associated with cryptocurrencies, I've decided not to touch Bitcoin. But some of these risks can be mitigated if you buy Bitcoin ETFs like GBTC. But still won't touch because I feel it's a true bubble.
I'm also afraid that trading Bitcoin will severely distort your trading/investing acumen. Because it's so easy to make money. Whatever experience or knowledge you've learnt from investing/trading stocks doesn't matter anymore. Soon you'd be thinking to yourself, might as well I put all my money on Bitcoin. Greed will probably creep up and that's the number 1 killer for retail traders and investors. Of course, you can always use newly released Bitcoin futures to hedge, but it wouldn't change your mindset.
These are just some of my personal opinions on cryptos and Bitcoin. No doubt you can definitely make money trading bitcoin, but the risks are too much for me to take. Hence I will stay away from Bitcoin and focus on stocks instead.
I've also attached an interesting infographic on Bitcoin that everyone can take a look at it.
Feel free to comment below on what your thoughts are on cryptos and Bitcoin! We're all here to learn from each other in this community.