At first glance, a loan program looks complicated. For example, if you reach out to reputable mortgage companies to find out what your options are, you will be presented with several that have varying terms and duration. The computations might intimidate you initially, but once you take the time to understand it, it will all make sense. They also have people who will explain all of that and guide you through the entire application process. It is not made complex for complexity’s sake. It is more about taking the financial interests of both the lender and the borrower seriously.
In the financial world, many people also think that the topic of cryptocurrency is a complicated one. They are baffled on how it works. One of its defining characteristics is that its value is on the volatile side. But it is for this reason some find it compelling from an investment standpoint.
A Backgrounder on Cryptocurrency
Cryptocurrency basically is digital money. It was created so users can have secure and anonymous transactions that can be traced permanently. All currency holders basically make a contribution to the blockchain, which can be seen as a universal ledger.
One way to earn yourself some cryptocurrency is by mining. Bitcoin is the pioneer and the benchmark currency, while all the alternative ones are aptly named as altcoins. Over time, people have seen many of them get launched only to lose traction later on and then eventually abandoned. Some of these were used as scams, capitalizing on the roller-coaster popularity of Bitcoin. At the positive end of the spectrum, there are enduring altcoins that are still holding their ground such as ethereum and litecoin.
In the stock market, the value of a share is said to be volatile if it experiences drastic changes in a period of time. Given that fact, you could say that bitcoin’s volatility rate is one of the wildest the world has seen. To provide context, take a look at its history. It was launched in 2009 with almost zero value. It breached the $1,000 mark at the start of 2014, but then it found itself valued at $300 during the first quarter of 2015.
In 2017, bitcoin broke the $1,000 barrier in March. September was a crazy month for this year, as it saw its value fluctuate greatly, going beyond $5,000 at the start of the month only to drop back to below $3,000 after almost two weeks. October saw it steadily climb, culminating in its all-time record high of $19,783.06 that it reached on December 17. Five days later, it went down sharply to the $13,000 mark.
2018 was uneventful and there was a perceived notion that the bitcoin bubble had burst. In the previous year, it made records, but this year’s December had it reach a relatively woeful $3,300.
Bitcoin in 2020 continues to prove how volatile it is. February saw it climb back to break the $10,000 mark. Then April came and it went back down to the $5,000 level, but it has since steadily climbed. September saw it playing around the $10,000 to $11,000 mark.
High Risk and High Reward
The basic advice of investors when it comes to shares or currencies is to buy low and sell high. When you put your money into something that is volatile, you are playing with uncertainty. Yes, you can say that taking in great risks will result in great rewards, but one could argue that even Bitcoin is susceptible to closure like the many altcoins that have become inactive. Its unregulated aspect seems to make governments take a cautious approach at recognizing it as a legitimate currency. This has caused its value to tank a few times in its lifetime.
On the other hand, if you came in at the perfect time, you might get some amazing gains in value. If you are planning to invest in it, make sure that you are willing to lose that money. Having this mindset will avoid any disappointment it may bring should things go on a downward spiral.
With the wild fluctuations in value it has experienced over the years, you can say that investing in bitcoin is for the brave. Getting into it requires that you have a lot of time to study its history and all the intricacies that surround it. If you want to dabble into investing in a volatile currency, you better make sure you come fully prepared.