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Volatility in Bitcoin

Investments make up approximately one-sixth of the U.S. GDP. These days Bitcoin is one way people are investing their money. Bitcoin is a form of digital currency with a market cap of over $7 billion. The typical investment strategy of buying low and selling high is utilized by traders of this cryptocurrency. Recently, Bitcoin has experience its toughest losses so far; the virtual token fell as much as 8.4%. This is in part due to the many inherent risks of BTC, decreasing the value of this new cryptocurrency.

There are several reasons to explain the phenomenon: first, it doesn’t have enough transaction volume, which makes it not qualified enough to be a currency. Second, it suffered from a series of hacker attacks, one of which caused the trading platform to crash down on June 15th, 2017. Security problem became the biggest concern for investors. Third, the overall technology market experienced a serious downturn during the past few months. Thus, some investment bankers were not optimistic about the future of Bitcoin’s worth. It’s important to remember the number one rule of investing is diversification. So whether or not you think Bitcoin is amazing, don’t put all of your eggs in one basket.

“So buying into Bitcoin has, at least so far, been a good investment. But does that make the experiment a success? Um, no. What we want from a monetary system isn’t to make people holding money rich; we want it to facilitate transactions and make the economy as a whole rich. And that’s not at all what is happening in Bitcoin.”  

——   Paul Krugman

  • What are other reasons for the depreciation in Bitcoin’s worth?
  • Is there any potential for Bitcoin’s past investment popularity to resurface in the future? Why or why not?
  • Would YOU invest in Bitcoin?

By Collette, Kaitlyn, Ruofan

8 thoughts on “Volatility in Bitcoin

  1. Chris Randall

    Bitcoin has reached a record high recently at a price of $6,671.87. A year ago to this day, bitcoin was worth $700.30. I do not think bitcoin has depreciated much in the last year. I think that people continue to invest in bitcoin because they are hopeful for a large spike in bitcoins price. Other crypto-currencies have surface, pushing bitcoin away from large corporations. The most famous rival to bitcoin is a currency called etherum, and JP Morgan uses etherum and blockchain technology to invest. Bitcoin is extremely risky to invest in because there is nothing backing bitcoin, but I would invest in bitcoin because throughout bitcoin's history it has quickly recovered after crashes.

  2. Ellie Bradach

    According to the graph, Bitcoin seems to rise and fall on a daily basis. Bitcoin’s rampant fluctuation shows that this depreciation is relatively normal and just a part of Bitcoin’s regular volatility. For this reason, I think that Bitcoin has a lot of potential for the investment to popularize once again. I would not invest in Bitcoin because it is not constant enough.

  3. Julia Moody

    Another reason for the recent depreciation in Bitcoin's worth is that Jamie Dimon, the CEO of JPMorgan, stated that Bitcoin is a "fraud" any anyone who invests in it is "stupid". Dimon made a variety of arguments about why Bitcoin won't succeed during his interview with CNBC, which caused Bitcoin prices to drop 2.7% before recovering. The skepticism of highly regarded leaders in the banking world could be another reason for Bitcoin depreciation. Since Bitcoin has been been becoming more and more well-known over the years, I think its popularity will definitely resurface and grow. I personally would not invest in Bitcoin because of its volatility, security breaches, and lack of government backing.

  4. laniere20

    Before I invested in Bitcoin, I would need to see an increase in security. The modern world is constantly trying to make things easier, and the easier method seems to always involve the internet. Unfortunate, the internet brings about a security risk, and this is something that all companies that rely on the internet need to be aware of.

    One reason why Bitcoin for the depreciation in Bitcoin's worth could be due to competitors. There are other digital payment systems, such as venmo, that are rising in popularity and are therefore causing a depreciation the Bitcoin.

  5. mcconnellm20

    It would be really hard for me to trust Bitcoin given everything that has happened. Therefore, I would probably not invest my money in Bitcoin. In order for Bitcoin to gain the trust of people again, it is going to have to prove that it has better security. In today's world, hacking is a serious concern. When people are investing large sums of money, they want to know that it is going to be protected. Clearly, Bitcoin has not proven that people's money will be secure from hackers. I think that Bitcoin will have the opportunity to bounce back and become popular once again. However, it is going to take a lot of improvements. Bitcoin is going to have to prove to everyone that it has improved its security. This might be hard to do even if it finds a way to increase security.

  6. mizeo20

    Having a decent sized position, I am confident Bitcoin will continue to appreciate. People time and time again have questioned the security, the longevity, and value of Bitcoin. Personally, I believe there has emerged a witch hunt on Bitcoin, and many of these individuals are referring to the popularity of tulips in the Netherlands. They say that Bitcoin is like these tulips and it only has value because people assigned it to it. They say Bitcoin is simply a mob mentality; however, as we have seen in over the course of this year, and this past month especially. Bitcoin has staying power. When there was speculation of regulation by Governments, the price dropped, but it quickly rebounded to new highs. I think regulation of Bitcoin will be a good thing; it will help risks with security. We're beginning to see more banks and investors take it seriously. The Winklevoss cryptocurrency ETF for example.

  7. the prof

    Is Bitcoin money?
    • is it useful for transactions, or are most people holding not turning to bitcoin to buy or sell (legal) goods and services?
    • is it a liquid asset, without paying high transaction fees?
    • is it a reliable store of value? is there any reason to think you can liquidate it without taking a large loss? is there any reason for the price not to be $200?
    • is it a unit of account?
    • is it at least a collectible, something you can display on your office wall to remind you of the basics of investment, or serve as a conversation starter?

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