There are several stocks that one can hold that are incredibly volatile- among these many rare metals and, as recent history has shown several tech companies and even the service industry. Each of these is subject to various market forces and investor sentiment. However there is one class of investment that exhibits volatility without seeming logic – it is simply not subject to market forces outside of the whims of investors – and that class of investment is cryptocurrency. The reason for the volatility of this class of investment is that – to put it simply, it is not backed by any government. It is not subject to the outputs of industry nor the volatility of government debt or a governments balance of payments.
The most famous of these is Bitcoin – and those who got in at the ground floor of this cryptocurrency have seen themselves become millionaires – at least on paper. However this is not to say that investment in Bitcoin has not been a white knuckle ride.
In 2010 the value of a single Bitcoin skyrocketed. Although the prices at that point were modest it was sign of things to come. During that year the value of a coin went from $0.0008 to $0.08. When one sees that sort of jump it brings to mind historical frenzies round investments which turned out to simply have very little value – the Dutch Tulip Mania which took place in the 17th century comes to mind. Fortunes were lost when investors made the decision to invest in tulip futures – investing in varietals which had not even been planted. That mania saw entire business empires crash of course it’s helpful to have a outsource accounting company resource. Is Bitcoin any different – after all – it’s a currency that has limited utility value. Although investors like Elon Musk seem to blow hot and cold about that utility – and despite the best efforts of advocates of virtual currency, buying a physical asset with Bitcoin remains an elusive goal – although it must be said that opportunities to spend Bitcoins are growing – albeit at a slow pace.
Bitcoin was designed by its inventor, Satoshi Nakamoto for everyday use – and also to avoid the charges that traditional banking institutions levy on their customers. In effect those banks are charging their clients when they are leveraging deposits and making a fortune off everyday transactions, something that Satoshi Nakamoto saw as unacceptable (as do many other people who use banks).
Be that as it may – and even taking into account the rise and fall of Bitcoin value throughout its history, it does have its advantages when it comes to being a hedge against inflation – it may be volatile, but that volatility has very little to do with inflationary pressures.
The pandemic showed just what Bitcoin was capable of. Amidst global gloom and doom which impacted the traditional markets Bitcoin shone. Each Bitcoin was trading for $7,200 at the beginning of 2020. By November of that year its value was $18,353. It’s difficult to imagine an investment that would outperform that sort of growth.
This is an investment that is only for those who have an appetite for risk – but for those with nerves of steel the payoff can be incredible.