The Strategist

Is it worth buying Bitcoin now?

02/17/2020 - 09:19

Last week, value of the most famous digital currency, Bitcoin, stopped above the level of $ 10 thousand. Since the beginning of the year, the rate has grown by more than 40%. This was facilitated by geopolitical tensions in the Middle East, the launch of Bitcoin options, and the spread of the coronavirus epidemic in Chinas.

On February 9, the value of the most famous digital currency Bitcoin exceeded the level of $ 10 thousand for the first time since September last year. According to Bloomberg, on February 13 it reached a six-month high of $ 10.5 thousand, which is almost 5% higher than the values of the end of the previous week. On Friday, quotes stabilized near the $ 10.25 thousand mark. The capitalization of the main virtual currency amounted to $ 186.8 billion. Etherium, the second cryptocurrency by capitalization, showed a more significant increase. On Friday, its value reached $ 272.3, adding almost a third of the price in five days. As a result, the capitalization of Etherium exceeded $ 30 billion.

Confident growth of quotations has been observed from the very beginning of the year. In a month and a half, the Bitcoin exchange rate has grown by more than 40%, and the Etherium rate has doubled. This growth occurred with a saturated news background. In early January, Iran attacked the military facilities of the US coalition forces in Iraq, which increased the demand for alternative assets. January 13, Chicago Mercantile Exchange (CME) launched trading of bitcoin options. In recent weeks, the market has been monitoring the spread of coronavirus in China.

In such circumstances, interest in digital currencies has grown not only from private, but also from institutional investors. Last week, the daily trading volume of CME bitcoin futures reached $ 600 million, while they rarely exceeded $ 300 million in the second half of 2019.

The high interest of institutional investors in Bitcoin is indirectly indicated by the quotes of exchange-traded index funds, in particular the Bitcoin Investment Trust (GBTC), focused on this asset. With the help of such funds, professional investors can invest in bitcoin without violating the investment declaration.

However, in addition to the benefits, there are infrastructural risks. Last year’s research by Bitwise Asset Management, presented in the SEC, says that about 95% of trading volumes on non-regulated exchanges were either fictitious or had no economic sense. In addition, very often technical failures occur at such sites, or they are subjected to hacker attacks which may result in loss of investments. Also, there are the frequent hacker attacks on such sites, the result of which is the theft of digital currencies.

However, private investors can buy bitcoin derivatives that are available on regulated foreign exchanges.