TCR TOP STORIES
Home / Bitcoin / Betting On Bitcoins? Here’s Why You Should Reconsider

Betting On Bitcoins? Here’s Why You Should Reconsider

It’s a well-known fact that investing your money not saving it makes you rich. However, if you want to make investments that are relatively risk-free then bitcoin is probably not for you. The recent QuadrigaCx scandal is a hint at the chaotic progression of the financial future of cryptocurrency. You’d be much better off spending your money gambling than with investing in bitcoins and cryptocurrency that is highly volatile.

Although the returns may seem high to the potential investors, the volatility i.e., the risk involved in investing in bitcoin is not often taken into consideration. Here is a comparison of one of the stock market investments vs. cryptocurrency investment risks.

Over the past five years, the S&P 500 – a stock market bellwether – has delivered an average annual return of 11.5 percent, with a standard deviation of 11.25. In any given year, the S&P 500 has a 95 percent chance of returning between -11 percent and +34 percent.

Over the past five years, the Grayscale Bitcoin Investment Trust has delivered an average annual return of 60 percent, with a standard deviation of 81. That means that, in any given year, Grayscale’s Bitcoin fund has a 95 percent chance of returning between negative ~100 percent and +222 percent.

A plausible explanation for the rapid hikes and drops in bitcoin would be the fact that retail investors (investors that have small amounts invested in bitcoin) cause bubbles and the value drops rapidly if the institutional investors(investors who either mine bitcoins or have bought large amounts of it) start actively participating. Other factors also include high-security risks, the uncertainty of bitcoin’s future and the fact that bitcoin is very much like gold and its value often fluctuates.

Thus, with all the above conclusions, it could be said that investing in bitcoin is not the ideal choice for anyone who is looking to create assets for themselves in this domain with calculated risks because of the high unpredictability of bitcoin value that can fluctuate within moments.

About Umme Haani

Umme is an aspiring engineer who immensely enjoys writing and technical writing brings the best of both worlds under one roof for her.

Check Also

Taiwanese Billionaire wants to merge Libra and China’s Digital Currency

Taiwan’s billionaire, Terry Gou founder and CEO of the manufacturing colossus Foxconn wants to merge …

Leave a Reply

Your email address will not be published. Required fields are marked *

Please wait...

Subscribe to our newsletter

Want to be notified when our article is published? Enter your email address and name below to be the first to know.