Bitcoin

Bitcoin Made a Comeback, But Is That Your Best Investment Option?

bitcoin bubble

Owners of the cryptocurrency Bitcoin should be pretty happy as the currency continued to climb on Wednesday. This was after a five-day disaster in the world of cryptocurrency. After some new regulations from Asia, digital coins started to crash, and they continued to spiral downward after some major US and UK financial institutions changed rules around how you can purchase cryptocurrency. Meaning, if you want to use a credit card to purchase the coins, you are no longer able to do that. Which sent Bitcoin on a bit of a downward spiral.

Bitcoin was valued at less than $6,000 the other day, for the first time since November. But let’s not jump to too many conclusions. November wasn’t that long ago. And I mean, it was bound to happen at some point, wasn’t it? That said, the coins are back up, trading at well over $8,000. Data from CoinMarketCap shows that all coins have been making up for lost ground for the past 24 hours. Bitcoin is up 25%, Ethereum jumped to over $820 for a 31% increase, while Ripple is approaching the $0.80 level, which marks a 21% improvements. Some coins are seeing even bigger gains, like Neo (54%) and Nem (45%).

Bitcoin

Don’t celebrate just yet. All this means is that you should be more cautious (or even worry) about your investments. Worry maybe isn’t the right word.  Worrying is useless. (Says the perpetual worrier) But being cautious is always a good thing. Especially when it comes to investing. Goldman Sachs, though, is worrying for you. They are concerned about the correlation between the prices of different cryptocurrencies.

“The high correlation between the different cryptocurrencies worries me,” Steve Strongin said in a note to investors. “Contrary to what one would expect in a rational market, new currencies don’t seem to reduce the value of old currencies; they all seem to move as a single asset class.”

The concern is the fact that no one knows when the next crash might happen, so you need to act responsibly with your investments. The market capitalization of all coins is closing in on $390 billion, after dropping to around $325 billion in previous days. Crypto coins may have had a rough start of 2018, but that market cap is still astronomical compared to early 2017 when the total market cap for digital currency stood at $18 billion. With this kind of shift in such a small amount of time, no wonder Goldman Sachs is concerned.

bitcoin

I understand the want to invest in something in order to make a quick buck. Trust me, I want nothing more than to be able to turn around in a few months and pay off my debt. But that’s not a realistic way of approaching that goal. I’m not saying don’t invest in cryptocurrency. But I am saying make sure you understand what you’re getting into. And maybe Bitcoin itself isn’t the one to invest in. There are many others out there, so do your homework. I am not trying to give you financial advice, so please don’t take it that way. I am trying to explain to you what your options are and hope that you make wise decisions.