At the beginning of 2018, buying Bitcoin might have seemed like a fantastic idea for many different reasons. Chief among which was the fact that with so much money going into developing cryptocurrency infrastructure, it looked as if it was only going to be a matter of time before this became a widely accepted method of monetary exchange.
Unfortunately, over the past 12 months, the Bitcoin landscape has changed significantly.
It looked as if the market was ticking along steadily during the first half of 2018. Although the price of the cryptocurrency fell from its all-time high, between January and March, the price stabilised and money flowed into the industry. The calm continued throughout the third quarter, but then, in the fourth quarter, all hell broke loose.
On November 13, the price of Bitcoin suddenly lurched lower, and then slumped again on November 18 taking the cost of the crypto asset to around $4,800 a staggering 75% below its all-time high.
Owners of Bitcoin have continued to sell ever since. At the time of writing, the cryptocurrency is changing hands for just under $4,000, 79% below its all-time high of $19,065 after a modest bounce from the one-year low of $3,185.
This kind of volatility is enough to scare off even the most resolute investor, and it is likely that most Bitcoin buyers, who entered the market at the peak at the beginning of the year, have already sold.
However, if you are still holding on here’s some advice on what I think you should do with your remaining bitcoins.
Buy, sell or hold?
A peak to trough decline of 85% might seem shocking, but in reality, this kind of volatility is not uncommon in the stock market, particularly with unproven, early-stage technologies and tech companies.
Take shares in Amazon for example. The company went public at the end of the 1990s, and the stock surged throughout 1999 rising almost 5,300% from its IPO until the end of the year. When the bubble popped, investors deserted the company. The stock fell a staggering 95% from its bubble peak. The same happened with Apple. Investors who owned shares in Apple heading into the year 2000, saw the value of their funds marked down by 71% by the end of the year. Shares in Microsoft lost 70%. All of these companies have since gone on to generate fantastic returns for investors with Apple briefly becoming the first company in the world to achieve a $1trn valuation earlier this year.
Will Bitcoin end up yielding the same kind of returns for its hardcore supporters? It is difficult to tell at this point. The cryptocurrency, and the technology that underpins it, blockchain, have certainly attracted plenty of attention over the past two years. Billions of dollars have been invested in developing the ecosystem surrounding cryptocurrencies with companies around the world working to get this technology into the mainstream.
These efforts could yet yield results. With this being the case, I think it might be worth holding on to your bitcoins for the time being, but acknowledge that this is still a purely speculative investment. I’m not a buyer at the current level, but if you already own it as a speculative play, it may yet pay off.
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Rupert Hargreaves owns no share mentioned. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK owns shares of and has recommended Amazon and Apple. The Motley Fool UK owns shares of Microsoft and has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.