Cryptocurrency Bitcoin has enjoyed another storming weekend. Last time I checked its price on Friday, it was stable at around $8,000. Today, it was up around 12% in Asian trading to $8,938, its highest price since May last year. So what happened?
Actually, with Bitcoin, nobody really knows. Last time I looked at this crazy crypto, people were pinning this year’s dramatic resurgence on everything from capital flight out of China to a New York blockchain conference.
Money is pouring into alt-coins, around $25bn over the last day. Bitcoin’s price has jumped 69% in the last month alone. Litecoin is flying.
I’ve been trawling the digital money sites and, as ever, rumours and theories abound. Some pin the jump on greater institutional interest, with E*Trade launching a trading service for Bitcoin, Fidelity Investments lining up a platform for its corporate customers, and US telecommunications giant AT&T ready to accept Bitcoin through payment provider BitPay.
Even criticism has been taken as praise, with claims by JP Morgan analysts that Bitcoin is trading above its intrinsic value seen as an admission that it actually might have an intrinsic value.
So now there’s all the standard talk of Bitcoin hitting $11,000, or $28,000, or some random figure plucked out of the air, along with equally predictable warnings of a crash.
The other big news is that Facebook now plans to launch its own crypto in 2020, called GlobalCoin. CEO Mark Zuckerberg has even met Bank of England governor Mark Carney to discuss the risks and regulations.
It’s also been talking to Western Union, Visa, and Mastercard to work out how Facebook users can use GlobalCoin to transfer money to each other and make online purchases.
The alt-coin community sees Facebook’s world domination plans as counter to the free-spirited crypto ethos, and is sniffy about what it sees as a desperate attempt to diversify revenues away from advertising.
They say it isn’t a challenge to Bitcoin at all and the weekend price surge appears to bear this out. If anything it might help, by bolstering crypto respectability. It’s beginning to look as if they really are here to stay.
Curb your enthusiasm
Bitcoin is getting traders excited but please, tread carefully. If you rush in now, you’re buying after the event. The quick gains have been made and the higher price leaves you vulnerable to a correction. As ever, only invest money you can afford to lose.
At the Fool, we believe the bulk of your investment wealth should be in the stock market (also having a good year, with the FTSE 100 up 8.7% year-to-date). Your money is invested in companies with an intrinsic value that can be measured in a host of ways.
Unlike cryptos, stocks also pay an income in the shape of the dividend, which you can reinvest and roll up for future growth. Some companies now yield 10% or more a year. Naturally there are risks, but you can reduce these by diversifying between different companies, sectors and regions, and leaving your money to grow for decades.
Have a crypto flutter by all means, but that’s all it should be.
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Harvey Jones holds the tiniest fraction of a Bitcoin but none of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.