This could prove to be a momentous week in the history of Bitcoin. Online payments colossus PayPal could allow customers to trade Bitcoin and other cryptocurrencies. And they could use them to buy products from the 26m retailers which use its service. It’s seen as a possible game-changer in the widespread use of digital currencies.
It’s no surprise Bitcoin prices leapt following the news. It hit levels not seen since summer 2019 at $13,200. It’s given back some of these gains on Thursday but, at $12,800, it remains a whopping 44% more expensive than it was at the start of 2020.
Chief executive of deVere Group, Nigel Green, for one has claimed the move represents “a major step forward towards the mass adoption of digital currencies.” He believes that the likes of Bitcoin will play a critical role in an increasingly tech-based global economy.
“The blistering speed of the digitalisation of economies and every aspect of our lives, including financial lives, shows that there will be a growing demand for digital, global, borderless money,” Green suggests.
I agree that the increasingly digital world presents a wealth of opportunity for investors to tap into. But I’m not convinced Bitcoin is really the top cash-building asset class we need.
Huge questions remain over the underlying value of cryptocurrencies. And investment experts like Warren Buffett are vociferous in their belief that the likes of Bitcoin are virtually worthless. Meanwhile, the drawn-out process of getting a Bitcoin-backed exchange-traded fund (ETF) signed off by the US Securities and Exchange Commission remains unresolved. This casts further doubts on the future of digital assets.
Finally, I’m put off by the huge price volatility that comes with Bitcoin. During 2020 it’s swung from lows around $4,900 to those recent highs, up more than $7,000. This sort of choppiness can end up costing investors a fortune. And particularly when you consider the high levels of leverage that Bitcoin trading attracts.
Looking past Bitcoin
Why take a chance with your money with Bitcoin when there’s so many other ways to use your cash? I prefer to buy UK shares in a tax-efficient Stocks and Shares ISA.
Unlike the business of buying into crypto assets, investing in companies on stock exchanges has been around for centuries. It’s not without risk, of course. I’ve been burnt by buying shares in Cineworld. But calamities like this are the exception rather than the rule. It’s why studies show that long-term investors in UK shares make an average yearly return of 8-10%.
And there’s plenty of UK shares that allow investors to get rich from our digital world. Online retailer ASOS, logistics giant Tritax Big Box REIT, and address verification specialist GB Group are great ways to play the e-commerce theme. I can invest in Iomart to get rich from the rising use of cloud computing too. These are just a few ways you can use your cash without having to endure the huge risk that Bitcoin still entails.
Royston Wild owns shares of Tritax Big Box REIT. The Motley Fool UK owns shares of and has recommended PayPal Holdings. The Motley Fool UK has recommended ASOS, Iomart Group, and Tritax Big Box REIT and recommends the following options: long January 2022 $75 calls on PayPal Holdings. 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.