This week’s provided another seminal moment in the history of Bitcoin. Prices of the virtual currency have rocketed to new record peaks, a whisker below $20,000, taking out the prior record struck almost exactly three years ago.
Demand for Bitcoin has rocketed as institutional investors have piled in en masse. The value of coins has soared 40% in the past month alone as risk appetite has improved across financial markets.
PayPal’s announcement in October that it will let users trade and purchase goods with the digital asset has also boosted Bitcoin prices too. News that the China Construction Bank will allow buyers of $3bn worth of bonds to purchase in Bitcoin has helped as well. These developments have been viewed as a thumb’s up to the legitimacy of cryptocurrencies.
Beware of Bitcoin
Bitcoin’s electrifying price action over the past month has led to some supremely giddy price forecasts for 2021. A leaked report from Citigroup shows that the experts there expect the cryptocurrency to surge as high as $300,000 per coin next year!
I’m still not convinced to buy the new-age currency though. There are a number of reasons why I won’t be investing in Bitcoin any time soon:
- As we’ve seen, prices of the crypto asset can soar in a very short timeframe. But they can come crashing down to earth as rapidly as they rise. Last time Bitcoin hit record highs in December 2017 it slumped from peaks of $19,873 to below $8,600 less than two months later.
- Bitcoin’s volatility makes it particularly dangerous given that investors usually need to be highly leveraged to make decent returns. This can cause losses to rocket.
- The ongoing failure of a Bitcoin-backed ETF hitting the market in the States shows that doubts over the legitimacy of crypto assets remain significant.
I’d rather buy UK shares
This is why I prefer to spend my money on UK shares than take a gamble on Bitcoin. Stock markets can be volatile, as 2020 has shown. But a well-balanced portfolio of quality stocks won’t wildly oscillate in value like crypto exchanges have recently. Investors don’t have to be highly leveraged to make decent returns from shares. And stock investment gives individuals a legitimate claim to a slice of a company’s profits and assets. Debate over Bitcoin’s inherent value, meanwhile, rages on.
I can understand the appeal of buying Bitcoin. Stories of people making millions by playing the crypto markets can be found everywhere. But there are plenty of individuals who have become millionaires by investing in UK shares too.
In fact, the stock market crash of 2020 provides an excellent opportunity to boost chances of making millions with UK shares. Investors can buy top-quality stocks today that were oversold earlier in the year at little cost. They can then sell them at a huge mark-up in the years that follow. It’s a strategy that helped the number of Stocks and Shares ISA millionaires surge during the 2010s. And there are plenty of high-quality cheap stocks for investors like me to choose from to make a fortune too.
Royston Wild has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended PayPal Holdings 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.