With Cryptocurrency companies like Bitcoin and Litecoin blowing up on the stock market recently, you probably reacted to the news in one of two different ways. Either kicking yourself for not investing in these companies early on or kicking yourself for not investing enough.
Many were shocked to see the stock in these companies skyrocket, with even a lesser known companies like Litecoin reaching a 1,400 percent increase in its initial value this year alone. But with Cryptocurrency (the term used for online-only digital cash companies such as Bitcoin) being such a brand new industry, how can anyone predict whether or not they will have the same value a year from now let alone the next few months? In other words: is Cryptocurrency really the wave of the future or is it just a passing fad?
Chicago based data company Hedge Fund Research (HFR) announced today that it will be launching a comprehensive database that will show the general public which major hedge funds are investing in Cryptocurrency companies that have advanced Blockchain technology, which is a new kind of software that these companies use to verify transactions and calculate exchange rates. Because this new industry is one of the only uncharted frontiers in today’s market, HFR hopes to help regular people understand their complexities if they choose to invest in it.
Kenneth J. Heinz, President of HFR, explained both his excitement and in a press release regarding this new database. As he sees it, the growth of this industry is inevitable but “while the recent performance has been exciting, trading and investing in these evolving areas requires specialized expertise and involves substantial volatility and risks, both real and structural.”
As of now, financial experts are scrambling to understand this large uptick in value and are having a hard time reaching a consensus on the future of this new currency. In a recent roundtable discussion with 5 different financial reporters from NerdWallet, titled "Is Bitcoin Safe?", the writers each tried to find out whether or not people can view investing in Cryptocurrency as a safe bet.
Investing writer Andrea Coombes tried to explain the sudden turn around for Bitcoin by saying “With Bitcoin, the underlying value is in question. I mean, you can lose money on a mutual fund investment, but if you believe U.S. and international companies are likely, over the long haul, to continue to make money, you can trust that there will be a general move higher for stocks over time. With Bitcoin, it’s hard to even understand what the value is. The value is in the demand itself right now.”
Others were a little less optimistic, as fellow investing writer James Royal sees the meteoric rise in Cryptocurrency stock as a fluke and an investment that people should avoid like the plague. “I’ve gone on record saying that it’s worthless or near-worthless,” said Royal, “I’m not the only one; super-investors such as Warren Buffett have made similar comments. Part of the issue is that as long as Bitcoin remains this volatile, it’s useless as a currency.”
All of this begs the question - is the main allure of investing in Cryptocurrency the uncertainty of the industry as a whole? No one truly knows if it will catch on in the end. Either way, those who held onto their stock are most likely over the moon with the recent news. It just remains to be seen if the value keeps rising or comes crashing down to Earth in the weeks to come.