Bitcoins price is down for the year and that’s pretty sad, but is Bitcoin currently a screaming buy? Are cryptocurrencies on general right now on sale and are they ready to be scooped up?
Bitcoin, the online cryptocurrency used to buy Alpaca wool socks and illegal drugs whose value dropped from $17.50 to pennies after a June 19, 2011 hack into it’s currency exchanger Mt. Gox has gotten plenty of media attention. If you had bought $10,000 worth of Bitcoin back then, lets say at $0.10 a piece, it would be worth $678 million dollars today.
In case you were drawn into the world of Bitcoin of December 2017 when it hit $19,500 a piece, logic would suggest you are now feeling the pain of it trading down 65% at roughly $6,800. A bigger basket of cryptocurrencies is down 64% since their peak in early January. According to Bloomberg, digital assets tracked by Coin Jolt were valued June 11 at $209 billion dollars, in early January 2018, their value was $830 billion dollars.
The latest trigger in the plunge is the freezing of CoinRail the 99th biggest exchange with 24-hour volume of $266 million dollars. Now in response to this hack, the South Korea based firm stated, “On June 10th, there was a system check due to the hacking attempt at DAWN, at present 70% of your CoinRail and token reserves have been confirmed to be safely stored and moved into a cold wallet and are in storage.”
That brings up a question. How do people make decisions? The argument being people have two systems for deciding. System one, going with their gut reactions, and system two, methodically weighing costs and benefits. From the theory his work investigates a range of heuristics.
So with that being said, what exactly moves the price of Bitcoin? Stocks are tough to value but at least in the United States and in other countries, their fairly rigorous standards for reportedly financial condition of publicly traded companies. Such standards make it possible for investors to apply a valuation theory. They are worth the value in todays dollars of their current revenue to securities.
There isn’t really such a theory or evidence of Bitcoins ability to generate cash flows, but there is no shortage of opinion about why Bitcoin prices were rising last December. 96% of economists surveyed by the Wall Street Journal in the early December 2017 believe Bitcoins price surge was driven by speculation on the future potential of blockchain technology.
There are other views that move the price, namely the strongly held beliefs that Bitcoin and a handful of other cryptocurrencies will take over the world because they and the so called blockchain, the anonymous public ledger of transactions that support it is far superior than any method of conducting transactions.
At a Supreme Court Justice meeting the following questions were asked:
Question: Does it bother you that Bitcoin is used to buy illegal drugs and to fund terrorism?
Answer: No, those things do not happen because of Bitcoin.
Question: Are you concerned that the place where you store your Bitcoin could be hacked and you would have no way to get them back?
Answer: No, the risk is very small.
Question: Are you troubled that Bitcoin could lose most of it’s value over time?
Answer: No, when that happens it’s a buying opportunity.
And that is something our investors actually agree with. When items and assets lose value, if they have some sort of inherent use case or some sort of practical value, they will regain that value that they previously held. In fact, they will almost always surpass that value.