The concept of the Bitcoin investment vehicle is still quite new. The cryptocurrency is incredibly volatile but has now been around for 9 years with each year leaving the coin more valuable than the previous one. It is an interesting concept because bitcoin is decentralised and therefore not regulated by central banks or governments. Theoretically, therefore, it should not be affected by geopolitical events. In reality, however, the cash crisis in Venezuela and India and the presidential election of Donald Trump were two key factors that made the value of bitcoin shoot up.
The Bitcoin Investment Vehicle
Because of the fact that, by the end of 2017, bitcoin was worth $20,000, starting at just 1000 at the beginning of the year, a lot of investors are incredibly interested in it. It is certainly true that there has been a tremendous drop in the value of bitcoin, currently standing at around $10,000, but that is still ten times as much as what it was before. Hence, people want to gain a greater understanding of the Bitcoin investment vehicle.
And one of the most interesting things about bitcoin is that it is finite in number. There are 21 million Bitcoin in existence, and there will never be more. Not all of those have been mined, however. Mining describes resolving complex mathematical equations come up which, if resolved properly, give the miner a full Bitcoin. Huge supercomputers have been built in order to mine for the remaining Bitcoin, which is becoming less and less cost-effective. Hence, when bitcoin first started, most people will try to mind their own but, today, people want to buy them through financial exchanges instead.
Unfortunately, because bitcoin is decentralized, the exchanges on which people can buy and sell them are equally unregulated. In 2014, Mt Gox collapsed, which was the earliest exchange that people could use. As a result, investors became concerned and started to look for a more institutionalized, safer way of accessing these currencies. Various exchanges have been formed in response to that. Those and have been operating quite successfully for nearly 4 years now, which means more investors are once again becoming interested in the cryptocurrency. Those with a lower risk tolerance I’ve waited this for years to ensure their Investments are safe, and they are now returning to the market.
The result of this is that the investment vehicle itself is changing as well. In fact, there are now even a number of ETFs, or exchange traded funds, that are used for Bitcoin. This is not yet hugely popular because of the way in which an ETF works, which is quite opposing to the volatility of Bitcoin as that value changes by the minute. That being said, it demonstrates just how much people have become interested in cryptocurrencies and how that is changing the world of investments.
The big question is, of course, whether or not Bitcoins are a good investment. That is something only time will be able to tell.