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Is bitcoin a good investment?
27 Feb 2021 (746 views)

Bitcoin is now trading at US$47,000. Some people expect it to increase another 5 to 10 times.

Their reasoning is that the corporates will invest in bitcoin. With the limited supply of bitcoin and the huge corporate demand, the price will increase many times.

I think that this will not happen over the long term. It may increase from the current level, but it is likely to face the risk of a collapse. 

Here are my reasons:

a) Bitcoin does not have any utility value, apart from the limited purpose of money laundering and illegal financing. 

b) It is too costly to use bitcoin for trade payments. The volatile nature makes it risky.

c) If bitcoin continues to go up, the corporates may justify investing in it to protect their cash. However, if bitcoin falls and the corporates lose money, they will find it difficult to justify the speculation and may face risk of neglect of fiduciary duty.

d) There is the risk that some governments will ban the use of bitcoin. 

e) Mining of bitcoin uses a lot of electricity. The govenrment may ban the use of electricity for mining, due to its wasteful nature.

f) There is the risk that some of the exchanges holding the bitcoins may be hacked, leading to loss of confidence.

For the above reasons, I think that the craze over bitcoin will not last long.

Tan Kin Lian

Disclaimer - this is a personal opinion. It should not be taken as investment advice.

 



Is bitcoin a good investment?
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Bitcoin is now trading at US$47,000. Some people expect it to increase another 5 to 10 times.

Their reasoning is that the corporates will invest in bitcoin. With the limited supply of bitcoin and the huge corporate demand, the price will increase many times.

I think that this will not happen over the long term. It may increase from the current level, but it is likely to face the risk of a collapse. 

Here are my reasons:

a) Bitcoin does not have any utility value, apart from the limited purpose of money laundering and illegal financing. 

b) It is too costly to use bitcoin for trade payments. The volatile nature makes it risky.

c) If bitcoin continues to go up, the corporates may justify investing in it to protect their cash. However, if bitcoin falls and the corporates lose money, they will find it difficult to justify the speculation and may face risk of neglect of fiduciary duty.

d) There is the risk that some governments will ban the use of bitcoin. 

e) Mining of bitcoin uses a lot of electricity. The govenrment may ban the use of electricity for mining, due to its wasteful nature.

f) There is the risk that some of the exchanges holding the bitcoins may be hacked, leading to loss of confidence.

For the above reasons, I think that the craze over bitcoin will not last long.

Tan Kin Lian

Disclaimer - this is a personal opinion. It should not be taken as investment advice.