Most investment managers and financial planners avoid bitcoins as an investment or as a currency, for a few reasons. First, the coins are not backed by any government or asset; they were made up by computers that solve complex algorithms, and therefore have no intrinsic value. Second, because transactions between parties is very difficult if not impossible to trace, many of those using bitcoins or other so-called “cryptocurrencies” are illegal; that is, the bitcoins are exchanged for illegal weaponry, drugs or other shady goods and services.
And finally, an investment in bitcoins can be incredibly volatile and unpredictable, which makes them unsuitable for investment portfolios. Over the last few years, the bitcoin price has risen from under $1,000 to almost $20,000, before plummeting to around $3,000 last year. And of course, nobody knows whether that’s $3,000 more than they’re actually worth.
But the whole cryptocurrency world received an unexpected boost from an unlikely source, when President Donald Trump suddenly tweeted, for no apparent reason, that he wasn’t a fan of “unregulated crypto assets,” which, he said, were based on “thin air.”
You might think this would be a disaster for bitcoin owners, but in fact, the bitcoin price rose following the President’s comments, and bitcoin traders and investors were enthusiastic about the sudden credibility and publicity that the tweets generated in the general public. The tweets may have catapulted bitcoin and cryptocurrencies into an issue in the next presidential election—what was called by a crypto exchange executive “possibly the largest bull signal for [bitcoin] ever.” Interestingly, Presidential hopeful Andrew Yang, the most technologically sophisticated Democratic candidate, is accepting campaign donations in bitcoin, etherium and other cryptocurrencies.
Could bitcoin become a mainstream form of payment? Possibly, but it will continue to be wildly volatile and many of the upstarts may fail before the survivors ever reach mainstream acceptance.