Archive for January, 2018

Is Bitcoin Too Expensive?

Posted on: January 16th, 2018 by jms No Comments

I was recently talking with a friend of mine and the topic of Bitcoin came up. I asked him if he’d buy any right now and he said no, it’s priced too high and I can’t afford it, to which I replied, well you can always buy fractions of a Bitcoin. Then I went on to say that I believe Bitcoin is still the best crypto currency to own right now. We are seeing massive volatility lately, but I think that should be expected for a new type of technology based asset class that promises to reshape the future of payment systems as we know it. We’ve seen crazier swings in the past, but Bitcoin, for one reason or another, has always bounced back with a vengeance. So is Bitcoin too expensive?

 

Based on recent news regarding China and South Korea considering a ban on crypto currency exchanges, we’ve started to see another downward price swing for Bitcoin and other crypto currencies. But what’s interesting is that, as of this writing, Bitcoin is still selling above market averages on South Korea’s largest exchange, Korbit. At the time of this writing, Korbit has Bitcoin listed for 14,748,000 Won, or $13,863.12 USD, far above the average of $11,678.61 USD from other top exchanges. And in other news, it seems Japan’s largest bank has plans to start it’s own crypto currency exchange this year. See https://news.bitcoin.com/japans-largest-bank-to-launch-cryptocurrency-exchange/.

 

Despite mainstream news, it seems Asia is not giving up on Bitcoin, not by a long shot. What I like about mainstream media is how it keeps creating buying opportunities for Bitcoin whenever we read about signs of crypto-armageddon. With the high price of Bitcoin reaching near $20,000 USD right around this time last month, and now reaching it’s lowest point since, I see a perfect buying opportunity, especially with some major financial institutions like Mitsubishi UFJ Financial Group, Inc and NASDAQ starting to get involved. Bubble or not, I think we’re only starting to see the beginning stages of growth for Bitcoin and other popular crypto currencies.

 

So again, is Bitcoin too expensive? I think the answer is… not even close! When my friend told me he wouldn’t buy an asset that trades at such a premium I asked him if he would have wanted to own a share of Berkshire Hathaway Inc. when it was trading around the same price in 1993 as Bitcoin is today, or if he would have bought into Amazon.com when it was trading at a premium of just over $800.00 this time last year. Berkshire Hathaway Inc.’s class A stock (BRK.A) currently trades at over $315,000.00 a share, and Amazon.com (AMZN) is currently at over $1,300.00 a share.  He had no good answer other than, Bitcoin is just too speculative. While I do agree with that, I also think the speculation is, in many ways, overhyped by mainstream media. I laugh when I hear Bitcoin (a transformative technology with a set limit that has the potential to redefine how we buy and sell) being compared to a flower like tulips.

 

We may be in a bubble, but we were also in a bubble when the Internet first hit the scene, and when housing prices went through the roof. Since then, housing prices have rebounded, and those early surviving tech stocks that actually offered promise are ones I wish I had owned at the time of the .com bubble. So for me, it’s not so much a question of price as much as figuring out which crypto currencies will survive the mayhem. So far, Bitcoin remains at the top, and as long as I keep hearing most people only mention Bitcoin when the topic of crypto currencies comes up, I know it’s still far off from being a losing bet.