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Bitcoin reaches its height in 2023: Should people make an investment?

2023.07.04 18:51:17 Grace Lee
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[Photo Credit to Unsplash]

Bitcoin has currently soared in value in virtue of the world’s biggest asset manager Black Rock’s plans to create an exchange-traded fund (ETF). 

“[B]itcoin has gained nearly 25% in value since BlackRock's filing.”

“[I]t rose as high as $31,458 on Friday, the highest level since June 7, 2022, and was last up 3.29% at $30,872.” (Reuters)

The price has gone through a history of wild fluctuations in the value of Bitcoin.

Its price began from $0.00 in 2009 and has risen to $64,000 in 2021, undergoing radical variations.

It had plunged about 65% in its value in 2022 but an extreme recovery has been made since the early month of 2023. 

The recent data indicating the drastic upward trend in price of Bitcoin keeps the investors’ hopes inflated about earning an enormous amount of money from the cryptocurrency. 

However, there are some significant aspects of Bitcoin which are being overlooked. 

Bitcoin can be precisely explained by Tulipmania: the Dutch Tulip Bulb Market Bubble.

There was a prominent market bubble and crash in Holland during the mid-17th century when speculation drove the values of tulip bulbs to the highest reach. 

In the mid-1600s, the Dutch gained a great prosperity, and with enough money to spend, they began to put eye on fashionable collectors items.

Tulips, one of those items, were introduced to Holland, leading to the price bubble occurring shortly after. 

At the apex of its price, a single tulip owned a value for about 10,000 guilders, equivalent to  the value of a mansion on the Amsterdam Grand Canal. 

However, the tulip itself - which is just a flower- has no such great value.

The tulip prices had jumped 18 times of its original price but then collapsed to its original price after a year. 

People’s irrationally optimistic expectation that the tulip price would last forever was a complete error. 

They were, in fact, overlooking what they were exactly buying; Bitcoin is like the Tulip. 

Bitcoin, lacking any commonly accepted valuation, cannot be transacted or used as an alternative of the currency; it just remains as a speculative real asset.

Also, Bitcoin cannot be one-hundred percent trusted in regard to security. 

“[b]itcoin technology is relatively safe, but it isn’t anonymous and relies on passwords,” says Daniel Rodriguez, chief operating officer at Hill Wealth Strategies.

According to Rodriguez, “hackers could use web trackers and cookies to find more information about the transactions that could lead to your private information and data.” 

“[i]f anonymity is part of your definition of security, Bitcoin might not be entirely secure.” (Forbes)

In short, the people are just buying the non transparent computer codes, solely based on their unclear speculation. 

According to some crypto experts, “[B]itcoin might touch $100,000 in upcoming years, but not so soon, and predicting this level in 2023 or in 90 days is just next to impossible.”

Investment in Bitcoin may make you super rich if the current trend continues, but considering its history, it may also cause a huge amount of damage.

None of those opinions on the future trend of Bitcoin can be assured.

Would you make an investment in Bitcoin?

Grace Lee / Grade 12
SDC International school Academy