The price of bitcoins has been on a wild ride over the past several weeks, as many investors have become enamored with this new internet-based form of money transfer. Since bitcoins are not widely accepted in traditional financial establishments, there is an air of intrigue when it comes to purchasing or investing in the precious virtual currency. There is also quite a bit of fear related to the same issues. However, it’s important to be realistic about things such as these. While there is plenty of fear associated with this particular venture, there is also plenty of reason for excitement.
Some might argue that the only reason why anyone would spend money on such a product is in the hopes of seeing a spectacular rise in the value of their portfolio. That is a valid argument and one that I agree with wholeheartedly. It would be unrealistic to expect such a price to occur any time soon, but I still feel it is important to discuss my views on why the price is being predicted so favorably.
The first point is simple. People love predictability. The idea that one can invest in something with near certainty is something that people like. And when I say near certainty, I mean that there is a 90% chance of the prediction being correct. With such a low likelihood of the prediction being correct, one must consider if such a high price would be worth the risk.
I don’t see any reason why such a high price would be justified at this time. The reality is that the price of every good thing in this world comes with a significant risk attached. It’s human nature to have the desire for more of what we cannot have. This explains the constant scramble to obtain new information and tools that increase the risk inherent in any investment. It’s how we work to be better, smarter, and more successful – and the risk we’re all taking is reflected in the price of things like iPhones and MacBooks.
I would much rather emphasize the positive side. As long as you understand that to succeed, you have to be willing to accept some risk. When you are working in an industry like the stock market, it is imperative to know when to get out while you are still ahead. This is why I am so bullish on the growth of this technology. You’ll see this everywhere you look, including in the products of companies like Dell.
The second point to make is about predicting the price. In order to do this, you need to understand what drives prices up and down. This is not as easy to forecast as the previous point. But I can give you a few pointers that you should keep in mind. As with the previous point, currencies will rise and fall based on several factors. If you have an accurate read on these factors, you can make a good guess on where the price may land.
One factor is supply and demand. If you have goods and services to sell, but no buyers, you have a problem. Many think that the answer is to raise the price, and the buyers will flock to your store. I tend to disagree. If the price goes too high, the sellers will go elsewhere, and if it goes too low, fewer buyers will find your goods.
On the flip side, if you have goods and services to sell but no buyers, you have a problem. Again, many believe that the answer is to lower the price. If you do this, the buyers will flock to your store again, and the price will reflect their demand. I tend to disagree.