Bitcoin Is Disappointing Investors, But Not Traders

Bitcoin Is Disappointing Investors, But Not Traders
Getty Images

In December 2017 the price of Bitcoin reached a high of over $19,000 which was amazing considering it started that year at below the $1000 level. The rise of the digital currency was unprecedented, and it took many other cryptocurrencies appreciably higher as they rode on Bitcoin’s coattails at the end of last year.

Market participants love nothing more than a bullish run in the price of an asset, and Bitcoin became a front -page news item in 2017 as the price reached dizzying heights. Few assets have increased in value by nineteen times in a year. Some of the smaller digital currencies did even better on a percentage basis. There were more than a few market participants that jumped on the bullish Bitcoin bandwagon in 2017, and many bought at prices that were north of $10,000 and $15,000 per token. Recently, the price of Bitcoin was trading at around $6,680 or 65 percent below its December 2017 high in the cryptocurrency. Bitcoin has been an ugly and expensive adventure in the bull that turned into a brutal bear market in 2018. Those who purchased the cryptocurrency in late 2017 were left holding the bag with lots of losses. The price action in Bitcoin and the entire digital currency asset class that has declined from over $800 billion in net assets in late 2017 to under $225 billion has left many in a position where they are licking their financial wounds.

The lesson from the price action in the world of cryptocurrencies is that trading rather than investing can often be the optimal approach to markets. 

Source: Coindesk

As the chart highlights, over the past three months, Bitcoin has traded in a range from $5,848.26 to $8,397.83 and was trading at the $6680 level most recently. The range of $2,549.57 was more than two and one-half times the price of the token at the start of 2017. The peaks and valleys in the market over the recent weeks and months has turned Bitcoin from an investment to a trading bonanza.

When it comes to the future for the digital currency asset class, many pundits still believe that Bitcoin and its brethren are the biggest bubble markets in history and that the bubble has only begun to burst. However, others think that the decline in value is an opportunity to load up on the assets and that it will not be long before the prices eclipse the December 2017 highs. The differing views are likely to continue to make Bitcoin one of the most attractive trading markets compared to markets across all asset classes over the coming days, weeks, months, and even years.

For those who paid the sky-high price of over $15,000 per coin, Bitcoin has turned into a long-term investment as they hope that the calls for higher highs eventually materialize. For others that view the asset class as a trading vehicle, Bitcoin and the over 1980 other digital tokens offer the kind of volatility that makes them a paradise of opportunity.

Bitcoin has done a great job of disappointing the investors that came to the market late last year in hopes of capital appreciation beyond their wildest dreams. There are few things more powerful than the attraction of a market that rose from 6 cents in 2010 to over $19,000 in late 2017. However, the current price variance in Bitcoin and other cryptocurrencies make them some of the most attractive assets out there these days when it comes to buying and selling to capture wide price swings. The digital currency asset class will eventually decide if it is a bubble or a market that will be around for the long haul. In the meantime, trading has replaced investing as the optimal approach in 2018.

 

 

 

The information contained above may have been prepared by independent third parties contracted by Nadex. In addition to the disclaimer below, the material on this page is for informational and educational purposes only and should not be considered an offer or solicitation to buy or sell any financial instrument on Nadex or elsewhere. Please note, exchange fees may not be included in all examples provided. View the current Nadex fee schedule. Nadex accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representations or warranties are given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk and any trading decisions that you make are solely your responsibility. Trading on Nadex involves financial risk and may not be appropriate for all investors. Past performance is not necessarily indicative of future results. Nadex contracts are based on underlying asset classes including forex, stock index futures, commodity futures, cryptocurrencies, and economic events.

Trading can be volatile and investors risk losing their investment on any given transaction. However, the design of Nadex contracts ensures investors cannot lose more than the cost to enter the transaction. Nadex is subject to U.S. regulatory oversight by the CFTC.