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Is now a good time to invest in cryptocurrencies?

01/09/2020

In early August, Forbes announced that Bitcoin had jumped 30% in the previous month – a total of 500% over the last year. They reported how Chainlink’s link token had risen in price by 120% in a month, with some investors describing it as still “wildly undervalued”.

But it’s not just Bitcoin that is catching investors’ eyes, but the wider cryptocurrency sector as a whole. Ethereum, for example, saw its price rise to 25-month highs in mid-August, and Tether is also performing strongly. In late August, the IMF published a cryptocurrency explainer video that went immediately viral, stating that cryptocurrency “could be the next step in the evolution of money”. The video had, at the time of writing, had over 700,000 views in just two days. 

But is now really a good time to invest? 

 

Is cryptocurrency a good investment in 2020?

Analysis from Market Realist suggests that the answer is yes. They cite the fact that Bitcoin’s price has risen by over 60% this year – compared with 3% for the S&P 500, and a 5% fall for the Dow Jones Industrial Average. Their analysis also highlights the fact that inflation will never be an issue for Bitcoin as its supply is capped – and quotes author Robert Kiyosaki, who has recommended US citizens to invest their stimulus checks in Bitcoin. 

Invesco Private Capital portfolio manager, Evan Darr, believes that Bitcoin and gold “are being bought by investors as a hedge against further deterioration of the global economy”. In the same article, Jibrel Network founder, Talal Tabbaa, states that “everyone should have at least 1 to 2 per cent of their wealth in Bitcoin”, viewing the cryptocurrency as having a similar level of stability as gold. 

However, it is important to remember that cryptocurrencies are, as The Times reports, “shockingly volatile”. The newspaper also reports that some cryptocurrency investors have faced delays in withdrawing their funds because of technical difficulties.

The Times also urges caution because of the lack of regulation of cryptocurrency by the UK watchdog, and because of the high level of risk involved. They quote Hargreaves Lansdown’s Danny Cox, who says, “Cryptocurrencies could remain niche, become mainstream, vanish without trace or anything in between, and any investment should be considered as very high risk”. 

As with any investment, investing in cryptocurrency is not without risk. While it is certainly paying off for some, your decision will be based on a number of factors, from risk to portfolio make up and beyond. 

 

Stable Rise Limited is not authorised or registered by the Financial Conduct Authority. The marketing materials are not intended to provide financial advice nor promote any individual financial products.

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