Bitcoin (BTC) loyalists predict that billions of dollars will flow into their beloved cryptocurrency when regulators in the U.S. approve a fully-pledged bitcoin exchange-traded fund (ETF). One rabid supporter even said the ETF will help bitcoin replace gold and become the Western world’s primary index soon.
The world’s most popular digital currency hasn’t fallen below US$60,000 since October 14, 2021. As of November 7, 2021, BTC’s price stands at US$62,025.80, or a year-to-date gain of 114%. Investors chasing quick gains will again be tempted to pick up the crypto.
However, some market observers warn against jumping on the bandwagon again. Moreover, you must approach the crypto with caution because BTC is not an investment for everyone. There are four reasons why you should avoid it like the plague in 2021.
1. Volatility
Bitcoin still carries an extremely volatile tag. The price rose to as high as US$63,503.46 on April 12, 2021, but the rally did not sustain. It went on a tailspin after, falling to US$29,807.35 on July 19, 2021, or a 53% drop. If you’re not careful, you could incur more losses than gains due to the wild price movements of bitcoin.
2. No backing
Only buyers and sellers of bitcoin believe the crypto has real value. The price depends on how much one is willing to buy at a specific price. Warren Buffett, the GOAT of investing says bitcoin has no unique value at all. It’s a tradeable asset but not money. Hence, it has no backing whatsoever.
3. Not a tangible asset
The world’s most precious metal remains the go-to tangible asset if the traditional financial systems fail. Governments and central banks won’t choose cryptos over the gold to keep in their vaults. Furthermore, you can’t retrieve your digital tokens in case technology or the internet breaks down.
4. Absence of regulation
The absence or lack of regulation is perhaps the primary reason institutional investors haven’t flocked to bitcoin and other cryptocurrencies. China has one of the largest cryptocurrency markets, but its central bank declared all virtual currency-related business activities in the country as illegal. Crypto trading is a crime and violators could face prosecution.
Safer alternatives
If you have a fear of missing out on bitcoin, Hut 8 Mining (TSX:HUT)(NASDAQ:HUT) and HIVE Blockchain Technologies (TSXV:HIVE)(NASDAQ:HVBT) on the TSX are safer alternatives. The crypto stocks are surging, and the gains are comparable, if not higher than BTC.
Your advantage with both stocks is that it trades on a world-class stock exchange, and is therefore regulated. Investors have protection and money will not turn into thin air. Thus far, in 2021, HUT 8 and HIVE have gains of 417.77% and 130.13%, respectively.
HUT 8 trades at $18.07 per share, while HIVE is cheaper at $5.50. Their trailing one-year price returns are more than 935%. Market analysts recommend strong buy ratings for both. HUT 8 has a market cap of $2.96 billion with industrial-scale bitcoin mining operations. On the other hand, HIVE mines and sells bitcoin and ethereum. The $2.12 billion company conducts its cryptocurrency mining in Canada, Sweden, and Iceland, and Sweden.
Zero fundamentals
The problem with Bitcoin is that there are no fundamentals on which to base your investment decision. HUT 8 and HIVE present their operational and financial results every quarter.
