For much of 2015, the Bitcoin market has been at something of a standstill. Following a burst to a lucrative value exceeding $950 in late 2013, the digital currency plummeted back to Earth at a fairly steady pace through most of last year. These trends were easy enough to explain: in very general terms, Bitcoin was snatched up quickly when its very creation seemed to promise the birth of what ultimately became a dominant new currency. Then, when financial analysts either condemned Bitcoin or stressed that it needed time to develop, public enthusiasm waned, leading to the decline in value.
Now, we’re in a holding pattern. The value of Bitcoin has not fluctuated significantly thus far in 2015 (hovering between about $225 and $260), as people appear to be withholding judgment (and action) on the future of cryptocurrency. As recently as April of this year some major analysts still opined that Bitcoin is going nowhere, but at the same time, arguments persist that the digital currency is ultimately the future of money.
So given all of this, should you invest? Frankly, that’s proven to be one of the more difficult questions in all of financial investment in the past couple of years, as the market has already proven to be unpredictable. Inevitably, the decision to invest in Bitcoin requires some level of blind faith. But this isn’t only because the product itself is still finding its place in the world. It’s also because the actual act of investing in Bitcoin is a unique and multi-faceted concept, unlike typical investment transactions in many ways.
On the one hand, standard Bitcoin investment can be approached somewhat similarly to forex trading—that is, the buying and selling of international currencies against one another’s value. Bitcoins can be stored online or in physical form, much like any other existing currency in circulation. By setting up a digital Bitcoin wallet, or by withdrawing physical coins, you’re simply acquiring value that can appreciate or depreciate over the time, either to be held continually, exchanged back for other currencies, or used as a functioning form of payment. The hope among many current Bitcoin investors is simply that their Bitcoins may be worth many times what they’re purchased for presently in the near future.
In a sense, however, Bitcoin investment goes beyond these types of ordinary currency transactions. This is primarily because the digital currency is in the unique position of being both a valuable resource and an emerging technology. The currency has already led to the emergence of several start-up companies that are looking to profit in numerous ways.
Some are simply seeking to provide new channels through which consumers can use digital currency. Others are marketing products and systems designed for convenient storage and management of the currency. And perhaps most significantly, a number of companies are in the business of spinning Bitcoin’s underlying Blockchain technology for alternative purposes (with many believing this technology is the true value of Bitcoin). Considering all of this, one could argue that investing in any of these start-ups or emerging industries also constitutes an indirect investment in Bitcoin, not unlike how investing in a jewelry company might reflect an endorsement of the gold market.