Technology 5 min read

Misplaced Faith in Bitcoin Prices: Analysis

Bitcoin is at an all-time high | via Shutterstock

Bitcoin is at an all-time high | via Shutterstock

Bitcoin prices have skyrocketed in 2017. If you bought Bc in January, you would have doubled your money in just half a year.

bitcoin pricesThis is leading to outrageous headlines such as “Bitcoin Price Will Hit $250,000 by 2020 If Seven-Year Trend Continues” and “Bitcoin Price Can Reach $1 Mln: CNBC’s Jim Cramer“. By the same logic espoused in those articles, bitcoin can double again in the next 6 months. 

What could possibly go wrong? Everybody’s Doing It!

bitcoin prices
Many Bitcoin investors have no idea why this is a bad idea.

Needless to say, past performance is no indication of the future, and investing in Bitcoin is a risky enterprise. The point of this article’s title is to warn our readers not to buy into the bubble, and we’ll tell you exactly why:

Hedge Funds are Staying Away from Tempting Bitcoin Prices

Once Hedge Funds start embracing Bitcoin, start believing Bitcoin has a viable future. Why? Because the 1% wants to know their money is safe.

Hedge Funds are generally private investment partnerships. Hedge Fund investors often look to reduce volatility. Regulations require Hedge Fund members to be accredited investors capable of absorbing large amounts of risk. That’s why allocations of over $1 million are very common.

Citing concerns over volatility, security, and perception, Louis Gargour explained why Hedge Funds are shying away from cryptocurrency investments.Click To Tweet

The Hedge Fund investors are notoriously demanding and difficult to please. They want to understand how their money is invested and believe the investment strategies are worthy of their fortunes.

But they don’t yet embrace cryptocurrencies – because it’s too risky! And who could blame them?

Security, Scandals, and Scams

Cryptocurrency scams exploit the general lack of knowledge. People just see the headlines and wonder how they can join in on the new Gold Rush and are easily exploited.

Who wouldn’t want to have hardware mining coins for you? All they need is your money. Case in point, Cloud Mining Ponzi schemes & scams such as Gawminers, Hashocean, Cointellect, Biteminer, Hashpoke, Hashinvest.

And even if you buy Bitcoins, who’s to say that your bitcoin bank or “vault” won’t disappear with your money? How can you trust that your bitcoins won’t disappear in a large transaction fraud? In other words, every step of the way is laced with risk.

Government Regulation

Governmental or inter-governmental regulatory overview is the double-edged sword which can put an end to the “wild west” world that is cryptocurrency.

On the one hand, it has the benefit of instilling confidence (in the same way the Government currently insures your bank deposits up to a certain amount), but on the other hand, such regulations have the possibility to wipe out entire parts of the industry.

Those who have tried to stand in the way of the mighty United States Dollar don’t have the best survival chances, historically speaking. The power of a central bank as a reserve currency affects sovereign countries, so the current lack of regulation is an indicator that Bitcoin is not perceived as a big enough threat yet. That argument alone should make us pause.

But once regulations inevitably start rolling in, who will control them? China? Russia? Japan? Europe? The United States? The Commonwealth? Fracturing will not just take place on a technological level, but also on a national level. It is likely that countries will launch their own, regulated, legal tender cryptocurrency as a competitor to these Bitcoin prices.

When (and if) the United States would launch its legal tender, Federal Reserve backed cryptocurrency, and your existing bank will support it, then Bitcoin could be instantly relegated to fringe status.

Bitcoin Prices & Volatility Concerns

Cryptocurrency volatility is the risk of rapid and unpredictable changes. Bitcoin and other cryptocurrencies have some of the highest risks associated with them compared to a central bank or national currency, save perhaps, Zimbabwe.

bitcoin prices
Unlike Zimbabwe, Inflation is not one of the risks of Bitcoin, but that doesn’t mean your bitcoins are guaranteed to be able to buy basic goods and services as legal tender, according to the Romanian National Bank | Image By Anton Ivanov, Shutterstock
There is no guarantee that bitcoin can be used in the future for buying goods & services as legal tender.Click To Tweet

According to, the National Bank of Romania recently issued a warning against virtual currencies because of the very high volatility and low security relative to currencies issued by regulated transparent electronic currencies and central bank issued legal tender.

Still Tempted?

Smart investors buy low & sell high. Bitcoin prices are at an all-time high. Can it drop? The last time Bitcoin was at a peak, this happened:

Between December 4th, 2013 and May 12th, 2014, Bitcoin dropped from $1,151 to $441. Click To Tweet

I think it’s in a bubble. I just don’t know when or how much it corrects. When everyone is bragging about how easy they are making $=bubble

Buying bitcoin right now would mean you buy high. Edgy Labs agrees with Mark Cuban: when everyone is bragging about how easy it is to make money, beware!

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Comments (7)
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  1. Marco Maltese June 10 at 7:37 am GMT

    This “article” (the term “analysis” is just laughable in this case) is filled with ignorance and superficiality.
    First of all, the title is dramatically misleading. In fact, in the article there’s no point in WHY the faith in Bitcoin is misled at all, if not for some foggy pointing about the fact that Bitcoin is unregulated (are you sure about that?) and there’s no “grant” about its value, and that it has great volatility, adding, again misleading, a banknote of Zimbabwe in its period of hyperinflation, something that will NEVER HAPPEN in Bitcoin, because inflation in Bitcoin is FIXED and nobody will ever change that, and you would know why I say this, if you knew how Bitcoin works.

    In the “article” the author doesn’t mention the QUALITIES of Bitcoin, that almost perfectly reflect the QUALITIES OF MONEY, making of it the best MONEY MEDIA ever created by humanity.

    Additionally, you point out the Ponzis that happen in cloud mining. Well, criminals are everywhere, and a new technology brings in also new ways to tease and rob people. It’s perfectly normal. Cash has brought in ways to rob people from their pockets. Credit cards has brought in a way to hack into banks and credit cards accounts and bancomat swipers, etc.

    “And even if you buy Bitcoins, who’s to say that your bitcoin bank or “vault” won’t disappear with your money? How can you trust that your bitcoins won’t disappear in a large transaction? In other words, every step of the way is laced with risk.”
    This is true: Bitcoin is not for everybody. You must have a brain to use it. But if you know how to use it, THERE IS NO WAY BITCOINS CAN DISAPPEAR IN A TRANSACTION OR ANY OTHER WAY.
    If you knew how Bitcoin works, you knew this. But the author doesn’t really seem to know what he’s writing about.
    You can’t “lose Bitcoins”, for the simple fact that the protocol HAS BEEN TESTED AND WORKING 8 (EIGHT) YEARS STRAIGHT NOW, and no matter how many tried to hack it, studied about it, etc. nobody has EVER lost a single bit of funds, if not for HUMAN ERROR.
    As said: you need a brain to use Bitcoin, and a certain IT skills level.
    It just means it’s not for everybody, like gold is not for people that have no strongbox at home, and money in general is not for people that can’t do counts.

    Revolutionary technologies are scary for the masses.
    It’s been like that for cars, planes, computers, internet, social media, smartphones, and yet they are all here.
    No matter how much you will try to push back this thing that you can’t fully understand: Bitcoin has THE SAME QUALITIES THAT DEFINE MONEY (if you don’t know what these qualities are, check Wikipedia or do a quick search online), and as that, it’s a great asset that a HUGE amount of people find and will find useful. That’s where its value draws from.
    Regulators will regulate. IN SOME COUNTRIES.
    In some other countries, non corrupt governments will ADOPT Bitcoin (Japan just did it, and Bitcoin exploded in that country) and make its value skyrocket, no matter what some other countries will do.

    I know it’s like talking to walls here, so I don’t write this for the author, but for the readers.
    Get your info straight before believing the first article you read. No matter how skeptic you are: if you DON’T KNOW how a things works and blow it as “useless” or “scam” or “ponzi”, you are talking out of IGNORANCE.

    See you again in a couple of years, when Bitcoin’s value will have increased at least 4 folds again, and you will still be stuck onto (ever devaluating) Fiat currency and other “traditional” assets.

    • Alexander De Ridder June 10 at 3:13 pm GMT

      Hi Marco,

      I love your passionate response. A lot of people are heavily invested into bitcoin (sunken cost fallacy), and a lot of people have made A LOT of money from Bitcoin, so your comments are understandable. But while everyone is drunk from the recent Bitcoin rally, it’s important to remind ourselves of the risks. We believe at best, that Bitcoin is in a bubble and caution should be used when investing, and at worst, will see its value obliterated by future developments.

      Volatility, security and perception remain significant issues Bitcoin faces, and those are arguments backed up by sources in the article. I didn’t say Bitcoin suffers from inflation – the Zimbabwe image is meant to illustrate that Bitcoin is just as worthless as legal tender unless it gets regulated first, which is a lead-in to my final argument about government regulation.

      Cryptocurrencies are here to stay, and I think Bitcoin will be around for a while longer. Governments will end up adopting cryptocurrencies, but it will likely be something akin to a block-chain US Dollar backed by the central banks and the US Government.

      Finally, and I didn’t put this in my article, but Quantum computing has a very good chance to completely obliterate Bitcoin. The community can’t even agree on transaction limits, how will they agree on something like reworking the entire digital signature method?

      • Marco Maltese June 10 at 5:54 pm GMT

        Thank you for your reply!

        “Volatility, security and perception remain significant issues Bitcoin faces, and those are arguments backed up by sources in the article. I didn’t say Bitcoin suffers from inflation – the Zimbabwe image is meant to illustrate that Bitcoin is just as worthless as legal tender unless it gets regulated first, which is a lead-in to my final argument about government regulation.”

        You say that it’s worthless, but you seem to be blind in face of facts.
        – It’s not worhtless to me in example, because I have trust that it will have a great future. And Bitcoin is not regulated in Italy, nor accepted by any shop around here. Still, I KNOW that around the world I can sell it back and thereby it is a good investment.
        – But let’s take a Venezuelan guy whose Bolivar is losing 10% a month. Do you think it’s worth something to him?
        – Or let’s take an unbanked person, who can finally have a Bitcoin account and save money.
        – Or let’s take a chinese wealthy person who wants to invest overseas. He can’t go past a certain threshold in exporting his Yuans, as you surely know. Chinese government regulated and blocked the Bitcoin exchanges for 4 months, not allowing withdrawal, as you again probably know. And guess what? Localbitcoins transactions EXPLODED during this period
        If governments will try to cut the way to Bitcoin, people will create a black market. There’s no way out, governments can only annoy people, like they do with drugs, it’s just a matter of time. Bitcoin PROHIBITIONISM CAN become real, and then it will have the same end ALCOHOL PROHIBITIONISM had in the USA.
        Some government may ban it, like Ecuador did. And despite this, Bitcoin thrives, because Bitcoin is BETTER MONEY THAN ECUADOR MONEY! The same ecuadorian government officials invest in Bitcoin, you know they are doing it, EVEN WHILE THEY ARE BANNING ITS USE!

        You see you are putting the accent on negatives, and you become blind to positives.

        About quantum computing I’ve read few articles about it. From what I understand, quantum computing is not very good at “brute force” calculations, which are the ones required to force the Bitcoin encryption algorithm. For what I see, an actual quantum computer could increase at best by 1000 the computing power to force an address. That’s like saying “instead of 1000000 years to force an address, you only need 1000”. I don’t see it as a real advantage, do you?

        You pose the political problem: if we can’t agree on the blocksize debate, how can we agree on something massive like the cryptography system?

        The blocksize debate has POLITICAL and ECONOMICAL implications, and with this I mean that there are a couple of groups that are fighting for supremacy.
        But this technical issue, CLEARLY DOESN’T AFFECT TOO MUCH THE VALUE OF BITCOIN, as you can see from its value, still growing like mad, despite increasing mining fees and transaction times.

        But if a quantum computing hacking would become a reality, then the Bitcoin price would begin to fall steeply in front of this menace, because everybody would then exchange it for something else.
        Don’t you think then that the whole community would IMMEDIATELY agree on the implementation of the next cryptographic algorithm?
        I think that miners would update the software in less than a week. This would happen BLAZINGLY FAST, in a scenario where everyone’s wealth is being destroyed by an issue that can be resolved with a simple installation. I think this update would see light and network update as soon as somebody could prove somebody forced a Bitcoin address.
        And I add here that implementing another cryptographic algorithm in the Bitcoin protocol is VERY EASY, from what I have read.
        Also, it could JUST be THE SAME PROTOCOL INCREASED IN DIFFICULTY, rendering again quantum computing (or anything else) worthless, in the face of trillions of trillions of trillions of calculations to just break a single address.

        So, I see two main issues in your attitude to Bitcoin:
        1) you are very scared about future developments, due mostly to fear that is in turn due to your misunderstanding and ignorance about the technology itself. Not that these things are common knowledge, of course, and the matter IS complicated, but still, you are waaaay off course and should dig better into the Blockchain technology. It took me MONTHS to understand how hacking proof Bitcoin is, in the depths of its system.
        2) the “bubble” fear. Not that Bitcoin is not in bubble, it is nearly always in bubble. That is how heavily traded assets grow in value, especially in a restricted market: speculators play the market, and then people who bought at higher price won’t sell for less.
        But when the price increases, also mining costs increase, because due to free market, people will add computing power to the network, increasing mining costs, because the Bitcoin protocol will increase its mining difficulty. Also, as I wrote, people find USES to Bitcoin, because Bitcoin has ALL THE QUALITIES OF MONEY, it only lacks quite of ACCEPTABILITY, but that can only come with time, and it IS coming. On the other side other qualities like INFLATION and FUNGIBILITY are way better than other forms of money… take a moment, if you wish, to read this short text I’ve written on a FB page I manage:

        This said, I don’t say that Bitcoin is 100% safe. I would be mad to say this.
        But it is 99.9999% safe. There is always the chance that something, some infinitely small bug has gone unnoticed all these years and somebody will finally find it, and this bug will make the whole blockchain system useless. Because nothing is really impossible.
        But I see this like a really infinitely small chance that shouldn’t even be taken into consideration. I may also be mistaken and the Bitcoin code has been so much throughly checked and tested that it is 100% bug free.
        This is POSSIBLE in coding, and in fact many applications and videogames are bug free.

      • Marco Maltese June 10 at 5:56 pm GMT

        I also suggest you to see Andreas Antonopoulos videos: they are enlightening on so many points of view on Bitcoin, you will see it under a completely different light.

    • Mugaathe Mubogothi June 13 at 1:26 pm GMT

      Your comment is very insightful but what is your view on ether. The other day it was under 25 dollars and now it is racing towards the thousand mark.

      • Marco Maltese June 13 at 3:39 pm GMT

        Ethereum is a very large project baked by firms like Samsung and Microsoft. It is very difficult that Ethereum value will fall.
        An investment now on Ethereum is as sure as on Bitcoin, if not better.

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