NEGATIVE press appears to have caught up with Bitcoin, at least momentarily, with the cryptocurrency plummeting below $US7000 in value last week, after peaking at close to $US20,000 late last year.
It may be a blip or the bubble may be bursting, but novice investors may just be asking what will become of their money if Bitcoin and other cryptocurrencies come crashing all the way down.
Finder.com.au canvassed 15 economists about the future performance of cryptocurrencies and 60 per cent believed the value of the top five “coins” would fall by 50 per cent in 2018.
Currently, Bitcoin, Ethereum, Ripple, Bitcoin Cash and Cardano combine for a total market capitalisation of around $US400 billion, but are being viewed with apprehension by some experts, according to Graham Cooke, Finder.com.au insights manager.
“These cryptocurrencies are volatile, so it’s not surprising some are reluctant about their sustained value,” Mr Cooke said. “Over the past six months many ‘virtual wallets’ have ballooned and perhaps contracted in value, however, the future is still exciting for both virtual currencies and the blockchain technology powering it.”
Should the value plunge, David Jackson, founder of Crypto Sydney said it was important not to panic.
“Markets are volatile and the crypto market is still in its infancy. One could say it’s in its adolescence as we see regulatory measures being introduced, which indicates that governments and the financial establishment are taking this market seriously,” Mr Jackson said. “Nobody makes good decisions in a panic, so keep a cool head.”
Mr Jackson said that all markets fluctuate and cryptos are no exception.
“Some seasoned investors are taking advantage of these fluctuations to buy into particular cryptos when the price falls, if they believe it will recover and rise in the future,” he said. “But it is vital to research carefully before making any purchase, and be critical, think and reflect objectively … don’t just jump on a coin because of a Facebook post or something you read in the media, including this. It’s important to understand your personal financial position, and assess whether you can you afford to lose your investment without creating undue economic hardship before jumping in head first.”
Finance experts are also concerned about an emerging trend, which has seen some people purchasing Bitcoin via credit cards. World banks are clamping down already, with British bank Lloyds Banking Group, plus America’s Citigroup, Bank of America and JPMorgan Chase banning plastic purchases of cryptocurrencies.
Some Australians have already bought Bitcoin on credit and their priority should be managing the fallout of any price plunges, according to Andrew Boyd, co-founder of comparison site Credit Card Compare.
“If you are not invested for the long haul and were just looking to make a quick profit, this should be addressed immediately,” Mr Boyd said. “The interest you will be incurring on your credit card will only add to what is likely to already be a considerable loss if the currency fails to regain its value.”
Mr Boyd suggested a balance transfer card with zero per cent interest might be one place to start taking care of the debt.