Uh oh. It looks like many of the people who invest in bitcoin know little or nothing about it. What does that say about the industry?
Bitcoin Investors Don’t Always Seem to Know What They’re Doing
Bitcoin is shaping up to be one of the biggest and most popular assets in history. The currency is reaching unprecedented levels, and recently shot beyond the $50,000 mark for the umpteenth time, though it has since incurred a small dip that has brought it back down into the $48,000 range. Still, the asset has shot up by more than $30,000 in just the past few months alone.
Obviously, people are eager to get their fingers on it. With something rising so quickly, people want to take advantage of the currency, though it appears that at the present time, the main thing that’s driving bitcoin purchases is fear of missing out or FOMO as it’s so often called. The fact is that many traders and investors are not too familiar with the technical side of bitcoin, and thus are buying something that’s going right over their heads.
Survey company Cardify conducted a poll involving more than 700 separate investors between early and mid-February. During that time, bitcoin shot up by more than $10,000, boosting itself from $37,000 to about $47,000. According to the survey data, not even 17 percent of those who took part in the study fall into the “fully understand bitcoin” category. However, a whopping near-34 percent fall into the category of “zero knowledge.”
This is a scary thought for many reasons. For one thing, if people aren’t doing their research before getting involved in BTC, that means they’re simply buying and not thinking about the future. Thus, it can be argued that they may be doing irresponsible things to get their fingers on BTC, such as mortgaging their homes or taking out loans they can’t hope to pay back.
In addition, it’s likely that those who are buying it in such a way are not leaving room for volatility. At this stage of the game, analysts don’t care how high bitcoin spikes. The fact is that tomorrow, things could come to a sudden end. We’ve seen this time and time again, perhaps the biggest example being between 2017 and 2018.
A Fluctuating Price Can Do Some Damage
During the former year, bitcoin was on a roll and by the end of those 12 months, reached its then high of nearly $20,000 per unit. The following year, within just a month or two, bitcoin had lost more than half of that value. By the summer, it was trading in the $6,000 range, and by the end of the year, each bitcoin was worth only about $3,500.
Price swings are a huge problem, and those that don’t make room for them could potentially see a lot of their wealth vanish quickly and without warning.