Bitcoin prices have had an extremely volatile stretch. Bitcoin 10,000 happened in late November. Incredibly, just three weeks later, 20,000 was within the scope on the bitcoin price chart. But the cryptocurrency couldn’t maintain momentum and found itself down near $12,000 within a week.
Sheesh, I’m getting nauseous just talking about bitcoin prices. In any regard, the cryptocurrency has been making a comeback.
Future contract introductions from both the CME Group Inc (NASDAQ:CME) and Cboe Global Markets Inc (NASDAQ:CBOE) added to the volatility in December. News of PayPal Holdings Inc (NASDAQ:PYPL) founder Peter Thiel dumping $15 million into bitcoin has given it a more recent boost. Though Thiel’s “Founder Fund” actually made the investment, it still shows a “tech visionary” making a bullish play in the crypto field. That makes investors feel better about bitcoin’s long-term potential.
Long-Term Bitcoin Prices
I have trouble seeing the value in bitcoin and I freely admit it. I’d rather invest in companies that have solid businesses and exposure to the crypto space.
For instance, Square Inc (NYSE:SQ) has a really great business; a phenomenal business actually. And through a pilot program — which has since expanded — Square is allowing some users to buy and sell bitcoin. That’s something I can get behind more than buying bitcoin outright.
Further, bitcoin is built on blockchain, a business that International Business Machines Corp (NYSE:IBM) is trying to leverage. With 22 straight quarters of revenue decline, IBM is not a flourishing company by any means. But it could return to positive revenue growth this year, has a crazy low valuation and a fat dividend. Its efforts in A.I. and blockchain would be the kicker for more potential upside.
The bottom line? Why not invest in companies with solid business models and bitcoin-related plans?
As for cryptocurrencies, some call it a bitcoin bubble. I definitely don’t disagree with aspects of these claims. This recent piece highlights the bubble phenomenon with respect to bitcoin. With bitcoin prices, it’s frothy for sure, but my biggest issue is the inability to value it.
We saw the dot-com bubble in the early 2000s and the real estate bubble a decade later. But they didn’t mean that the Internet or housing was worthless. They just meant that the investing public got way too optimistic about their immediate potential. Now, tech plays a dominant role in everyday life and real estate has rebounded substantially.
Bitcoin could be the exact same. But it doesn’t mean investors should chase at any price.
The Bottom Line For Bitcoin Prices
During the dot-com bust, many public companies went under. Some, however — like Oracle Corporation (NYSE:ORCL), Intel Corporation (NASDAQ:INTC) and Cisco Systems, Inc. (NASDAQ:CSCO) — initially collapsed, but lived to see brighter days. Those who bought Nasdaq 5,000 took almost 15 years to break even.
My point is, many cryptocurrencies may prove worthless. Some — be it ethereum, ripple, bitcoin or others — may take a big haircut but live on after the deflation. Bitcoin and other cryptocurrencies may ultimately play a significant role in technology, not unlike Cisco, Intel and others.
Still, that doesn’t mean paying $50 to $73 for INTC stock during the height of the dot-com run (levels it has yet to eclipse) was a wise move.
While I do believe bitcoin will have a place in the future — as will the blockchain technology it’s built on — I have too much trouble buying in now, even though a run to new all-time highs doesn’t seem unrealistic.
Optimism in the stock market, cryptocurrencies and the economy continue to gain steam. That could easily propel bitcoin price to new highs. I won’t be along for the ride though. I feel more confident investing in companies than trying to catch big moves in the crypto market.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell did not hold a position in any of the aforementioned securities.