What happened to the Bitcoin hype, and why it’s time to invest in it
Two years ago, a phenomenon known as Bitcoin gained hype across the globe, including in Pakistan. Anyone with even a modicum of tech knowledge was head over heels to invest in it, and it seemed unstoppable.
Fast forward to the present, the hype seems to have vanished and Bitcoin is rarely the centre of discussion now. Back then, Bitcoin sounded like a method to make easy money, but investors soon became wary of the challenges associated with it.
While Bitcoin was still making space in Pakistan in 2017, the cryptocurrency seemed to offer promising returns at a global level. The price was rising and hitting new peaks on a regular basis. For investors, it felt like a dream investment which would multiply their wealth. For a substantial amount of time, this turned out to be the case, as Bitcoin touched its record high at the end of 2017.
However, shortly afterwards Bitcoin became a victim of speculation, like most investment avenues, and its price nosedived in 2018. During the year, an event known as the 2018 cryptocurrency crash took place in which massive sell off was experienced for most cryptocurrencies, particularly Bitcoin.
Bitcoin shed 65% of its value within the first month of 2018, and by December, its value had declined by 80%. This led to a dent in investor sentiment causing them to withdraw their investments, either after massive losses or due to fear of losing investment. At this point, it was clear that Bitcoin’s value had taken a U-turn and sooner or later it would fall to zero, right where it started.
Many analysts argued that Bitcoin had created a bubble which would soon burst, leaving all investors bankrupt. In 2017 alone, Bitcoin’s value soared by 1,200%, further supporting their claim. It was enhanced interest in the commodity within a short span of time that sparked uncertainty in its value and turned its price unstable, for until early 2017 it was rising steadily.
Nevertheless, there remain a handful of serious buyers who managed to make hefty profits from Bitcoin and still continue to invest. On the other hand, when non-serious buyers went aboard the hype train is when things worsened for all parties involved.
The case of Pakistan
Pakistanis who invested during Bitcoin’s early days managed to make a fortune, but newcomers are having a hard time.
Everything in Pakistan gains hype rapidly. Three weeks ago, cinemagoers were hyped to watch Avengers: Endgame, and even those who had never seen any of the prequels ended up watching this film. The same applies to Bitcoin. The hype it actually deserved should have come from investors, market researchers, tech savvy people, financial analysts, currency analysts and IT experts. Instead, every second person pretended to be an expert once the hype reached the country.
The bottom line is that Bitcoin did not deserve to lose its hype, but it vanished because it came from the wrong people.
Pakistanis should continue investing in Bitcoin, but what they need to understand is that it is not for everyone, and they should thus not invest carelessly. It requires careful scrutiny and complete knowledge of its mechanics beforehand so there are no surprises later on.
Those who deem it a tool for making easy money should stay away from it, because it is not simply a tool to multiply cash. This was the massive confusion that gave birth to the Bitcoin bubble to begin with. Like every investment, Bitcoin comes with its own risks but those who understand Bitcoin completely know it is a worthy asset to invest in.
On the other hand, people should also stop considering it an investment avenue. Bitcoin is a currency and should be treated so – for online transactions and receiving payments. That way its price would follow a stable trajectory rather than a volatile trend.
Another high for Bitcoin
In the past few days, Bitcoin has seen an uptrend yet again, and it hit a fresh nine-month high this week.
This rally is expected to lead a few more investors in Pakistan to invest in Bitcoin, and there is no doubt it will a cause a spike in its hype yet again, but perhaps not as much as it we saw two years ago.
Those who benefitted through their investment earlier will return to the market, as they know how to gain from this. Those whose money was invested beforehand will continue to hold as Bitcoin’s global outlook is mostly positive, meaning that it is expected to gain in the months to come. Its market has turned bullish and whoever invests at this point is expected to reap huge benefits. In the world of finance, this practice is known as cherry-picking, where investors return to a market at a time when prices are lower and expected to rise.
The problem with Bitcoin in Pakistan
Buying Bitcoin is way out of the affordability range of a common man in Pakistan. At the moment, one Bitcoin will cost over Rs1.1 million. Its price multiplying manifold – coupled with multiple rounds of rupee devaluation – has made it a very expensive commodity leading to local investors shifting to alternate avenues, such as Pakistan’s property market which offers excellent returns.
From an investor’s point of view, Bitcoin’s biggest disadvantage is that there is no cap or limit for gains and losses, making it an extremely risky business, as all the profit could be wiped out within a matter of days. Compared to this, the capital markets of a country have a cap on gains and losses, which is safer.
Another big danger that all cryptocurrencies pose is of data breach and cyber attack. Pakistani banks have faced this issue and it poses a threat to investors, which stops them from investing in Bitcoin. Some people who displayed an interest in buying cryptocurrencies ultimately became victims of fraud, making others wary.
Moreover, there are only a few exchanges in the country and those too are online, while a majority of Pakistanis prefer cash or credit card over online payment methods.
Internationally, many stores and companies have started accepting Bitcoin as a method of payment. However, such a step has not been taken in Pakistan and it doesn’t look like it will be happening anytime soon. If businesses and firms in Pakistan start accepting Bitcoin as a medium of exchange, then Bitcoin buyers will increase and people who don’t understand it or remain confused might find it easier to accept it.
When Netflix announced its global expansion, it started charging its subscribers in Pakistan in their local currency. As a result, Netflix subscribers in Pakistan skyrocketed because paying in rupee is feasible and trustworthy. Similarly, if businesses start accepting Bitcoin, its use and availability in Pakistan will become common. However, Pakistanis remain unfamiliar with its concept and consider it a scam, and until that changes, Bitcoin cannot makes its way across the market.
Thus, although Bitcoin managed to give birth to many other cryptocurrencies and remains worth the hype, it will take a long time and many changes before it truly becomes popular and acceptable in a country like in Pakistan.
The views expressed by the writer and the reader comments do not necessarily reflect the views and policies of The Express Tribune.