Investor interest in Bitcoin has soared in the last couple of years. That may coincide with a significant increase in its price level, with it rising from $1,000 to almost $20,000 in 2017. And while it then declined by almost 90% within a year, the first half of 2019 has seen its price level surge higher.
Bitcoin risks
While some investors may have profited handsomely from Bitcoin’s price rises in recent years, it continues to offer an exceptionally high amount of risk. It lacks fundamentals, may not be able to replace traditional currencies in the long run, and could be negatively impacted by changing regulations.
As such, further volatility could be ahead. This may mean that investors see the value of their virtual currency double or halve within a short space of time, with the outcome being largely dependent on supply and demand for Bitcoin. Since this is impossible to predict even over the long run, the cryptocurrency appears to be more of a gamble than an investment.
FTSE 100 opportunities
By contrast, the FTSE 100 appears to offer a more appealing risk/reward opportunity. It has been a relatively unpopular index among investors in the last few years. While this may or may not be due to Brexit uncertainty, the reality is that the FTSE 100 is an internationally-focused index that generates almost 70% of its revenue from international markets.
This means that it is much more dependent on the world economy, rather than the UK economy. It also means that it could even benefit from Brexit uncertainty in future, should the pound weaken and its members gain a positive foreign currency translation boost.
As such, investing in the global stocks that dominate the FTSE 100 could be a shrewd move at the present time. Many of them trade on low valuations and have high dividend yields. This could mean that they offer a favourable risk/reward investing opportunity – especially when compared to Bitcoin.
Shareholder experience
As well as offering a potentially more favourable risk/reward ratio than Bitcoin, investing in the FTSE 100 may also be a less stressful experience for investors. Certainly, the index will experience downturns and bear markets in the long run. But it has a long track record of posting successful recoveries and making higher highs following every challenging experience in its history.
As such, investors may feel more confident about the performance of their portfolio when compared to the experience of holding Bitcoin. The virtual currency’s valuation is difficult to justify at the present time, with there being no facts and figures for investors to rely on.
Although digital currencies may form an increasing part of the financial system in future, Bitcoin’s limited size and the seeming unwillingness of regulators to embrace it may mean that it displays high volatility in the long run. This could cause losses, as well as stress and worry, for investors who may be better off focusing on FTSE 100 dividend stocks.