The end of 2017 cumulated in an intriguing rise in fortune of the
cryptocurrency, Bitcoin. The price of one Bitcoin peaked at $19,700 in
November, driven mainly by early adopters and Millennials’ discontent with
traditional forms of investment.
A report by Blockchain Capital shortly before Bitcoin’s peak suggested that 30% of
those aged between 18 to 34 would prefer to invest in Bitcoin and
cryptocurrencies than stocks and government issued investment opportunities.
Between the
introduction of multiple new cryptocurrencies dividing Bitcoin’s demand and whale investors looking to exploit the craze surrounding the currency
to manipulate its price, investing in cryptocurrencies is a dangerous
investment.This is exemplified by the fact the value of Bitcoin dropped to $9,200 in the third week of January 2018, down
more than 50% when compared to
November 2017.
However, Millennials’ reasons in wanting to trade in cryptocurrencies
and bypass traditional investment opportunities is becoming increasingly
challenging to ignore. It most certainly present an opportunity for alternative
methods of investment to find, attract and retain potential new suitors.
Peer-to-Peer
Peer-to-peer
lending is a relatively new development for investors and one which has
dramatically increased since the financial crisis of 2008.
Replacing the need for a bank, individuals and businesses can apply to
online services to obtain money for a variety of reasons. Once the borrower is
qualified, the loan amount will be funded by a pool of investors who are
willing to lend money in return for the interest accrued.
Despite being a relatively new way to invest, the return being seen by
many using it has been overly positive. The return offered on investment is
often higher than that those offered by traditional investing opportunities.
Critics, however, are
quick to point out that those taking out the loan may not be able to repay it. Many
of those applying via peer to peer lending platforms have been unable to obtain
a loan or other traditional loan outlets.
Yet this remains a highly attractive alternative option for those Millennials
who are wary of the current state of cryptocurrencies or are wary of
traditional investing methods.
Investment opportunities presented via peer to peer lending allow
potential investors to be highly selective in the opportunities that they
support, usually ones they are genuinely excited by or see the greatest chance
of returns. They can also reduce the amount of risk that they take by setting
their own credit score limits for borrowers, as well as diversifying
their investment across many opportunities.
Collectibles
In contrast to peer-to-peer lending, the practise of investing in
collectibles as a form of investment has a prestigious history. In what is a
hugely diverse sector, investors buy items such as antiques, art or cars with
the main purpose of selling the item in the future for a greater amount.
However, investing in collectibles is a hotly debated method amongst
financial experts. Many warn that the potential to lose a vast amount of
investment is heightened due to the subjective nature of value on the items.
Those supporters of this type of investment like to compare the
potential to that of cheap stock options. Depending on the choice of
collectibles, many are likely to yield little or no return, but those that do,
often result in significant returns on investment. Two of the more lucrative
types of collectible investment in recent years has been to buy art or store wine.
Wine in particular has benefited from investors looking for novel ways
to diversify their portfolios with the value of fine wines witnessing a 20%
increase in value over the last couple of years. While art continued to challenge wine as
the best-performing luxury investment in 2017, with a 16% increase in value seen.
It is recommended that potential investors should only focus on areas
that they possess extensive knowledge in order to best assess the true value of
a commodity and in turn reduce their risk, or in items that they would
genuinely desire to own.
This desire, and the fact that the collectibles are tangible items,
present a clear alternative to uncertainty surrounding cryptocurrencies.
Instead of being disillusioned by the significant drops in value that
can happen over short periods of time, the investor can deride value from the
collectible while its investment increases – in the case of art the enjoyment
of owning and looking at it and if the wine shows no increase in value, it can
be consumed.
Caution
The current uncertainty surrounding cryptocurrencies is reminiscent of
the global financial crash in 2008. Investors were quick to pull their assets
from housing and stock markets in search of less volatile assets. While the
confidence by this new age of investors in affected by different rationale,
both are looking for new ways to invest.
However, the same caution remains; individuals should only invest what
they are able to lose and remember that all investments are a gamble, not
matter how well researched.
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