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Do stock Traders hate Bitcoin?

do stock traders hate bitcoin

July 20, 2021 | 

633 Views | 

JOHN K MWANIKI | 

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While it is true that some stock traders hate bitcoin, that is not the case for all of them. In fact, the majority of them do not hate Bitcoin. They just don't trust it or believe that it is a worthwhile investment (or an investment at all). In this article, we will look at the reasons why some stock traders would rather not invest in Bitcoin. 

Reasons why stock traders don't want to invest in Bitcoin

1.    Lack of understanding

Stock trading has been in existence for many years. There are hundreds of books written on how to trade stocks from beginner level to mastery. Cryptocurrencies have been around for less than two decades. Bitcoin was created in 2009, and people are still grappling to understand how it works. Since investing is about trusting that where you place your money will help it grow, many stock traders are reluctant to invest in Bitcoin because they don't understand it. 

2.    Many believe it's not an investment but a currency.

Would you buy US dollars today, hoping that they would be worth more in the future? That is the argument many stock traders have against investing in Bitcoin; it was created as a medium of exchange. So, while some stock traders may believe in the vision of our currency system shifting from fiat to cryptocurrencies, they do not believe in buying the currencies as an investment.

3.    Unregulation of bitcoin exchanges

Stock traders cannot buy stock directly from their accounts the same way many cryptocurrency traders purchase crypto. Instead, they have to buy them through a broker or a brokerage company. These brokerage companies are regulated by a federal agency. Cryptocurrency exchanges, on the other hand, are not regulated or are loosely regulated. It may explain why there have been so many cases of fraud, scams, and hacking. Many stock traders used to the security of the stock market would rather opt out of the unregulated exchanges.

4.    Bitcoin's extreme price fluctuations.

Many stocks make great long-term investment options because their prices gradually grow with time. Rarely do you witness swings in the stock market charts similar to those in crypto. For example, in mid-April 2021, Bitcoin was trading at 65k, but it later started crashing and sold at 30k at one point in mid-May. This means that for traders who have low-risk appetites, the cryptocurrency market is not an option. 

5.    Bitcoin is not backed by any identifiable commodity/company.

When stock traders buy shares from a company, the price of these shares often goes hand in hand with the company's performance, i.e., they are backed by the company. Bitcoin is not backed by any commodity or organization. In many cases, its value is determined by supply and demand, which means that the price will most likely fall if the demand diminishes. This lack of backing makes some stock traders shy away from bitcoin investing altogether.

6.    Who made Bitcoin?

When stock traders want to buy a particular company's stock, they often perform fundamental analysis on the company. Fundamental analysis usually involves performing qualitative and quantitative analysis to determine what the company and consequently the shares are worth. Part of qualitative analysis is determining the quality of the company's key executives. 

Bitcoin, on the other hand, can be considered to be an enigma. It was created by Satoshi Nakamoto, but it is unclear whether this is a person, a group of people, or a company. In terms of how cryptocurrencies function, it makes sense that the creator is unknown. The cryptocurrency is supposed to be trustless and decentralized and having no 'leader' ensures that. Stock traders who rely on fundamental analysis, especially qualitative research, would be hard-pressed to invest in Bitcoin for this reason, even though it is by design. 

7.    Bitcoin's flaws

Many altcoins exist today, trying to solve some of the design flaws in Bitcoin. Bitcoin has been criticized for several reasons. The main one is that it is extremely energy-intensive, which would make it challenging to scale long term. Therefore, you should not be surprised to find stock traders with an issue with Bitcoin but who have no problem with specific altcoins. 

8.    Some believe it is a bubble.

A bubble is an asset, commodity, or stock that exceeds its actual economic value by a large extent. There have been many bubbles in history, from the tulip mania to the dotcom bubble. Some bubbles burst, and they are forgotten, while others burst, and then the market restabilizes. 

Stock traders who are skeptical about bitcoin and believe it is a bubble may fall into two camps. Those who are not investing in Bitcoin because they believe it is currently overvalued and will eventually die away, and those who believe that the market will eventually stabilize. Either way, they are among other people like the Bank of England Governor who believe that those who invest in Bitcoin now will lose their money.

9.    Nobody to blame if they fail

When a company fails, there are often reasons that can be used to explain the fall, like strong competition, bad governance, or even the economy at large. Usually, stock traders use the lessons they learn from failed stocks to inform future decisions; to make better decisions. If Bitcoin fails, those who invest in it will have nobody to blame because the system has been designed to be trustless and decentralized. Some stock traders chose not to invest for this reason. 

Conclusion

It may be incorrect to conclude that stock traders hate Bitcoin even though you can find those that do. Instead, you can find concrete reasons some stock traders would give as to why they would rather not invest in Bitcoin. Investing is a very personal matter as it often involves how an individual chooses to spend their money. There is room for investors to have different investment styles and preferences, and it is, therefore, okay if some investors choose not to invest in Bitcoin or other cryptocurrencies altogether. 

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