Tuur Demeester: Bitcoin still a great investment #Bitcoin2013

Tuur Demeester

-- publisher of the Dutch-language investment newsletter MacroTrends -- began advising his readers to buy bitcoins back when the currency was trading at just $5 (US) per BTC. But even at today's prices ($120.50 as of mid-day on May 19), he says he believes Bitcoin remains a very good investment.

The current high price is not a bubble, Demeester asserts. He points to the fact that past price peaks -- despite having sometimes been followed by steep drops -- have now been surpassed.

"Obviously there is something wrong with this idea that Bitcoin would be what is traditionally considered a bubble," he says.

Because cryptocurrency is a technology, Demeester expects Bitcoin's adoption to follow the typical S-curve seen in other new technologies. In fact, he notes, that is what we are seeing so far.

"This parabolic rise in price we're seeing over time shouldn't really surprise us," he says.

The price fluctuations are scary only to the uninformed investor, Demeester says. He dismisses fear of perpetual volatility as unfounded.

Demeester reasons that it's the youth of the fast-rising market attracting speculators that cause price gyrations during this stage. Another short-term cause of today's volatility, he adds, is that the fledgling companies providing Bitcoin services are not yet prepared for sudden increases in volume. These technical hiccups can cause price drops now, he says, but they won't be a perpetual issue.

"The Bitcoin economy as a whole is growing and we are seeing the embryonic start of a financial system in itself," Demeester says. "For the investor, that means in the future you'll be very likely to ... buy commodities, futures and shares with bitcoin."

This will make holding bitcoins as an investment much more practical, he says.

After all, Demeester says, bitcoin is a new commodity. He looks back to other instances when a new commodity -- petroleum, for example -- was introduced to the world market. Showing a graph of oil prices beginning in 1860, he points out how petroleum prices gyrated wildly in the first decades of trading, before settling into a more regular pattern.

Although he expects the Bitcoin market to stabilize over time like petroleum did, Demeester doesn't expect the digital currency to follow an exactly parallel path. The reason he gives? Oil, he says, has become more plentiful over the years, but bitcoin's supply is forever limited.

That's just one reason Demeester recommends that all investors should hold at least a few bitcoins.