Let’s just say for example, I bought a stock at $10. Then it goes up to $500
I can obviously make a profit, but why would someone buy it at such a high price?
Is it like the person who buys it at $500 is hoping that it will go up to $1000, then the person who buys it at $1000 hopes it will go up to $1500, and so on?
In: Economics
Sometimes that happens. Stocks represent the value of a company. You expect the value of a company to change over time as they sell new products and open locations or as they cut products and close stores. This means it’s a valid strategy with stocks to buy a stock and hold onto it for a long time, because the stock’s price may continue rising in value for a long time. Some stocks will also provide dividends where money is paid out to stockholders without them selling the stock back.
Most crypto currencies run into the problem you describe. If the crypto doesn’t end up getting used as a currency, then the rise in value is based on how much people are buying it at its higher prices. In the case where a crypto currency is only being used as speculation, new people keep driving up the price until the price gets high enough that people start selling on mass out of fear of the price dropping. This tanks the value of the crypto currency, making the only winners those who sold before the crash
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