Is NEPSE Going the Same Path As Bitcoin? Will the Horror Stories Be Similar?

Abhib Tuladhar

Sharesansar's disclaimer: The author deserves sole credit and responsibility for the views presented in the article. Reader discretion advised. 

On 6th June 2021, the Nepse index closed at 2,906.89, which was the highest closing as of date. Nepse index also recorded its highest turnover for a single day with stocks worth Rs. 17.271 Arba changing hands. The high turnovers have been a trend for the past few months where the Nepal Stock exchange experiences a sudden increase in the number of people entering the market.

Since this new influx of first-time traders entered the market there has been a buying frenzy sending stocks prices higher and higher without a valid reason. Most people entered the market due to the influence of friends and family members how have put some money in the stock market. These first-time investors usually don’t have a good idea about stock and have only entered the market because they fear they might miss an opportunity to make money.

When observed closely, the current bull run of the stocks somewhat resembles the bull run of Bitcoin. Over the past few months, Bitcoin prices sore up to $64753.228 based purely on the hype created by certain influential people and their public statements. The frenzy created was such that the price of Bitcoin increased by 15% within a few hours. However, this bull run was not to last as some unfavorable statements were made by the governments of the world and public figures. The price of Bitcoin plummeting reaching its twelve-month low at 33954.64 just a few weeks after reaching its highest point ever. A lot of people may have lost money due to the fluctuation of Bitcoin prices and their unpredictable nature.

People invested in Bitcoin without first understanding the fundamentals of what they are and how they operate. These people were just buying into the hype in the hopes of making quick cash. It is usually these people who stand who lose the most when the hype dies down.

While it is yet to be seen if the fear of a Bitcoin-like fate is justified for the stock market at this point, it does beg us to be more careful with our stock investment and not just buy into the hype without proper knowledge and analysis.

Article by Abhib Tuladhar