Bitcoin has come a long way since 2009. It has gone from a curiosity among a group of cryptography enthusiasts to a legitimate digital currency that may have the potential to replace cash. Many people want to know, is it smart to invest in Bitcoin today? While some believe that the days of massive gains are over others contend that the best is yet to come for the world’s number one cryptocurrency.
Cryptocurrency Becomes an Asset Class
There may not have been many people in 2009 who thought that Bitcoin would eventually be regarded as an asset class. Stocks, bonds, gold. Bitcoin now legitimately belongs in that group. It is traded on cryptocurrency exchanges alongside other tokens like Ethereum, Litecoin, and Ripple. It seems that new altcoins appear each week.
Cryptocurrency has gone from the simple concept of digital currency to a type of investment. There are those who buy Bitcoin and other tokens to hold like growth stocks. They are looking to make a strong return in the long run. Others prefer to trade the market on a daily basis. It is even possible today to buy into Bitcoin mutual funds and trade Bitcoin options.
Is it possible that crypto could rival other asset classes? When one looks at the historical nature of Bitcoin the answer seems to be yes. Let’s look a little closer at Bitcoin as we try to determine if it is smart to invest in Bitcoin.
The Consistent Growth of Bitcoin’s Value
Since it was first released Bitcoin has shown steady growth. Like any other asset, Bitcoin has gone through both bear and bull markets. Overall, however, on a yearly basis the token continues to appreciate in value when one discounts the late 2017 run which drove the price of Bitcoin to almost $20,000.
2018 and 2019 saw a pullback, but this is common in all financial markets. What one must consider is where the token is today as compared to where it was in its early days. That will show that Bitcoin has one of the best returns of any asset class over a period of ten years.
There are some factors which account for Bitcoin’s growth. The digital asset is limited in number, meaning that only a specified amount of Bitcoin can ever be produced. The controlled supply of Bitcoin has the ability to push its value higher as we near the limit of coins that can be mined or created.
Another factor is the usefulness of blockchain technology. Many institutions are now exploring how to best use blockchains for everything from supply management to record keeping for healthcare providers. There are a vast number of applications currently in development that rely upon a blockchain. This interest seems to benefit Bitcoin and can affect its trade value. Watch the crypto market the next time a major company announces a blockchain project. You will probably see the market move in a positive direction.
From the standpoint of growth, is it smart to invest in Bitcoin? The answer is yes.
Greater Global Acceptance of Cryptocurrency
We must now look at how Bitcoin and other tokens are regarded around the world. Since its creation Bitcoin has been slowly but steadily embraced by individuals and businesses in many sectors. There are many people today who own at least some digital currency, and the number of active traders on cryptocurrency exchanges such as Coinbase and Kraken continues to grow.
This is not to say that there are not challenges present. Some governments are still resistant to cryptocurrency and others are outwardly hostile. Some governments have tried to take measures to create some type of regulation for the token, but it is unlikely that this will happen soon.
The decision of Facebook to launch its own cryptocurrency token is proof that Bitcoin and its relatives have gained an important place on the world’s financial stage. Facebook has the potential to introduce millions of people to Bitcoin and its own crypto token. That could create more interest, and more interest generally leads to more increases in value.
Does greater global acceptance of cryptocurrency mean that it is smart to invest in Bitcoin? The answer is yes.
There are Risks When Investing in Bitcoin
What one must remember when deciding to invest in Bitcoin is that there are risks involved. This is true of any investment. Perhaps the biggest concern related to Bitcoin is the volatility of the cryptocurrency markets. Prices can swing wildly from day to day, and sometimes from hour to hour.
If one is trading Bitcoin options, for example, the risk of losing money is very high. One bad trade could cost an investor a large sum of money. Those who day trade are also at risk if they do not use wise measures to limit losses and preserve gains. The person who is willing to buy and hold Bitcoin against a future increase in value may be the least exposed, but risk is still present.
As a pure disclaimer you should understand that cryptocurrency investing carries a significant risk of loss. Is it smart to invest in Bitcoin when such risks are present? The answer to this question is yes, when one considers the potential reward.
All investors know that the greatest reward comes when the greatest risks are taken. Whether one is willing to take that risk or not is a matter or personal choice. There are things to consider such as the size of the investment one is willing to make and how long one is willing to wait for the expected return.
As you attempt to determine whether or not Bitcoin is a wise investment, remember that many mainstream investors are skeptical. You would probably do better listening to those who can offer an unbiased approach on the value of Bitcoin and cryptocurrency as an investment class.