So the question is, is Bitcoin a good investment?
You see, since the beginning of the year Bitcoin is up over 50%, and over the last few weeks, the whole crypto market has seen a boost.
In this article, I’ll show you the pros and cons of investing in cryptocurrencies like Bitcoin so that you can decide whether crypto trading is for you.
What Is Bitcoin?
Now before we talk about the pros and cons of investing in cryptocurrencies like Bitcoin, let’s talk about what it is.
What is Bitcoin or cryptocurrencies in general?
You see, I’m using Bitcoin here because it is the most popular cryptocurrency there is.
Bitcoin is a digital currency. This means there are no bills, no coins…it’s ‘internet money’.
You don’t have a $1 Bitcoin, $10 Bitcoin, and so on. It doesn’t exist. It only exists in cyberspace.
Bitcoin was introduced in 2008 by Satoshi Nakamoto. Still to this day no one is certain if this is an individual or a group of people.
You don’t need to know this, but you do need to know the idea behind Bitcoin.
What Is The Point?
So the idea was to have a worldwide decentralized system because it’s much better than a system controlled by banks or the government.
This is where many people say that banks and government can manipulate currencies.
Especially right now, we are seeing that governments all around the world basically put the printing presses into overdrive and are printing money like crazy.
Now, this is also where Satoshi Nakamoto said that there will be no more than 20 million Bitcoins.
After the last Bitcoin has been mined, no more will be created.
So it is not possible to artificially inflate it by just mining more and more Bitcoins.
Right now it’s estimated the last Bitcoin will be mined in 2140.
Is Bitcoin A Good Investment?
So with all that said, is Bitcoin a good investment?
Many crypto and Bitcoin fanatics look at Bitcoin like ‘digital gold’ and make the argument that it is a good “store of value.”
So let’s talk about the pros here.
The Pros of Bitcoin
First of all, a lot of people who love investing in Bitcoin say, “You know what? It is a great investment because it can only go up.”
And here’s what they are arguing. They say, “Because we have a limited supply.”
And that is true. There will be only 21 million Bitcoins, the algorithm is programmed this way.
Secondly, the pros of this is that it can’t be inflated by printing more money.
And you know that this is what’s happening right now all around the world to get through this pandemic.
Number three, everybody says, “Well, you know what? It’s the new currency.”
These days, if you think about it, we are pretty much already paying cashless, right?
Credit cards are used, and now there’s Apple Pay, for example, that sends payment right from your phone.
So in order to arrive in 2020, this is where everybody says, “Well, you know what? It’s the new currency and everybody should get used to it.”
The Cons of Bitcoin
Now talk about the cons.
First of all, the assumption is it can only go up. And this is where I say, “Hell no!” Let’s take a look at a Bitcoin Chart.
If you’re going back to the beginning of Bitcoin, again, it started in 2008, at first, it was only trading at a few cents.
At some point in 2017, Bitcoin got so popular that it went from a few hundred dollars to more than $20,000 per one Bitcoin in a matter of weeks.
But then what goes up must come down, and it crashed all the way down to $3,500.
Right now we are trading at $11,300.
As you can see above, the assumption that it can only go up is not a valid assumption.
In order to do this, yes, there is a limited supply, but what do you need for price to go up? You need demand, right?
And this means that it would need to be widely accepted as a payment mean.
Right now this is not the case, and I’ll give you some stats here in just a moment.
Is Bitcoin The New Currency?
Well, I don’t know, because, again, it was introduced in 2008.
It gained popularity in 2017 when it went from a few hundred dollars to $20,000.
As of right now, Bitcoin is only 0.4% of the world’s money. And now you might say, “Well, this is only Bitcoin. There are way more cryptocurrencies.”
This is true, but all cryptos combined only account for 0.7%. So it’s not really the new currency just yet.
Now, not saying that it couldn’t happen, but let’s talk about whether it makes sense for you to invest in Bitcoin and whether I’m personally investing in Bitcoin or not.
Should I Invest In Bitcoin?
First of all, I’m a trader, so I’m always curious can we trade?
Is this good for trading? And what I mean by “trading” is that you’re entering and exiting within a few days.
You also need to know that it has lots of volatility.
Right now, it moves 4% per day on average. That’s a lot, right? Within a few days, it can move 10% — 15% in your favor as well as against you.
Now let’s talk about whether or not it is good for investing.
This is where most people look at cryptocurrencies and say, “You know what? Why don’t I invest a few thousand or $10,000 into Bitcoin or a cryptocurrency?”
Then everything will be fine, maybe in 10 years or 15 years it will be at some say “$100,000.”
Let’s talk about this.
We know that the limited supply is good, but it needs to have demand. And in order to have demand, it needs to be widely accepted.
Think about it this way. Right now, a coffee at Starbuck would be $4, right? Easy enough.
So in order to pay for it with Bitcoin, it would be 0.000363636 of a Bitcoin.
You see, it’s really difficult for us to think this way.
Now you might say, “Well, it doesn’t really matter because it’s all electronic and we pay with the phone.”
Well, first of all, we need to get used to the idea that a coffee costs 0.0003636 Bitcoin.
The other thing is it might, at some point, replace other currencies or gain more traction.
But right now, keep in mind, you can’t touch it. And for many people, if you can’t touch it, it’s not real.
Gold for example, when you buy it, you can put it in your safe. The same goes with dollars.
Cryptocurrencies you can’t put in your safe.
And for some people, this alone is a deterrence. Because for them ‘real’ means something they can hold onto or put under the mattress.
Also currently there’s still lots of competition. There are over 5000 cryptocurrencies and more are introduced every year.
So now the key question is here, will there be a better one than Bitcoin and will maybe one other rise to the occasion?
So what am I personally doing with Bitcoin and cryptocurrencies?
Well, I personally do not have any bitcoins (or cryptocurrencies). Right now, I don’t really see Bitcoin taking off in the next year or two.
It might in 10 years, 20 years, 30 years. Who knows, right? But right now, I don’t think that it is a good investment for me.
Also looking at the chart, I do believe that the ship has already sailed.
I mean, it would have made sense to invest in cryptocurrencies when they were only a few hundred dollars.
Now that it is $11,000, sure, it could go all the way to $100,000, as some say, or it could crash and burn and go back to $3,000 or $2,000.
So it is a super, super risky investment.
I personally don’t believe that Bitcoin is a good investment. I believe that there are other possibilities and better investments with far less risk.
In my opinion, if you’re trading stocks and options you will run circles around Bitcoin traders.
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