You’ve probably heard of Bitcoin, but are you sure it’s a good investment? Despite its high price and booming market cap, many investors are skeptical. What makes Bitcoin so popular, and what’s the best way to invest in it? Here are a few factors to consider. The biggest one: Bitcoin is non-correlated with traditional assets. While investors can speculate on the price of Bitcoin, there is no intrinsic value.
Another advantage to investing in Bitcoin is that there is no central authority to control its price. The currency has a rules-based monetary system, and its policy is determined by the parameters of its code. In times of economic recession, governments are printing more money, and investors are turning to alternative investments. Bitcoin is one of these alternatives. However, investors should do their homework to determine if it’s a good investment before making a large commitment.
Despite its volatility, bitcoin has consistently been a winner. In January 2009, it had no value, and by February 2021, it had reached $50,000. With no closing bells or circuit breakers, the price of Bitcoin fluctuates wildly. In February and March of 2020, it dropped by nearly a third, driven by the collapse of the economy. This is twice the size of the stock market’s drop. Bitcoin is a good investment for high-risk investors.
There are two main downsides to Bitcoin. The first is the price fluctuation. Since Bitcoin is a very volatile asset, its price can increase and decrease dramatically within a short period of time. You should evaluate your risk tolerance and avoid investing in Bitcoin if you are not comfortable with the risk. Fortunately, there are other ways to invest in the digital currency. But, bitcoin is still not for everyone. Don’t make the mistake of relying on the news that it’s a good investment.
Another downside to Bitcoin is that most online trading platforms don’t allow you to own it standalone. While you can trade Bitcoin on an exchange, you cannot actually own it. Instead, you can purchase shares of companies that accept the cryptocurrency. Bitcoin exchange traded funds (ETFs) let you buy Bitcoin without actually buying it. Moreover, if you’re considering investing in Bitcoin exchanges, you might also consider investing in the blockchain itself. The tech platform Solana has claimed to have the fastest blockchain in the world. Several investment companies have even launched bitcoin funds.
Another downside to bitcoin is the volatility. Since bitcoin’s emergence in November, the prices of leading cryptocurrencies have seen huge ups and downs. Bitcoin reached a record high in November at $68,000, but it dropped to below $30,000 in July. This volatility is another reason why experts recommend keeping your crypto investments to less than five percent of your overall portfolio. As with any other investment, you should understand that bitcoin is not a good investment, but if you do decide to invest in it, make sure to stay disciplined.