Should you invest in Bitcoin – Florida Financial Advisor
Should you invest in Bitcoin – Florida Financial Advisor
The all-time favorite topic among many is for sure the Bitcoin and cryptocurrency in general.
The first digital asset ever was Bitcoin and now there are so many cryptocurrencies out there.
Many people risked and took their chances and now they are very rich because they were smart enough to invest, or they were just lucky.
The best thing that you can do is to not lean on luck when it comes to investments and things that have to do with money.
You need to be smart, wise and think twice before you do anything.
But is good now to invest in Bitcoin and any other cryptocurrency, is it worth it?
Should you invest or not?
Many people are intrigued, but also a bit scared when it comes to investment in cryptocurrencies, and there is a possibility that you’re one of them.
No matter where you stand on bitcoin, we can agree on one thing: It’s polarizing.
Some investors believe it’s the way of the future and others think it’s a scam.
However, it’s gaining popularity.
It’s likely that the coronavirus pandemic accelerated its acceptance by pushing more retail online.
Now, more than one-third of small- and medium-sized businesses will now take bitcoin as payment.
What’s A Bitcoin Worth?
The value of anything is what someone will pay you for it. So, what is a Bitcoin worth? Well, again, like anything, it’s worth with someone will pay you for it.
What is Bitcoin as an investment?
Bitcoin is one of the most volatile investments you could make.
Bitcoin goes through incredible spikes and plummets in value.
Back in July of 2010, a year after bitcoin was released to the world, a bitcoin was worth only eight cents.
The value jumped all over the place until it really started to make some waves in 2017. One bitcoin reached a value of $1,000 early on, then zoomed to $5,000 in October, then doubled to $10,000 in November.
By mid-December one bitcoin’s value was almost $20,000. The bubble finally burst, and the value dropped to about $3,500 by November 2018.
But bitcoin’s value started to skyrocket again in 2020.
Just a couple weeks ago, the value of a bitcoin had hit an all-time high of just under $42,000—but then tanked within 24 hours down to $34,863.
Will it continue to grow in value? We don’t know.
But the reality is that volatility always equals risk.
And risk isn’t a bad thing, but you need to be aware of what it might cost in the end.
Should cryptocurrencies be a part of your investment portfolio?
It may appear completely foolish to invest in a digital asset that does not exist physically and is not backed by a real commodity, government, or governing financial intermediary.
Yet the price of bitcoin has surged to new highs at the tail end of 2020, the start of 2021, and the bullish case for cryptocurrencies is captivating, while far from obvious to the average investor.
Yes, there are real risks to investing in crypto, but there is an opportunity with enough merit to garner investors’ attention
Why should bitcoin be a part of your investment portfolio?
We are not experts in the space however we are well-read observers of what is happening in the world.
Like any investment, nothing is guaranteed and this is a very speculative asset class.
We must recognize that the value of cryptocurrencies could plummet to zero.
Does this feel like a bubble in some ways?
Yes, however, Google once felt like a bubble. And ‘feelings’ have close ties to emotions, the emotional investor is not a successful one. The rational investor is far more likely to see long-term success.
All things considered, it is advisable to only invest a small amount or percentage of your portfolio, if at all.
The risk may simply be too large for some investors, while at the same time, a phenomenal opportunity for others.
Why shouldn’t bitcoin be a part of your investment portfolio?
- Protocol Risk. The protocol that bitcoin is built on could have a design flaw, or it could be broken by the development of quantum computing. If the underlying protocol is broken then the faith in bitcoin may be severely damaged. This is the smallest known risk to investing in bitcoin, however, it does not make it any less real.
- Exchange Shutdowns. Bitcoin is decentralized by nature, however, the exchanges where people can exchange fiat currency for bitcoin are highly centralized and could be regulated or closed by various governments. The growth of bitcoin would then be severely hindered, however, a complete shutdown would be extremely unlikely.
Should you invest in Bitcoin – Florida Financial Advisor
The prices of everything goes up and goes down.
ALL asset classes will lose at least half of their value at some point in your lifetime.
You might want to write that down. Look no further than the stock market over the past 20 years.
Now, with that said, suppose you spend 100 bucks a weekend playing golf, eating out, on boat gas, or some other frivolous (but possibly necessary for your sanity) activity.
That comes to over 5k per year.
That’s 5k that you’ll never see again.
True, all work and no play makes Jack a dull boy so you could argue that the money was well spent.
And, it might encourage you to work harder so that you have even more money to spend.
The point is, if you’re already spending-insert the current price of Bitcoin-per year on something that will not have any chance of a monetary return then what’s the harm in buying one Bitcoin?
Well, now that Bitcoin is closing in much higher than that, it’s a little tougher to make the argument, but you get the idea.
So should you invest just a bit…a money that you do not need?
Is Bitcoin A Bubble?
The quick answer is probably.
That’s okay though.
Bubbles are very tradable.
They usually go a lot further and last a lot longer than most believe.
Just make sure that you have a chair ready for when the music stops.
Savvy traders can then also ride the fall lower.
Bitcoin, like any other asset, it’s worth exactly what someone will pay you for it-nothing more, nothing less.
If you are to invest then tread lightly, possibly no more than what you would normally fritter away on a frivolous activity.
Based on their current trending characteristics, the cryptos have proven to be wonderful trading vehicles.
Treat and trade them like you would trade any other asset class.
Beware that exchanges aren’t regulated and there have been a few horror stories here so far.
The blockchain is what makes bitcoin possible.
It will revolutionize many businesses.
We need to pay attention for opportunities here.
The good news is that the charts with lead the way with both the cryptos and blockchain opportunities.
Bottom Line
While Bitcoin is the first and currently most popular cryptocurrency, it accounts for less than 1.5% of all outstanding financial assets, plus gold and silver.
Bitcoin it is incredibly risky and may swing greatly in a matter of minutes.
So, be very careful with whichever way you decide to go.
Despite structural and operational challenges, larger financial institutions are adding Bitcoin and other cryptocurrencies to their portfolios.
This suggests that cryptocurrencies are here to stay.
The novelty of cryptocurrencies, however, combined with their above average price volatility and the potential regulatory challenges they could face in the short term suggest they will appeal more to younger investors with a larger appetite for risk than to those who are older and prefer less volatile financial instruments.
Michael Minter is an independent financial advisor, managing partner of Mintco Financial with offices in Tampa,Fl and Buffalo, NY.
Call 813-964-7100 or 716-565-1300
Editor’s note: Investing in crypto coins or tokens is highly speculative and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment.