Charles H. Miller
Before we start, we must add that the following text should not be viewed as an investment advice, and we expressly disclaim any liability, including in respect of direct, indirect or consequential loss or damage. That being said, let’s proceed to answer the question of the day:
Is It a Good Idea to Invest in Bitcoins?
Overall, we think – YES, you should buy bitcoins and use them as a way to diversify your investment strategy. The common sense tells us that we shouldn’t put all eggs in one basket, so bitcoin — and other cryptocurrencies for that matter — is one of the baskets to think about, and it is arguably the most potent basket to anyone’s portfolio. Let’s look at a few reasons why that’s the case.
1. Bitcoin has a solid tech foundation
It is decentralized, backed by the rock-solid blockchain technology. You can can’t just invent more bitcoins — its protocol is set to automatically half the volume of bitcoins that can be mined every four years. So while there will be new bitcoins on the market, there won’t be a ton of them, making sure that the law of supply and demand keeps ticking to the benefit of bitcoin owners.
2. Bitcoin has been around since 2009
It is not invented yesterday, and we had almost a decade to play with it. The underlying technology (blockchain) has proven its worth and is now used by major corporations. So there is value behind bitcoin, and again — other cryptocurrencies. Speaking of which, the newer cryptocurrencies are also made on solid foundations though they tend to be more volatile than bitcoin.
3. Bitcoin is the digital gold standard
As noted, Bitcoin is the longest running cryptocurrency and is considered the digital gold standard. This in turn makes it a safe haven when economic challenges struck; for instance, bitcoin was up 15 percent on the news of Brexit. And with general economic uncertainty, its role as a safe haven will become increasingly important.
4. Bitcoin is the reserve currency of the cryptocurrency space
Think of it as a U.S. dollar of cryptocurrencies. You can use it to buy into Ethereum and Litecoin markets; when there is an ICO (Initial Coin Offering) — which is the IPO (Initial Public Offering) for cryptocurrencies — you typically need bitcoins to buy in. Also, bitcoin is by far the most accepted cryptocurrency in the world.
5. Bitcoin is already mainstream
Related to the previous point… While less-known cryptocurrencies have to fight for wider adoption, bitcoin is already accepted at hundreds of thousands of merchants and vendors around the world. In fact, there are already more than a thousand bitcoin ATMs all around the world, with new ATMs being added every single day!
6. Major corporations are on board, as well
Aside from small and medium sized businesses, major corporations also allow users to pay with bitcoins, including Microsoft, Dell, Expedia, Time Inc, and many others. And it was back in 2013 when Bank of America Merrill Lynch stated its belief that “bitcoin can become a major means of payment for e-commerce and may emerge as a serious competitor to traditional money-transfer providers.”
7. China is getting in…
Yes, the country has tried and still tries to regulate bitcoin and other cryptocurrencies, and even ban them, but around 80 percent of new bitcoins are mined and almost three quarters are traded there. So while the government doesn’t like the money it can’t regulate, its rising middle class can’t get enough of it. And the same (obviously) goes for the country’s super-rich.
Downsides
It is only natural that there is some “but” and when it comes to cryptocurrencies like bitcoin that “but” is that much more important. Because of its decentralized nature, governments can do little to control fluctuations of bitcoin’s valuation. As of 2014, bitcoin had volatility seven times greater than gold, eight times greater than the S&P 500, and 18 times greater than the U.S. dollar. This in turn has made it a risky investment, but also the one that can bring 10x returns.
However, due to increasing acceptance of bitcoin and some other cryptocurrencies, we think its volatility will decrease. Sure, it will still react to such major events as Brexit, but then again the British Pound also lost a chunk of its value on the same news.
Another reason why we believe in the future of bitcoin is people’s “Fear Of Missing Out” — FOMO for short — that keeps the market vibrant. It is only natural that you wouldn’t want to miss the big ride when you saw/read how some kids have made fortunes buying bitcoins a few years ago.
Conclusion
Yes, we think it is still a good idea to invest in bitcoins. There are many places around the web from where you can buy bitcoins, you can find them buy searching for “bitcoin exchanges” on Google; the first few results should work for you…
Good luck!
