Charles H. Miller
This is one of those questions we get asked a lot, to which we can’t answer with a simple “yes” or “no.” Buying bitcoins is an investment and as every investment it comes with a risk. Except if you want to buy the U.S. government treasuries or put your money in a money-market fund, some risk is involved. And so is the potential of gain. That’s how things work with any kind of investment, Bitcoin included…
In a way, it is like investing in a tech startup…
Buying Bitcoin is very similar to investing in a high-tech company. It comes a higher risk, but it could potentially provide greater returns.
Actually, we tend to think that putting your money into Bitcoin is a bit safer — it has been on the market for years and many big companies have started accepting it, including Microsoft, Dell, Newegg, Overstock.com, Expedia, Overstock.com and Time Inc, among others.
Also, we have a Bank of America Merrill Lynch report from 2013 stating that they believe bitcoin can “become a major means of payment for e-commerce and may emerge as a serious competitor to traditional money-transfer providers.”
That’s Merrill Lynch we’re talking about, not some round-the-corner bank…
Uncertainty works in Bitcoin’s favor
We live in the age of global disruption which works in Bitcoin’s favor.
For instance, we’ve seen some Argentineans buying bitcoins to protect their savings against high inflation or the possibility that governments could confiscate savings accounts. This in turn caused the surge in bitcoin’s price.
Similarly, during the 2012-2013 Cypriot financial crisis, bitcoin purchases in Cyprus rose due to fears that savings accounts would be confiscated or taxed. Again, this prompted bitcoin to appreciate in value.
Finally, on the news of Brexit, the pound was down — but bitcoin value surged in value, gaining validity as “digital gold.”
Add terrorism to the mix and you’ll see why this world of uncertainty we live in plays to bitcoin’s favor — it will appreciate on pretty much any bad news.
Bitcoin is a “default” cryptocurrency
There are literally hundreds of cryptocurrencies out there but bitcoin is, and will likely remain, the “default” option. Yes, Ethereum has been growing like crazy lately and even though it uses a somewhat better technology, chances are it will always be trailing Bitcoin.
In fact, it is really hard to imagine what will make Bitcoin disappear. Any other currency would have to go through the same long process to see its adoption growing through the years. Also, there is no good reason why several cryptocurrency platforms cannot sit alongside and be complementary to each other, rather than fighting each other out of existence.
More and more merchants are accepting bitcoin payments
Related to the previous point, bitcoin is the most widely accepted cryptocurrency and there are even thousands of bitcoin ATMs in the world. It takes time to build such infrastructure, and it’s that infrastructure plus the fact that it is accepted by the growing number of merchants is what makes bitcoin valuable. That’s basically the definition of money — something that can be exchanged for other products and services.
Caveats
Bitcoin is not a regulated currency and is thus more volatile than any other money out there. According to the risk management expert and faculty member in the Finance Department at Boston University — Mark T. Williams — as of 2014, bitcoin has volatility seven times greater than gold, eight times greater than the S&P 500, and 18 times greater than the U.S. dollar. This, on the other hand, also makes it a great investment opportunity.
Conclusion – should you invest in Bitcoin?
As noted above, investing in bitcoin is like any other investment — it comes with a risk, and we must add that this article shouldn’t be considered as an investment advice, and we expressly disclaim any liability, including in respect of direct, indirect or consequential loss or damage.
And while millionaires have been made from bitcoin over the last few years that doesn’t mean you will be able to join their (millionaire) club, as well. Nevertheless, the demand (for bitcoin) is there and the limited amount of bitcoins that will ever be available should work in the favor of those who buy and hold their bitcoins.
So yes, we do expect Bitcoin to keep growing from here, though its price may be going up and down. It is a volatile commodity which in the long run promises to outperform many other investments. It is up to you to decide whether this is the ride you want to take.
