You may have experienced a mix of emotions while watching Bitcoin rise from the sidelines: at first, it was curiosity and disbelief. When it reached the price of $1,000 back in 2013, you thought that would be the end. A few years later, it suddenly went to $20,000, and you declared that to be a classic bubble waiting to burst. But with this digital currency breaking through the $100,000 mark, you now wonder: should you invest in bitcoin now?
For many, cryptocurrency represents a generational shift. Millennials observed the boom of the crypto market and often (have) seen friends and fellow peers become millionaires through early investments. On the other side, individuals belonging to older generations can find it hard to figure out what Bitcoin is, and still less how to invest it.
Bitcoin, at its core, is digital money. Unlike conventional money forms, it is not governed nor controlled by governments or banks. Still, it is deployed on a distributed network employing blockchain and can be used to encrypt transactions. Bitcoin has been the pioneer of this new financial age, and Bitcoin is now in the hands of everyone to learn.
The recent price jump of Bitcoin has been tremendous. Just this month, Bitcoin crossed the $100,000 mark, fueled in part by talk of a crypto-friendly administration under former President Donald Trump. His promise to make the U.S. “the crypto capital of the world” sent shockwaves through the market, which itself fueled an even greater desire.
Is it too late to invest in Bitcoin now?
Experts are divided on the matter. Editor-in-chief Caleb Silver at Investopedia still thinks that it may “be just too late to buy” Bitcoin, but he nevertheless strongly cautions. Investors should take notice, he tells them, that cryptocurrencies are volatile, unmanaged, and not completely understood. If you’re hoping to profit from Bitcoin’s rise, it’s important to keep these factors in mind.
But Motley Fool’s crypto analyst Bernd Schmid is optimistic. He further compares the current level of crypto adoption with the internet of the late 1990s. Likewise, the Internet has been a global phenomenon that arose in gradual steps, cryptocurrencies might follow that trend and become more and more widespread.
However, not everyone shares this view. Bryan Armour, director of passive strategies research, Morningstar, in fact, characterizes Bitcoin as a speculative wager. He cautions that its range, and especially range-associated volatility, can wash out a portfolio, especially for risk-averse investors. Similarly, Jonathan Swanburg, a certified financial planner, muses whether it is the best time to put money behind Bitcoin at such a high price. If you didn’t like Bitcoin at $20,000, how could you want it at $100,000?
Though it may have already happened that, due to the “Trump effect”, Bitcoin increased in price, there is still potential for an even greater rise. As has been pointed out by experts, the recent regulatory amendments in the United States under the Biden administration may lead to widespread retail availability of cryptocurrencies. This could boost prices in the future.
How Much Should You Invest?
If you’re new to Bitcoin and crypto, start small. Experts recommend that no more than 5% of the portfolio should be allocated to cryptocurrency. Bitcoin volatility is well known and it is imperative to not risk losing money that you are able to afford to lose. Risk reduction, investing in Bitcoin ETFs (Exchange-Traded Funds) is less risky since it reproduces the price of Bitcoin without direct investment in the digital currency.
It is now the private investor’s risk profile, appetite for capital, and view on the future of cryptocurrencies that will decide if the investor will provide capital to Bitcoin. While not too late, investing in Bitcoin should not be done without thought. The market remains a very speculative market and its volatility is a matter of which all potential investors should consider.
Ultimately, if you’re willing to take on the risk and have a long-term investment horizon, Bitcoin could still offer significant potential. However, as is the case in any investment, remember not to invest beyond what you are able to lose.
Also, see: From 2008 to 2024: Significant Events in History of Bitcoin