It’s mid 2017 and you are asking yourself. Is it still a good time to invest in bitcoin?! The answer is yes and no. If you’re not risk adverse and are looking for an investment with insane upside ( but also downside ) potential you should definitely look into investing in bitcoin and other crypto currencies.
Bitcoin just broke the $4000 mark and we are definitely in some kind of euphoria stage ( not necessarily a good thing).
Here are some pros & cons about investing in Bitcoin:
The problems with bitcoin :
Basically the main downside of Bitcoin is that it is worth what the people believe it is worth. Yes there is a limited amount of them out there but unlike stocks of good companies they don’t hold any “real” value. If tomorrow millions of people change their mind and say that Bitcoin isn’t worth anything the price would plunge.
Lets say you own some stocks of apple. That company can generate cashflow and pay dividends to it’s shareholders. Bitcoin can’t do anything like that. Bitcoin has only value because a lot of other people believe that it’s valuable and can be used to buy goods.
Keep in mind that Bitcoin is NOT connected to any real asset.
The best way I can put it is : Imagine there are 10000 stones of a kind somewhere (and thats the final amount).
If you could convince enough people that they’re worth something and that they can be used as currency to buy other goods you would also have created your own currency. Lets say 10000 people buy a stone for $1 each to start with. Then if someone else would like to have a stone he would have to pay one of the original owners of that stone enough money to part with it ( price increase).
Lets say someone wants the stone so badly that he would pay $2 for it because he is expecting it to grow in value and for some reason he prefers to use the stone over the existing money. Someone else would see that the stone just sold for double than what the original owner paid for it and also wants to have a stone so he offers even more money for it because he thinks its more valuable than the money in his pocket.
More and more people hear about this and they also want stones now so they cut them in half & quarter them and start parting with them for a lot more money than they originally paid for them. Now a stone that was worth $1 in the beginning is suddenly worth $100.
This can continue and does not necessarily mean its a bad thing. Thats how currencies got created in the first place. The main problem is just that it does not have any real value ( but thats the same with the paper money in your pocket. It’s only worth something because billions of people believe its worth something ).
Owning stock in a company is different because that company can generate profits etc. But then on the other end no company I ever heard of has a increase like Bitcoin. So should you still invest in bitcoin?
The good things about Bitcoin:
There isn’t much to compare it yet and nobody knows for sure how high this can go. For the longest time the naysayers have been bashing it but it kept growing. More and more of the official business magazines such as CNBC, WSJ and the Financial Times are reporting about bitcoin and to me that just adds to the credibility.
If you would’ve bought Bitcoin at the beginning of 2017 you would’ve gotten a 4x on your money already and it’s not stopping to grow yet.
Japan accepted it as currency and other countries are considering it as well which will only add to its value and will make it a widely accepted currency.
Furthermore if you are not very risk adverse and are looking for a way to make money quick ( Mutual funds for stocks make 7% ish a year yawn) you should be looking into CrpytoCurrencies. At the moment they offer a way to increase value that has been unheard of. I’m sure you heard about all those people that got in early and are now millionaires. But even most of those don’t want to part with their bitcoins because they’re expecting it to raise even higher.
To be honest nobody knows for sure how high it can go but it doesn’t look like the growth is stopping anytime soon.
I am personally a bit torn myself about investing more into Bitcoin ( I got in earlier so I am extremely happy but I also know that isn’t a safe investment. But then on the other end what is ).
In the end you need to know if you can handle the risk. If you have $200 or so of disposable income to invest in bitcoin you could give it a try and if it goes as planned you will make a nice profit. If not then you didn’t risk too much and can say that you tried to invest in bitcoin.
Disclosure: I am invested in bitcoin via CFDs . If you want to invest in bitcoin yourself check my other blog entries.