Bitcoin with other coins

Is Bitcoin A Good Investment? An Honest Tell-All About The Leading Crypto

Bitcoin has been around for a decade, and it’s had its shares of ups and downs. Bitcoin’s December 2017 high of almost $20,000 is yet to be revisited though but not entirely out of the picture to some investors — some even predict of a Bitcoin run-up to fifty grand. It could be possible since the cryptocurrency is still highly volatile but it can plummet in quadruple digits on a single day too! This leads to the question, “should you get in on this crypto game?” You’ve probably even asked, “Is Bitcoin a good investment?”

Well, this article will hopefully clear your doubts about whether Bitcoin is indeed a profitable investment for you to make.

Defining what investment means

Before concluding whether Bitcoin is a good investment or not, you must first be able to explain what investing is. Because the meaning of “investment” varies between individuals.

Investopedia defines an investment as “an asset or item acquired with the goal of generating income or appreciation.”

In other words, for you to consider if an asset is an investment, it should produce income that you can depend on, or you must be able to sell it at a higher price later on.

What kind of assets produce income?

Bonds, shares of companies, businesses, and real estate (if it earns rental income) are just a few examples of assets that produce income.

assets drawing

What kind of assets appreciate in value?

Similarly, assets that can be sold for a profit are also bonds, shares of companies, businesses, and real estate. Precious metals can be sold at a higher price too. However, there’s plenty of debate whether something like gold can be classified as an investment, but this article will not cover that.

As for Bitcoin, it falls under assets that appreciate in value.

But what is a good investment?

It depends on who you ask. If you were to ask billionaire stock investor Warren Buffett, he’d probably tell you that a good investment would be a company with a business model he can understand, has a long-term competitive advantage, and can be bought at a cheap price.

If you were to ask hedge fund billionaire Ray Dalio, maybe he’d suggest creating a portfolio of uncorrelated assets so that you mitigate risk as much as possible.

Or, if you’d seek the advice of Quantum Fund’s co-founder Jim Rogers, gold would likely be his recommendation.

Investing Perspective

Investors have varying views for preferring one asset over another. It could be that an investment that provides consistent income is more attractive than an asset that only goes up in value if another investor paid a higher price for it.

Or, it could be that there’s some long-term value associated with an asset that has been overlooked. So, depending on who you ask, the answers may differ.

But one thing’s for sure: You should be able to crunch some numbers with an asset, meaning you have to have a sound metric to assess its worth and forecast its value.

Ask yourself, what metric can you use to predict how good Bitcoin will be as an investment?

What is the purpose of buying into the asset?

A particular investor may buy different kinds of stocks: stocks that regularly pay dividends, stocks that are undervalued, and stocks that are poised for growth.

By doing this, an investor can depend on consistent income and perhaps a basket of stocks that can be exchanged for a higher price twenty or thirty years into the future.
bitcoin and gold

Plenty of investors buy gold because, according to them, “it’s a hedge against inflation.”

Others purchase bonds to weather the volatility of riskier investments in a portfolio like stocks because the return of bonds are more predictable.

With Bitcoin, what do you think is the purpose of betting on the cryptocurrency?

Investing and Time

Another important consideration for an investment is the time. Usually, when people look at an investment opportunity, they tend to look at the time horizon narrowly — like a few months to a couple of years.

If that’s the duration to measure an investment’s performance, then that’s more akin to trading. Not that there’s anything wrong with trading, but time is what a good investment requires to be in full blossom. Expecting your investment to return tenfold within the next year is unconscionable.

Want to learn currency trading?

In addition to that, trading follows a different methodology, and the same principles of investing may not apply to trading.

Examining Bitcoin

Bitcoin’s purpose is to enable digital transactions using a currency that isn’t overseen by a central authority. And, as a currency itself, it can’t produce income. It only goes up in value because others are willing to pay a higher price for it.

Its real value can’t be determined either since there isn’t much to analyze about the currency other than the fact that its supply (total coins in circulation) is limited and the rewards for people who mine bitcoin decrease over time, a.k.a. Bitcoin “halving.”

It can also be susceptible to a much better payment solution, whether it’d be a new cryptocurrency or a brand new technological breakthrough in finance. Think Libra.

facebook libra

And, all the other factors that affect Bitcoin’s value positively is mostly driven by speculation.

If you buy Bitcoin now, you’re not sure where it’ll be or what will happen to it twenty or thirty years in the future.

And, yet everything is uncertain, debt investments run the risk of default, established companies can go bankrupt, and real estate properties may go bust.

Nothing is for sure.

The best bet on Bitcoin is that if the world drops the current financial system and formally adopts Bitcoin as the world’s reserve currency.

So, is bitcoin a good investment for you to make? By conventional measures, no would be the answer.

Think we’re wrong? Comment your thoughts below.

9 thoughts on “Is Bitcoin A Good Investment? An Honest Tell-All About The Leading Crypto

  1. I can very well accept your position here on bitcoins because since I have known about it some of my friends have lost their money to it. From the definition of investment and the possible loss in bitcoin, it is easy to agree with you that Bitcoin isnot a good investment. I need to share this with a few of my friends who still think it’s the best way to hit millions.

  2. I really would love to show this to my friends as we just concluded an argument if bitcoin is actually a worth investment to make. To me and in accordance with what you have said, Bitcoin is too volatile and as such, predicting its outcome on the level of circulation alone would only make it a bigger risk to take on.  Thanks for your analysis here through this post

  3. My view about this content is all about the information i have benefited from what investment is all about, before you consider anything as an investment, it should produce income that you can depend on or one must be able to sell it at a higher price later one all in all an investment must be profitable

  4. This is a very good post. You see, i was thinking of going into bitcoining before but now i can tell that it is not the best thing for me to invest in. I was really wondering there is so much fuss about it. Having read your post, i can understand why you do not recommend bitcoin as a good way to invest money. You have drawn definitions to justify that. What other ways would you recommend that i invest in?

  5. Thank you for sharing this review here and I am delighted that you have shared this post on bitcoin. I have been caught inbetween making the right decision as to investing in bitcoin. Though it has been established here that bitcoin is like a gamble with money and as such, I’m not enthusiastic about putting my money in something like this. I guess I would look for a more better business offer than this investment.

  6. Great question. I am always interested to know the long-term outlook on crypto-currencies and it’s always good to have as much information as possible especially when we’re talking Bitcoin, since it has historically been such a volatile and potentially profitable (or costly) instrument. It would have been nice to have gotten in early with Bitcoin for sure, and if I had them I would probably hold them to see if they get up to that 50k mark. But since I did not get aboard that gravy train information such as this is very helpful. I have to agree that Bitcoin may not be the best investment, at least at the current market price since there is so much uncertainty, but if it really tanks it might be worth a shot to buy a few shares and hold onto them. Thanks for the very useful information on investing and on Bitcoin and keep up the good work!

    1. Thanks for sharing your thoughts.  Well, yeah there’s an opportunity to get on board if it does tank, but if it continues to slide that’s where it gets troublesome.  I can’t imagine how the traders who bought it at $20,000 are feeling as they’re running with a loss for two years now.

  7. You speak the truth and maybe the use of reason is where you are with the investment risks of Bitcoin. We bought our own house twenty-four years ago and it is now worth six or more times its value than when we purchased it. Good investment ? Yes, if we were to sell and down size, or move to an area or country that had lower prices. We’ve not lost money on it but as an item of worth it is the same as it was all those years ago. The same type of property will cost me what my own is worth, so there is no gain there.

    Is investment without risk then ? a long term gradual rise in what ever you decide to invest in will always come with a risk. None of us have a crystal ball. Bitcoin may well keep on rising for many years to come as the digital age becomes more reliant on block chains as a secure way of transaction security. Are there any guarantees when it comes to investing in anything I wonder. A thought provoking post.

    1. Hi Twack Romero, you make some good points here.  And, I totally agree with you that no investment is without risk.  True no one can predict where prices will be.  But there are just so many variables that hold back BTC from being a sound investment.  Even with the digital age being more reliant on the blockchain technology, then wouldn’t that mean that people could innovate a better crypto than BTC?

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