Hey Tony – should I invest in bitcoin?
I’ve probably gotten this question asked a million times, if not more.
There are a few different ways to answer this question. I’m going to go over all of them in this post. First, however, make sure to read my Bitcoin explanatory post that I wrote a few years ago if you’re still not familiarized with digital currencies.
Also, before I dig into it… Be sure to sign-up to my email list. I’ll be revealing this week (exclusively to my email list) how much I’ve invested in bitcoin and whether I currently hold any bitcoin or not. I’ll also explain the reasoning behind my actions.
Okay… Let’s get to it.
The 3 Common Laws to Investing
These laws apply to anything that you’re thinking about investing in. If your answer is “no” to any of these questions, don’t consider investing in whatever it is you’re looking into.
Ps. I totally made these up according to my knowledge and my experience.
Law number 1: Do you know what it is?
Whether it’s bitcoin, stocks, bonds, real estate… Do you know what you’re getting into? Do you understand what it is? If not, don’t put a dime into it. Don’t do things just because people are doing it. Humans are stupid and when people fail, they fail big and collectively. Make sure you’re thinking rationally, on your own, before making any decisions.
Reading my posts and advises are a good way of educating yourself – but you should always be making those last calls according to your own knowledge. What worked for me might not work for you in some scenarios. This is why it’s so important to understand what you’re investing in.
Law number 2: Do you understand how it works?
Again, it doesn’t matter what you’re getting into. Do you understand how real estate works? Do you know how to buy and sell bitcoin? Do you know how dividends are taxed?
If the answer is “no”, get educated before putting money into something. And stop delaying your education. You don’t need to enroll in a university to get yourself educated. Most info you can get from books that sell at around $10. I usually leave you a recommended read for you to check out at the end of each post. I do this for a reason.
Law number 3: Are you aware of the risks?
Risk management is a necessary technique that everyone should develop as soon as possible. Managing risk is not only important when investing, but it’s an essential aptitude in life for someone to have. Here is a great article explaining how risk management works.
When it comes to Bitcoin, risk is definitely something to consider. By now, if you’re considering investing in bitcoin you most certainly have already come to realize how volatile the cryptocurrency market is. One day, you wake up with Bitcoin sitting at a $10,000 resistance level. The following morning, it has dropped down to a $3,000 mark, losing 70% of its value. And this happens for no apparent reason. You have to learn to put up with the whales in the crypto market. Well, and in pretty much every market.
If you’re aware of the risks and are okay with them – then follow along.
Should I invest in Bitcoin?
Let me ask you something first. Have you ever considered investing in gold? If so, why did you think about doing this? If not, what made you want to invest in bitcoin and not gold?
I mean, Bitcoin is literally the digital version of Gold. You can’t use Bitcoin for anything else rather than to store value and use it as a means of transaction. Yes, of course, it’s easier to transact with Bitcoin and Blockchain technology than it is to use Gold. But the underlying essence is the same. Although Gold has a less degree of uncertainty. It has been around for centuries and its price is relatively stable. Bitcoin, on the other hand, has only been here for a decade and fluctuates in value like a rollercoaster.
Investing in Bitcoin today, in my opinion, is good for people who have time to sit down and trade on a daily basis. Making money of a volatile currency is actually not that difficult. Most traders today make use of bots (I like gunbot) which literally do most of the work for them.
I feel like the golden days of buying Bitcoin at $1,000 and watching it grow into the tens of thousands of dollars have ended. The initial investment to be able to profit from long-term holding Bitcoin is extremely high. At least for middle-class and lower-class people. I can’t see how someone who spends a year saving up $10,000 to put into Bitcoin will make much money today. In fact, the risk-reward ratio is not worth it in my opinion. Hey – I might be wrong and BTC truly jumps up to be $1,000,000 in twenty years. But for that to happen something bad needs to happen to traditional currencies in my opinion. And if something bad happens to the dollar or the euro, Bitcoin will be the least of my concerns. I’ll probably be more interested in collecting cows and soybeans than any kind of currency.
Anyway, what truly pushes me away from investing in Bitcoin (and Gold too) is that neither of these assets scale. One Bitcoin today will still be equal to one Bitcoin in 10 years. Whether the value of that Bitcoin increases or decreases within the next ten years is still to be determined. But the fact that I don’t get rewarded for holding Bitcoin really pushes me away from putting cash into it right now.
Stocks, real estate, bonds, treasury notes… They all have a certain element of risk associated to them. But they all reward you with extra cash for holding on to them. Whether you’re leasing out a property, getting paid a dividend… These are all great ways of building a passive income through an investment portfolio. Holding on to something and hoping it goes up is not something I personally enjoy doing.
Anyways, again, if you want real insights as to how much I’ve put into Bitcoin and how many I currently hold (or held) be sure to sign-up to my email list!
Ps. Just because I might not suggest you put a lot of time into Bitcoin (at this point) doesn’t mean that I don’t like Bitcoin. Hell, I work in the blockchain space! I love blockchain and I love crypto. Cryptocurrencies are here to stay. They are (in my opinion) the future of money. Whether it’s Bitcoin, a digital version of the USD and the EURO, Ether or any other cryptocurrency. Blockchain and crypto make the world a much more just place. This post was written from an investment standpoint and not a political or social perspective.
Recommended read: Blockchain Technology (And Bitcoin) Explained
