Unless you’ve spent the past five years hiding underneath a rock, you’ll have heard of Bitcoin. You might not fully understand what it is or how it works, but you know that it’s a digital currency, and you know it’s made a lot of people rich. We’ve all heard stories about people who bought Bitcoin cheaply when it was new and have now become millionaires. There are plenty of them. Five years ago, a single Bitcoin was worth a little less than two hundred dollars. At the time of writing, that same Bitcoin is worth several thousand. Those who got on board early and played the long game have been counting their blessings ever since. Are they the only people who’ll ever ‘win big’ from Bitcoin, though, or is it still worth your time and money to get involved?
There’s no such thing as a ‘safe’ investment, and the value of any investment can go up as well as down. That’s why investing should only ever be done by qualified professionals, or people using the services of those qualified professionals to inform them. Without that guidance, you might as well put your money into online slots, spin the reels, and hope for the best. That comparison isn’t without merit; you can now use Bitcoin to play online slots on some websites like Rose Slots. That’s how far the pseudo-currency has come in a few short years. Putting your hard-earned savings into online slots and expecting to win every time would be a terrible idea, though, and if Bitcoin offered the same chances of making a good return, it would be a dire investment choice.
Clearly, there’s still something to be said for investing in Bitcoin, or people wouldn’t still be doing it. What we’d like to bring you in this article is a little more insight into when it is and isn’t appropriate to do so, and what you have to watch out for in the process. We’re not financial advisors, and this article isn’t financial advice. You should always consult a professional before making any important decisions about investing, and what you’re about to read here is not, in any way, a substitute for that qualified advice. With that disclaimer out of the way, let’s go into a little more detail.
In May 2020, Bitcoin went through a scheduled ‘halving’ event. This halves the effectiveness of all ‘Bitcoin mining,’ and makes the creation of new Bitcoin more difficult. It now takes longer to create new Bitcoin, and therefore makes existing Bitcoin more rare and valuable. That’s the theory. It doesn’t necessarily mean that Bitcoin will now always be worth more than it was at the start of May, but in theory, it protects the future value of the coin by making it harder to acquire and, therefore, more valuable to own. You might want to think of it as the opposite of quantitative easing, where more money is printed to support a struggling economy. Just as that process always reduces the value of the currency being printed on the global markets, halving increases the value of the currency that is being ‘halved’ in terms of production.
Aside from making Bitcoin harder to own, some experts think that the publicity that’s come along with this halving event might persuade new investors to come aboard and start trading in crypto. If they do, that will push the currency’s value up even higher. At the time of writing (an important disclaimer to include, because the value of Bitcoin can change quickly and dramatically), that value was sitting just below ten thousand dollars per coin. It’s not out of the question that it could jump above that figure in the very near future. If you have ten thousand dollars burning a hole in your back pocket right now, that might make it tempting to buy into Bitcoin and enjoy the ride as the price climbs up.
There’s more to investing in Bitcoin than just the normal performance of the markets, though. Partially because of the way that the proposed Facebook cryptocurrency ‘Libra’ courted controversy in the United States of America last year, crypto is being scrutinized by regulators and lawmakers more closely right now than it ever has before. The banking and finance industry has never been a fan of crypto, as they view the existence of a popular decentralized currency as a threat. Governments and authorities dislike it because of its anonymity. Cryptocurrency, by its very design, is almost impossible to trace. It’s stored and traded anonymously. That leaves it wide open to fraud, money laundering, and even terrorism. Should regulators decide to impose restrictions on it (or even ban it completely in some territories), it would have a disastrous impact on the value of the coin.
We also shouldn’t ignore the fact that Bitcoin is more sensitive to the general market than we once assumed it was. As its decentralized, it was once thought that it would be immune to major global events – the one that’s happening right now, for example. Bitcoin traders watched on in horror as the price of their commodity plunged through the floor during February and March 2020, threatening to dip below one thousand dollars for the first time in living memory. It quickly recovered and rallied, but the idea that it can survive situations that would decimate the value of other investments has now been put to bed forever. Bitcoin is no longer a niche currency traded between only a few technically-minded parties; it’s part of the world’s marketplace, and being part of that marketplace comes with pitfalls and risks.
You could still make money from investing in Bitcoin if you’re lucky. You could buy in at ten thousand dollars, sell at fifteen thousand dollars, and walk away very happy with your decision. You could also buy in at ten thousand dollars and be stuck with something that’s barely worth more than two if things don’t go your way. It isn’t a ‘get rich quick’ scheme like it used to be. It’s no longer guaranteed to go on increasing in value as it did during its early years. It might still be valuable – more valuable than regular currencies in most cases – but it’s not a ticket to a millionaire lifestyle. If you choose to invest in it, you should probably temper your expectations about performance.