Should you invest in Bitcoin?

There is so much hype around Bitcoin – and maybe for good reason.  It’s an exciting new technology that could have a huge impact on the world.  But should you be investing in Bitcoin?  In this post I’m going to break down some of the reasons why it’s good and bad and why you should be investing in it.

Let me know in the comments if you’ve invested in Bitcoin and what you’re experience has been.

If you can’t spare $10

First up, Bitcoin definitely isn’t for you if you can’t spare $10.  While you may have heard stories about people who started with nothing and are now millionaires, the chances of that happening are slim.  Bitcoin isn’t going to make you a millionaire overnight.  It’s a very risky investment so if you’re struggling and can’t afford even afford to spend $10, then it’s best to give bitcoin a hard pass.

If you’re in debt

Similarly if you have a lot of debt that you’re struggling to pay back, then stay away from Bitcoin.   It’s not going to be your saviour.  Many people fail investing in Bitcoin because they buy in and the price drops.  Suddenly they need to pay some bills and are forced into selling their holding at a loss.  So if you’re in debt then Bitcoin probably in’t for you.

You don’t need to invest a lot in Bitcoin

You’ve probably heard the Bitcoin price mentioned on the news.  It’s currently thousands of dollars.  This may have made you think that Bitcoin is out of your reach.  But the good news is, is that a single Bitcoin can be divided and divided down – so it’s possible to buy just 0.001 of a Bitcoin – or even smaller.

Most Bitcoin exchanges have a limit to how small you can buy.  And it’s usually around the $10 mark.   Unlike stocks we’re you’re forced to buy 1 entire stock, with Bitcoin you can buy part of a coin.  So it’s actually a gold investment for those looking to start investing with a small amount of starting capital.

Don’t invest everything in Bitcoin

The “bitcoin millionaires” that you see on the news either bought Bitcoin years ago when it was first starting out, or invested everything they had into it before the price surged.  Please don’t do the latter.   Bitcoin is such a volatile asset.   It can drop $1000 in a day.  If you’re a student or young person you’re probably not in the position where you can invest everything in Bitcoin, and that’s a good thing.

I have a 1% rule.  Can you afford to lose 1% of your net worth?  Maybe even 5% if you’re young with few monthly expenses.  If you can they sure, go ahead an invest in Bitcoin.  There is a chance that the price will go close to nothing.  But there is also a chance that it could skyrocket.  Either way, if you invest just 1-5% of your net worth, then you won’t be in a position where Bitcoin wrecks you.  But if it does sky rocket you’ve still got some skin in the game.

You probably won’t get rich from Bitcoin

The reason why so many people got rich from Bitcoin in the early days is that the price doubled and doubled numerous times.  The chances of it doubling again aren’t ridiculous (personally I could see it happening this year or next), but it’s not going to double multiple times, in a short period like it used to.

So even if you invested $1000 in Bitcoin, its only going to be worth $2k if the price doubles from where it is now.  That’s a big jump, but it’s not exactly going to make you rich.

If you had invested $1000 in 2011, that would now be worth around $2 million.  That’s quite a difference.

Now Bitcoin might shoot up and be worth $100,000 a coin, who knows???  But I am certain that Bitcoin will now make fewer millionaires than it used to.

I wouldn’t think about Bitcoin making you rich.  Just treat it like any other investment.   It may outperform them, but it’s not some magic pill.

Investing to learn about Bitcoin

Bitcoin is an interesting technology.  And there is absolutely nothing wrong with wanting to learn more about technology and concepts such as Bitcoin.  One of the best ways to learn is through real world experience.

Investing in Bitcoin so you can learn more about how it works is a legitimate reason to buy bitcoin.  Remember, you don’t need to spend hundreds of dollars to buy bitcoin.  You can start with just $5.

If you’ve never held any bitcoin then how it works can be quite confusing.  But once you buy some, possibly transfer it to a wallet or use it to buy something, everything will become much clearer.   And I do encourage you to learn more about it.  Learning more will help you make better investing decisions.

Be Prepared to Sit and Hold

Bitcoin is volatile.  During the last bull run, you could buy it one day and sell it for $1000 more the next.  On the flip side, it can easily drop that much in a day as well.

If you’re looking to see some returns, your best bet may be to just sit and hold.  Bitcoin is a finite resource.  A limit of $21 million will be mined.  So in theory it should become more scarce.  So there’s fundamentally wrong with just sitting and holding and waiting for it to become more scarce.  That’s a reasonably sensible investment strategy.

Trying to beat the markets and trading bitcoin (buying and selling regularly) is a high risk strategy.  Most people who try, end up losing money.    If you had bought Bitcoin two years ago and held onto it, you would have made a tidy profit by now.

In conclusion

So in conclusion, don’t buy Bitcoin if:

  1. You can’t afford to spend even $10
  2. You’re in debt
  3. You need a quick get rich investment

Do buy bitcoin if

  1. You want to learn more about Bitcoin
  2. You want to buy a small amount to be part of the journey
  3. Willing to risk 1% of your net worth

How to get started Buying Bitcoin

The easiest way to buy Bitcoin is through Coinbase.  They are the worlds largest seller of Bitcoin with a good reputation.  Depending on where you live you can buy Bitcoin using a bank transfer or credit card.

If you sign up through this link, you’ll get a special bonus if you choose to buy some Bitcoin.

 

 

This post is for educational purposes and should not be considered as investment advice. This post is based on individual experience and journalistic research.

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