Have you been watching the Bitcoin surge with a touch of hesitant envy? It might not be too late for you to jump on the crypto gravy train.
It’s undeniable, Bitcoin seems to be everywhere again. After marginally stepping out of the limelight following a crash in 2017, Bitcoin has roared back into the public consciousness with a vengeance.
In February 2011, Bitcoin (BTC) cost an almost unimaginable $1. Fast forward ten years later to February 2021, and BTC is $51,000. In March, that value has surged to an all-time high of $61,500.
After such incredible growth, seemingly everyone and their dog have sat up and taken notice, wanting to hop on the Bitcoin gravy train. However, a question on many people’s minds is that perhaps it’s too late now, that perhaps the train has already left the station.
So, is it too late to invest in Bitcoin? Have would-be investors now lost the opportunity of a lifetime?
Maybe It’s Too Good to Be True
Many doubters of Bitcoin believe that it – along with other cryptocurrencies – is nothing but a passing fad. These naysayers believe that cryptos exist in soon-to-burst bubbles fueled by frenzied speculation and Millenial know-it-alls.
It’s a fact that based on gains alone, Bitcoin does offer holders growth, albeit of a volatile nature. However, growth and investment are two different things, and some experts argue that Bitcoin can hardly even be classified as an ‘investment’.
Harvard economist John Furman has argued that cryptocurrencies aren’t assets or suitable investments because they do not grow in relation to economic growth, they do not generate cash flow, and they don’t provide diversification.
A second problem is that Bitcoin and other cryptocurrencies cannot actually function as a currency. Emanuel Datt, principal fund manager of Datt Capital says, “The argument that it’s a medium of exchange is incorrect, it’s simply too volatile.”
The volatility of BTC as a currency makes it impossible for sellers to keep steady prices. Furthermore, the perceived rapid value growth of Bitcoin encourages hoarding, which is counter to the purpose of currencies, which is to be spent.
Big Companies Are Banking On It
Despite Bitcoin’s volatility and perceived lack of practicality, many big businesses see a bright future in the currency. Nigel Green, CEO of financial advisers deVere Group says, “[Institutions are] attracted by the good returns that the digital asset class is currently offering but, more importantly, by the huge future potential it offers.”
What are some of the said institutions making a pivot towards BTC? Tesla has invested US$1.5 billion in Bitcoin., while Ruffer Investment has announced a 2.7% portfolio shift into BTC. These are two shining examples among many of large companies diversifying into crypto.
These businesses have made this pivot with an eye on the long-term potential of Bitcoin. This represents a significant perspective shift from the short-term get-rich-quick mentality associated with BTC back in 2017 and earlier.
It’s also not just big businesses helping themselves to a slice of the pie. Crypto exchange Swyftx has seen self-managed super funds (SMSFs) and corporate trust accounts increase tenfold between early 2020 and 2021. A deVere survey indicated that more than two-thirds of its Millennial client base believe that Bitcoin is a safer bet than gold.
Make no mistake, the frenzy to grab a slice of Bitcoin is a modern-day gold rush.
Bitcoin as the New Gold
Why has Bitcoin suddenly found widespread acceptance among financial institutions and doubtful baristas? Because it has started to be seen as a hedge against the inflation that many fear is on the way due to the global pandemic and a devalued US dollar.
Green from deVere Group continues, “These emergency measures, like the massive money-printing agenda, reduce the value of traditional currencies like the dollar and raise the inflation threat. Bitcoin, like gold, acts as a shield.”
The fact that both Bitcoin and gold are limited means that they are protected against inflation, that a sudden increase in demand won’t result in a high supply. However, the big difference between the two is that the market size of gold is 52 times greater than Bitcoin’s. This means that one can expect BTC’s market cap to increase far beyond its value today.
It’s Not Too Late…if You Understand What You’re Getting Into
So, what does this all mean? This means that it’s not too late to invest in Bitcoin if you understand it. Hastily investing in BTC because of a severe case of financial FOMO is probably one of the worst decisions you could ever make. This kind of investing is what leads people to gamble their life savings on crypto and then panic sell at the first major drop, causing huge losses and psychological trauma that’ll likely prevent them from ever touching Bitcoin again.
So how do you book yourself a seat on the train? You stay calm and do your research. Your life isn’t going to end if you don’t buy Bitcoin before the bottom of your next beer. Instead, hurl yourself into the rabbit hole, staying away from the hype and sticking to the facts. Try reading the book, The Bitcoin Standard, which is a great starting point on your Bitcoin journey.
And what if you want The Idiot’s Guide to investing in Bitcoin? Ric Edelmen, founder of RIA Digital Assets Council advises to consider even just a 1% portfolio allocation in BTC. Even better, you can dollar-cost average it by investing a set amount regularly. If you had invested 1% of your money in Bitcoin back in early 2020, then it would have now grown your whole portfolio by 25%.
A 1% allocation is pretty conservative, but it can still provide impressive gains without costing you your life savings or your favorite kidney.
Remember, don’t get FOMO, nothing good will ever come of that. Instead, get smart, get strategic, and when you’re ready, get in the mix!
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Disclaimer: Alpha Men Asia is not a registered investment, legal or tax advisor or a broker/dealer. All investment/financial opinions expressed by or published on Alpha Men Asia are from the personal research and experience of the owner of the site and/or the author of the story and are intended as educational material. Although best efforts are made to ensure all information is accurate and up to date, occasionally unintended errors and misprints may occur. All opinions expressed in the above article are those of the author and it is important that you do your own analysis before making any investments based on your own personal circumstances.