Is Investing in Bitcoin a Good Idea? What You Should Know

Bitcoin Investing

According to reports, roughly 17% of adult Americans own Bitcoin. What’s more, 75% of survey respondents report that they want to learn more about products like Bitcoin annuities and Bitcoin life insurance.  

Bitcoin has garnered a lot of attention this year, thanks to its rapid price hikes and retracements. This has left a lot of investors asking whether the digital asset is something they should be adding to their portfolios.  

Are you wondering whether you should start investing in Bitcoin? Keep reading to find out whether Bitcoin is a wise option in a modern-day portfolio, or whether it is a gamble.  

Investing in Bitcoin Offers Opportunity for Portfolio Diversification

One of the key benefits of investing in Bitcoin is that it offers an opportunity for portfolio diversification. Any seasoned investor knows that diversification and risk management are vital to a strong investment strategy.  

Bitcoin can facilitate both objectives. It is a unique asset type and, historically, has had a negative correlation to conventional investments. For example, the market crash of 2020 saw a large amount of capital flowing into Bitcoin. 

Over time, many people have started to view Bitcoin as somewhat of a refuge when there is turmoil in the traditional markets. This is interesting, given the fact that Bitcoin has been termed an uncertain investment in some circles. 

Be aware, Bitcoin doesn’t always perform inversely to traditional markets and stock prices. However, under conditions of extreme uncertainty (such as the first year of the pandemic), Bitcoin can be a safe haven.   
 

Bitcoin Can Act as an Effective Hedge  Against Inflation

Another important characteristic of Bitcoin is its ability to act as a hedge against inflation. The mathematics behind this is simple. At present, there isn’t any country in the world that still utilizes a gold standard. Therefore, treasuries in most jurisdictions can create new units of currency.  As more units of currency come into circulation, devaluation can be triggered. Which, in turn, results in inflation.  

Bitcoin has a finite supply. Although digital currency mining creates new Bitcoins every day, the supply is capped at 21 million. 

What’s more, the supply of newly minted Bitcoin is on a steady but slow trajectory. It’s estimated that all 21 million Bitcoins will only come into circulation by 2140.  This slow release means that Bitcoin’s value isn’t likely to suddenly erode thanks to newly mined tokens.  

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Bitcoin Has Become Semi-Mainstream

Where once Bitcoin was considered a highly speculative investment, in the last few years it has entered the mainstream. Nowadays, most people know what Bitcoin is.

What’s more, there is a growing contingent of investors who consider Bitcoin to be a staple part of a diversified, modern portfolio. A large portion of millennial investors view Bitcoin as solid an investment as a stock like Apple.

Adoption is Still Rising

Bitcoin’s price has risen dramatically since its birth, which leaves the question, has it reached the top? Is Bitcoin still a viable investment, or has it reached peak adoption?

What Bitcoin’s ultimate value will be is up for debate, as it is still a young market. What’s more, survey results indicate that adoption is still very much on the rise. Over 50 million people in America alone are likely to buy Bitcoin within the next year.   

 

The Potential Risks of Digital Currency Trading

Like most lucrative investments, Bitcoin isn’t devoid of risk. Digital currency investment is a relatively new area. Therefore, the regulation of digital assets is still in its infancy. 

Cryptocurrency transactions are anonymous and irreversible. When you sell, transfer, or buy digital currency there isn’t a controlling body. The anonymity of Bitcoin and digital currencies can make it easy for scams to occur.

However, this risk isn’t restricted to digital currency investment. Traditional investing has seen its fair share of scams and, too often, there isn’t a lot of recourse for these.

What’s more, most investment scams are aimed at the inexperienced. Professional investors aren’t likely to easily fall for a suspicious scheme from an unreliable source.

Another potential risk of digital currency trading is that it’s a fast-paced market, often subject to sudden price movements. For inexperienced investors, this can trigger panic selling or buying at the top when the hype is high and media coverage is at a peak.

Once again, these types of scenarios aren’t likely to happen to experienced investors. Professional investors and traders have systems and strategies in place to protect their portfolios from emotion-based decision-making.

 

Security

One of the important factors to get right when it comes to investing in Bitcoin is security. Although Bitcoin itself is highly secure, human error can compromise this.

For instance, if you hold Bitcoin in a wallet, you need to establish a security protocol for storing the private keys. If you hold Bitcoin on an online exchange, you need to ensure that the exchange guarantees your holdings in the event of an attack.

When transacting with digital currencies, it’s also imperative that you protect your device or computer from malware and spyware.

Fortunately, it is becoming easier to securely buy digital currencies and hold them. For example, here at Mawson, we specialize in giving our clients a highly secure way to store their digital currency investments.

Digital Currency Mining and the Environment

Recently there has been a lot of attention placed on the environmental impacts of digital currency mining. This is an important concern, given the state of current emissions and its effect on climate change.

Fortunately, there are avenues by which Bitcoin can be mined at a 100% carbon-neutral level. We are passionate about this and are leading the way in the emerging sector of efficiency in digital asset transactions and creation.

Formalized Investing in Bitcoin Has Never Been Easier or Safer

Are you considering investing in Bitcoin? But wondering whether there are still gains to be made in the market?

Nobody holds a crystal ball. However, it stands to reason that Bitcoin still has a way to go in terms of adoption and peak value.  Besides this, Bitcoin can also be an ideal asset for portfolio diversification and hedging inflation.

Lastly, formalized solutions have minimized a lot of the risks involved in digital currency investment. If you are concerned about the security requirements around buying and storing Bitcoin, we can help.

We specialize in digital asset management for sophisticated and institutional investors. Our company gives clients access and insight into new digital asset opportunities. We also offer the best-in-class local storage and multi-level encryption for digital asset safekeeping.

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