Is It Safe to Invest All My Savings in Bitcoin in 2020?Posted by Michael Cao on December 11th, 2019 We’ve always been advised to set aside a portion of our income in savings. I’ve heard that since I was a kid. I remember saving up to buy stuff that I wanted. It was satisfying to buy something out of my pocket. That was my end goal for saving – to buy new stuff. Of course, that changed when I matured. My saving horizon broadened in my teens. I save because of future needs. Notice that I use the term “need” and not “want”. A “need” is a must-have; a “want” is just a wish for something. There is no urgency in fulfilling a want for example, that new car you want can be put off for another month. On the other hand, need is necessary. An unfulfilled need will result in an adverse outcome. Saving money is a need or a must. We save money to become financially stable and have a safety net for the future. I started with a simple savings account as most kids do. A savings account is safe but the returns are small. The interest on savings accounts doesn’t keep pace with inflation. I realized that if I wanted to have a comfortable retirement then I would have to consider other asset classes. I diversified by investing in stocks and bonds. Diversification is the practice of spreading your money so that your exposure to an asset class is limited. This strategy helps minimize risk and volatility. Bitcoin is a Safe Asset Class
People were wary about investing in Bitcoin after seeing its value skyrocket in 2017 and then fall in 2018. It settled at ,500 – ,000 range but has gone up to ,000. It went as high as ,000 last June. The cryptocurrency market has stabilized because of regulatory oversight and controls by government agencies. As a result, large institutional investors have come into the market. Government regulation and institutional investors have given Bitcoin respectability. Investors remain bullish with Bitcoin. Since Bitcoin is a relatively young asset. It is still volatile but not as wildly volatile like it was a couple of years back. Investment experts agree that cryptocurrencies have bested traditional investments like oil, gold, and stocks. It is estimated that the total market cap of the entire cryptocurrency market is at 1 billion with Bitcoin having the largest share. Reasons to Invest in Bitcoin People talk about investing in Bitcoin like they missed the boat. A recent survey conducted by Fidelity showed that institutional investors are seriously considering investing in cryptocurrency. Here are other reasons why you should invest in Bitcoin:
The ongoing US-China Trade war, Middle East tensions, and fears of a global recession are weighing heavily on investors. The major stock markets are skittish as well. Bitcoin has so far bested assets like stocks, bonds, and gold. Brave New Coin analyzed the ROI of Bitcoin over a one-year, three-year, and five-year horizon:
These numbers make the argument that Bitcoin should be included in your investment nest. It is a good asset that has done better than bonds and stocks. The high return potential of Bitcoin makes it very attractive to investors. Remember that there are only 21 million Bitcoins. As more Bitcoins are mined, the scarcer they will get. The mining difficulty will push the value of Bitcoin so that miners can cover their operational costs. The world of investing is fraught with uncertainty. All investors, regardless of the size of their portfolios, have experienced loss. Again, diversification helped mitigate their losses. Don’t put all your money into cryptocurrencies. Follow the lead of wise investors who never invest more than they can afford to lose. Like it? Share it! More by this author |