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Many people are investing in Bitcoin despite its volatility, should you? Bitcoin(BTC) is the most rated and well-known cryptocurrency in the world. Bitcoin price is infamous for its volatility. After humble beginnings in 2009, the coin price rose above $1000 for good in 2017, then followed a steep to an all-time high of roughly $69000 in November 2021. Then ditched as low as $35,000 in January 2022 before bouncing to its current market price of about $45,000.
Bitcoin’s volatility can be crusty. A Goldman Sachs analyst predicted that bitcoin may go beyond $100,000 if it becomes accepted as a gold alternative. While bitcoin may not be a store of value for gold shares yet, the crypto lord is gaining acceptance and could have a spot in your investment plan.
Here are some things to remember if you are thinking of investing in Bitcoin:
- How does Bitcoin fit in Your Investment Portfolio?
- Risk of owning cryptocurrencies
- The future of Bitcoin
[READ: Bitcoin vs Altcoin: Which Is Better Investment?]
How does Bitcoin fit in Your Investment Portfolio?
Bitcoin is available for trades 24/7, and investors can access their bitcoin anytime during the day or night to buy or sell and perform multiple crypto transactions, alongside other cryptocurrencies. While you can trade crypto at any time, it is advised you participate in the crypto market when trading activity is high, for sufficient liquidity and favorable prices.
Many crypto investors turned to Bitcoin because they believe it is uncorrelated with stocks, making it an option as a portfolio diversifier. Retail financial backers ought to restrict their property in Bitcoin to 1% to 3% of their portfolio since it could “lose a great deal of its worth in a short measure of time,” says Alex Chalekian, CEO of Lake Avenue Financial in Pasadena, California.
“One of the biggest reasons for adding Bitcoin to a portfolio is having exposure to a cryptocurrency, which can be a non-correlated asset to the existing stocks and bonds in a traditional account,” he says.
Notwithstanding, there is late proof that Bitcoin’s connection to stocks is expanding, particularly as more retail investors, both individual and institutional, come into the crypto market and as more Bitcoin-related speculations become accessible to a more extensive crowd.
There are multiple ways of getting exposure to Bitcoin. If you honestly think investing directly in Bitcoin would introduce an excessive amount of risk, you can put resources into a Bitcoin trade exchanged store like the ProShares Bitcoin Strategy ETF (ticker: BITO) or VanEck Bitcoin Strategy ETF (XBTF).
Investors can likewise add Bitcoin stocks, or organizations that either work in the crypto business or have Bitcoin on their monetary records. A portion of these Bitcoin stocks incorporates Coinbase Global Inc. (COIN), PayPal Holdings Inc. (PYPL), and MicroStrategy Inc. (MSTR). This methodology permits traders to add Bitcoin exposure while overseeing instability risk.
Risks of Owning Cryptocurrencies
Investing in Bitcoin can be challenging for some because of the consistent changes in price – You may not know the right time to buy or sell. This makes bitcoin a riskier asset, though historically, BTC has outperformed, the difference in price changes is potentially too high.
There are many reasons for bitcoin volatility. Firstly, the speculation around the future utility of Bitcoin. Bitcoin could rise exponentially in value, collapse again and the process keeps repeating itself. Investors can only speculate on the future price of Bitcoin because it has no intrinsic value.
Secondly, cyber-attacks are another big risk bitcoin face. Hackers target cryptocurrency exchanges. Billions of dollars of the market capitalization have been lost in cryptocurrency markets due to hacking since bitcoin was developed in 2009. Risk conscious investors should be aware of the impact bitcoin operations have on the environment. The Bitcoin network is maintained through Bitcoin mining which involves verifying bitcoin transactions and maintaining the integrity of the blockchain network. This process is known as “proof of work” and needs a high volume of computing power to function. The best advice for risk-conscious investors is to be careful with their bitcoin wallet and account security when performing bitcoin transactions.
The Future of Bitcoin
As bitcoin awareness continues to grow, many individuals and financial industry experts are deciding to have bitcoin as an investment. More people are becoming comfortable with owning crypto assets and trading in the Bitcoin market. Bitcoin is increasingly being seen as a store of value in the future. Some observers have addressed BTC as the “digital gold”. Bitcoin value is becoming more appreciated and the increase in trades in the Bitcoin network increases daily, these actions could cause a spike in Bitcoin price. Many countries are beginning to accept cryptocurrency as a legal tender, likewise, companies and financial institutions are accepting bitcoin as payment options.
As these acceptances steadily increase, the price of Bitcoin is likely to increase as well. Just maybe bitcoin will hit $100,000 as predicted by many crypto analysts. Indeed bitcoin has a promising future.
