2019 is a big year for Bitcoin as it celebrates its 10thanniversary. On January 3, 2009, someone known as Satoshi Nakamoto entered the “genesis block” or the first lines of codes into the Bitcoin blockchain. On January 12, Nakamoto sent 10 Bitcoins to Hal Finney and the revolution of the cryptocurrency began.
Today, Bitcoin is already gaining more traction as a digital currency, which is really not surprising since the world is becoming more dependent on the Internet. But is Bitcoin’s popularity enough to make it a good investment? Let’s take a closer look:
Why are people investing in Bitcoin?
If you’ve heard the story of the 10,000 Bitcoin pizzas, then you know that those pizzas bought by a forum user called Laszlo Hanyecz may be the most expensive ones in the world because as of last year, 10,000 Bitcoins is already worth at least $10 million.
One of the biggest reasons people invest in Bitcoin is the promise of astronomical returns. For instance, those who invested $10,000 in Bitcoin in 2015 will already have $229,266 today. This means that they’ve earned at least $200,000 within a span of just four years. No bank or financial institution will give you those staggering returns in a short amount of time.
Bitcoin is also gaining more popularity among regular investors because of the support it’s getting from big-time entrepreneurs and investors. For instance, crypto fund manager Mike Novogratz correctly predicted that Bitcoin would be valued at $10,000 in 2017.
He said: “I’m pretty confident to say it’s going higher…It would not surprise me if in the next 6-10 months, we are over $10,000.” Veteran Wall Street trader and former Vice President of JPMorgan Chase Tone Vays also predicted that Bitcoin may reach $100,000 per coin in the long run while JPMorgan’s former Chief Equity Strategist Thomas Lee said that Bitcoin will be valued at around $20,000 by 2022 with a legroom of up to $50,000.
What are the skeptics saying?
Like any other investment, there are always two sides of the coin. In this case, skeptics are pointing out the downsides of investing in Bitcoin. For one, currency isn’t a good investment since it has zero returns and doesn’t create any value. Some financial experts would say that instead of investing in Bitcoin, you should invest in stocks or bonds that will give you access to the economy.
Another argument that skeptics would like to present against Bitcoin is the fact that the man who created it, Satoshi Nakamoto, remains anonymous up to this day and may not even be alive anymore. This means that the world only know him as the creator of Bitcoin and nothing more than that. So, why follow an evangelist that you haven’t even seen or heard about?
Still, more financial experts point out the volatility and level of risk that comes with investing in Bitcoin. For Ulrich Stephan, the Chief Strategist for Deutsche Bank, the bubble-like behavior and lack of use other than a form of investment makes investing in Bitcoin very risky.
So, is Bitcoin really a good investment?
Whether or not Bitcoin is a good investment is still a topic of argument for financial experts. But the best of them would agree that the decision to invest in Bitcoin is mostly a matter of perspective and it can be affected by the biases that most of us have in our heads.
For one, there is the unit bias. Because we humans are so used to the idea of measuring things by the standard that the world gives us, we feel overwhelmed by the idea that one Bitcoin is equivalent to, let’s say $10,000.
Since we’re used to the mindset of determining how expensive an asset is by the cost of each unit, we easily discard the idea of investing in Bitcoin thinking that it’s too expensive for us. But once you get to know more about this digital currency (and a good place to start is to find out from xCoins), you’ll be amazed at how much potential it has as an investment.
Another factor that could affect our decision to invest in Bitcoin is the neglect of probability. Since Bitcoin is so popular and a lot of people have their opinions about it, it’s easy to think about the severity of the threat or the magnitude of the reward rather than factoring in the expected value.
But if you look closely, Bitcoin’s risks are not really as big as they are pictured to be. If you know how to do things right, you can reap some very good rewards in the future but be sure to give much thought to your approach and don’t jump in without some counsel from someone that did it before.