After a strong 2020 and 2021, cryptocurrencies like Bitcoin have had a rough year. But does that mean they should no longer be considered viable investments? Far from it.
What is Bitcoin?
You know the phrase, you’ve heard about it, and you probably even know people who have invested in it – but what the heck is Bitcoin, anyway? You might feel like you’re the only one who doesn’t really understand it at this point, but that’s not true.
Most people simply aren’t willing to ask the question for fear that they’ll be embarrassed. But this is a safe place! (After all, it would be pretty difficult for us to communicate why Bitcoin is still a good investment without first explaining what it is in the first place.)
According to Forbes, “Bitcoin is a decentralized digital currency that you can buy, sell and exchange directly, without an intermediary like a bank. Bitcoin’s creator, Satoshi Nakamoto, originally described the need for ‘an electronic payment system based on cryptographic proof instead of trust.’”
Clear as mud?
Let’s put it another way: Bitcoin is a digital currency that’s stored on a digital “ledger.” Its value goes up and down based on demand, and there’s a finite supply. Unlike fiat currency (like USD), Bitcoin is totally decentralized and has no relationship to any world government.
Why Bitcoin is Still a Solid Investment
The last several years have been incredibly turbulent in the cryptocurrency marketplace – Bitcoin especially. In 2017, Bitcoin was worth less than $1,000. By 2018, it was worth as much as $13,000. Then it cooled off to below $4,000 in 2019. In 2020, it climbed all the way up to a peak of $18,795, which exponentially increased to $60,000 at one point in 2021. Since then, prices have cooled to $20,000 and below. Talk about a roller coaster ride!
While the ups and downs are real, this is probably a roller coaster you want to be on. Here’s why you should buy bitcoin:
- Long-Term Investment
You have to look at Bitcoin for what it is: A long-term investment. This isn’t some pump-and-dump Reddit meme stock that you’re trying to make 400 percent on overnight. We’re talking about a five, 10, or even 15-plus year time horizon.
If you’re looking for a way to build wealth for the future, not just earn some quick spending cash, Bitcoin offers real opportunities. Keep the long-term perspective and study the historical charts. Crypto might go up and down over any 12-month period, but the overall trajectory is up and to the right.
Bitcoin is totally decentralized. It is not dependent on any government, nor is it tied to the value of another physical asset. It’s also digitally scarce. (There’s a finite supply of Bitcoin. While they are still being mined, there is ultimately a cap on how many can be mined.) These two factors should be encouraging – particularly in a world where the U.S. government prints thousands of dollars per second.
- Superior Performance
If you look at all of the major investment classes over the past decade, you’ll notice one thing: They’ve all done pretty well. With the exception of silver, they’ve almost all gone up. This includes gold, oil, real estate, stocks, etc. But if you study what cryptocurrency, including Bitcoin, has done over that same period, you’ll be shocked.
Bitcoin has outperformed every single major asset class over the past decade (and it’s not particularly close). While there are no guarantees that this will continue to happen, it’s a pretty good sign that you should probably put a little bit of your money into Bitcoin. Even if it’s just three to five percent of your income, there’s something to be said for getting in the game!
Diversify Your Investment Portfolio
Is Bitcoin the perfect investment that’s going to make us all rich beyond our wildest dreams? Probably not. But can it help you build wealth and pave the way for real wealth creation? The answer is yes. Hopefully, this article has given you some solid ideas and motivation to work with.