When it comes to cryptocurrency investing, Bitcoin is still the most popular option. However, the question should be asked: is Bitcoin a good investment, especially for retirement? Trading Bitcoin holds a lot of promise to investors looking for diversity in their portfolios, but it can also be volatile. Keep these factors in mind to make informed investing decisions.
Is Bitcoin a Good Investment? | Use These Volatility Factors for Evaluation
1. Among Cryptocurrencies, Bitcoin Shows the Least Volatility
Is Bitcoin a good investment? There is some good news: it is not as volatile as some other cryptocurrencies.
According to the American Institute for Economic Research (AIER), it fares well when put up against the others since it lacks the wild fluctuation swings of some of the other cryptocurrencies like:
- Bitcoin Cash
While Bitcoin does show more stability than the others, the fluctuations may still be a cause for concern for some people.
In January of 2017, Bitcoin traded at nearly $1,000, with average trading between $930 and $978. A mere 12 months later, the price was nearly $20,000 per Bitcoin. The rise was meteoric, with Bitcoin achieving and surpassing all-time high values along the way.
Of course, a stunning rise like that must eventually come to an end. Bitcoin today hovers near $6,000-$7,000. For people who bought at $930 or even $1,000, that is an outstanding return, but not so much for those who purchased at the height of the frenzy leading into January 2018. Investors may wish to sell and buy cryptocurrencies with caution or explore the idea of Bitcoin futures.
2. Cryptocurrency Is Still an Unknown Variable
Most of the volatility in the cryptocurrency market revolves around its being an unknown commodity.
While the novelty of Bitcoin has been widely circulated, Bitcoin technology remains poorly understood by many people. To a large degree, it was the first among digital currencies on the market today. In fact, some people today may have never heard of Bitcoin currency.
There is literally nothing backing its value other than market supply and demand. It isn’t a tangible asset, like gold or silver, and it doesn’t have the backing of a bank or government. This makes it a difficult concept for many people to wrap their minds around.
3. Mistrusting Governments Cause Marketplace Volatility
Is Bitcoin a good investment? It depends on your government.
Those who opt for a Bitcoin transaction do so under the impression that its value is immune to the regulations or control of a Central Bank, but the truth is that governments can have a say on its trading.
When China announced its ban on initial coin offerings (ICOs), Bitcoin prices plummeted. This decline happened despite the fact Bitcoin was not even directly affected by the ban. Prices of Bitcoin decreased nearly $200 per coin upon this news.
China is not the only government considering action against cryptocurrencies. Market volatility remains high as South Korea, a nation where Bitcoin has a huge following, mulls the decision to ban cryptocurrencies in general. Other countries are considering doing the same for Bitcoin mining.
The bottom line is the government influence on cryptocurrency values can be enormous — larger than anyone wants to acknowledge.
4. There Is No Oversight
We live in a society that has become heavily regulated. Think about all the things that are regulated in society today:
At this point in time, the cryptocurrency industry is relatively unregulated. Although some governments are attempting to clamp down on the cryptocurrencies, any regulations are in the early stages of development. This can breed an atmosphere of distrust and lawlessness. Cryptocurrency is like the Old West of the Internet.
Is Bitcoin a good investment? The answer is that it can be to a certain extent. It can make you the next Bitcoin millionaire, or you can lose all the hard-earned money you invested due to its volatility, especially if you think about it as a get-rich-quick scheme. To do cryptocurrency investing wisely, Inside Your IRA is here, ready to help.
Is Bitcoin a good investment for you? Let us know in the comments section below.