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Bitcoin: Should I Consider an Investment?

December 19, 2017

While there is opportunity for a great return on investment, bitcoin is still a relatively new concept – learn more in our latest blog.

Turn on the news or open social media and you will see the chatter about bitcoin’s rocketing price blowing past $16,000 last week alone. Everyone and their grandmother is investing; causing the primary US based brokerage Coinbase to experience troubles with bandwidth. Bitcoin has increased 860+% in 2017 and is starting to gain legitimate support. You may ask, is it too late for me to get in?

First of all, what exactly is bitcoin?

A completely digital form of currency known as the Bitcoin has captured the attention of many businesses as of late because it allows for easier and more convenient online transactions. Bitcoin enables spending with full transparency through a publicly available ledger known as the blockchain. Unlike PayPal, Bitcoin payments are not monitored by a trusted central authority, but rather payments are verified using a consensus in an immense peer-to-peer (P2P) network. This non reversible payment method does not freeze accounts, and has substantially lower transaction fees.

Here are the pros and cons:

Pros of investing in Bitcoin

  • It is convenient-With Bitcoin you are able to send and get money anywhere in the world at any given time.
  • Better recordkeeping abilities through blockchain- The block chain technology behind the currency has spurred the interest of both skeptics and bitcoin geeks, including our next Federal Reserve president and bitcoin naysayer, Jamie Dimon, CEO of JP Morgan. It holds the key to secure and organized recordkeeping. Through the block chain, all finalized transactions are available for all to see, but personal information is kept hidden.
  • Volatility is expected to decrease- Bitcoin has what’s known as “volatility” (liability to change rapidly and unpredictably, especially for the worse) mainly due to the fact that there is a limited amount of coins and the demand for them increases by each passing day. However, this is expected to decrease as derivatives of the currency will soon be traded at the Chicago Mercantile Exchange and the NASDAQ has stated interest in trading them soon as well.
  • You can invest in bitcoin through your individual retirement account.
  • Its value is expected to increase- Industry figures speculate that the currency’s value (which is currently about $10,000) could increase to $40,000 by the end of 2018 when taking into consideration...
  • Its relative value to gold,
  • The fact that it is the first global currency, and
  • The fact that untrustworthy governments’ citizens are protecting their assets using the technology.

Cons of jumping on the “bitcoin” bandwagon

  • Bitcoin is not regulated by the government- Although lack of regulation is what gives the currency its global edge, it is a concerning point.
  • Lack of awareness- Many people are still unaware of digital currencies and Bitcoin. This means that not many businesses accept it as payment yet, and that it needs more time to develop into its full potential. Users should realize that Bitcoin is not perfect and there are some flaws to the system that when fixed can provide greater stability to it.
  • Security- Bitcoin has a bad rap being associated with the black market. However, these illegal transactions are in-fact transparent to law enforcement. One could argue there are more black market transactions conducted in hard-to-track cash.
  • Lack of bitcoin brokers- There are not many brokers that you can conduct business with in the United States. Gemini and Coinbase are two popular options.

So should you invest?

If so, advisors recommend investing no more than 1-5% of your liquid net worth. If you wish to invest, you should speak with your advisor. If you go it alone, understand that the broker likely won’t track taxable transactions so you or an advisor should make sure you have that area covered. Most importantly, if you invest, you could make a lot of extra money for your savings if you hold on tight for the rollercoaster ride, but most importantly don’t invest a penny more than you are willing to lose.

Skeptic or not, all reputable analysts agree your chances of success with bitcoin (or alternative crypto currencies such as Ethereum or Litecoin) are better than playing the lottery.

So, what do you think? Are you ready to invest?

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