This “Should You Invest In Bitcoins?” post describes why or why not you should invest in bitcoins. This post contains affiliate links/ads. See disclosure policy.
In the past couple of months, bitcoins have been in the center of almost every major newspaper and website across the globe.
Why? Because the price of a bitcoin keeps on increasing and defying the rules of investing.
As of this writing, bitcoin's price hovers around $17,000. Bitcoin started in July 2010 at $0.02 per BTC. Now, it's around $17,000 and keeps on climbing day after day. No wonder that a lot of people are buying the hype and are dipping their hands into bitcoins and other crypto-currencies that followed bitcoins.
I have been investing on bitcoins, ethereum, and litecoins (recently) since the start of the year.
I invested $2,000 in bitcoins and ethereum (thanks to my blog money) and now my portfolio is over $10,000 (see first image to see my account). When I told my friend how much I have in my crypto-currency account and how much I started with, he asked me if it's a good idea to jump into and start investing.
Of course, I gave my two cents and told him to take them with a grain of salt. That leads me to this post.
With so many talks, rumors, news, and what not about crypto-currencies especially bitcoins, people rush into investing in them without considering all the angles. With bitcoin price increasing by the minute, who has the time to analyze if bitcoin is good or bad, right?
What is bitcoin?
Before we dig into the reasons that you should and/or should not invest in bitcoin, let's define what bitcoin really is.
Bitcoin is a digital currency that's created and held electronically. There's no middle man in bitcoin transactions and you can send bitcoin all over the world without having to go through so many steps (i.e. regulations and banks).
Bitcoins are not tied to any country, thus, are not subjceted to regulation.
In addition, international payments are easy and cheap because bitcoins are not tied to any country or subject to regulation. Some people buy bitcoins as investments while others use them for business purposes to eliminate credit card fees.
Where do you buy bitcoins?
There are a number of companies that you can create an account for bitcoins and other crypto-currencies. I particularly like Coinbase, which is what I use for buying and selling bitcoins, ethereum, and litecoin.
I've been using Coinbase since the start of the year and it is super easy to use. I was able to make a trade even when I didn't know anything about bitcoin trading. Click here to create an account with Coinbase.
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Should You Invest In Bitcoins?
Investing is not for the faint of heart. Your investments can tank in a blink of an eye or it can skyrocket and make a ton of money. Definitely, investing in bitcoins is also not for the faint of the heart since the price of a bitcoin can tank or skyrocket faster than you can type a word on your keyboard.
Here are some reasons that you should and/or should not invest in bitcoins.
1. Invest if you have disposable money.
Never invest your life savings, emergency funds, home equity, and other “essentials” funds on bitcoin.
Lately, a lot of people are taking out mortgages to buy bitcoins. On one hand, people like to make money, which may make sense. But on the other hand, this practice is as deadly as it could be. Why?
Bitcoin's price fluctuates every single second.
When I first bought a portion of a bitcoin, the price I paid was around $1,200ish. Then, literally the next second, the value went down to $900. I knew what I was getting into so I let it go. I knew the risks and rewards associated with bitcoin investing.
It's always necessary to safeguard your important funds for rainy days. Where's the safety in your safe funds if you invest them in risky investments like bitcoins.
That's why I only invested the money I am willing to lose. Since this $2,000 I initially invested was a disposable money, I was clearly ok to gamble it in bitcoins. If I make money through bitcoins, then, that's fine. If I lose money, then, that's fine as well.
One lesson here is, never gamble or invest money you cannot afford to lose.
2. Don't invest if your emotional investor.
As I said earlier, bitcoin's price fluctuates every single second.
Investing, whether it's stock market or bitcoin, should be about data and other technical information and should not be mixed with emotions.
It's easier said that done.. that I can tell you. I've been there and done that and it didn't end so well for me. But I learned and now, my crypto-currency portfolio is up 500%.
Where does this emotion come from? The answer is in your desire to keep your portfolio from bleeding money.
When your portfolio is losing money day after day and minute after minute, you want to take control of the situation (even when you can't) and take your money out from that investment. But by then, you would have lost money already.
If you want to invest in bitcoins, make sure you take the emotion out of investing and rely on data.
If emotion were the key to success in investing, then, by now most people would be rich. But that's not the case.
If you can go to sleep not worried about what will happen to the money you invested, it's a good sign you're not an emotional investor.
3. Set goals and expectations.
In general, when you invest, you need to set your goals and expectations. Do you invest for long-term gains, capital appreciation, or something else?
It's hard to navigate through the world of investing especially in bitcoin investing when you don't have a finish line on mind. It's like you're traveling on a long and winding road without a foreseeable end on sight.
Before I started investing in crypto-currencies, I had setup my goals and expectations. These have become my guiding principles or benchmarks. If I don't think I'm going to get there based on what is happening now, then, I either tweak my goals and expectations or completely take my money out of the crypto-currency world.
Right now, everything is going well and so, I'm sticking with this kind of investing.
It's nice to make money but it's always best to have a reason why you are making money.
4. Learn from other people's stories.
As you do more research about crypto-currencies especially bitcoins, you will read and hear about success and horror stories from people investing into them.
Take the time to read them and learn something from them. They'll show you the gravity of the risks and rewards when it comes to investing in crypto-currencies.
Sure, you may have understood the risks and rewards of this kind of investing, but you may not necessarily figured out how impactful these risks and rewards truly are.
Researching these stories and internalizing them will help you understand if this kind of investing is really meant for you.
Investing in bitcoins or other crypto-currencies has its own risks and rewards. It is best to research and even talk to your financial advisor if this type of investing is or should be part of your portfolio. Remember, a single financial mistake could make a dramatic effect on your financial future.
Should you invest in bitcoins? Do you think bitcoin investing is for you? Please share your comments below.