Most people invest in bitcoin as just that: an investment. In other words, they hope and expect the value of the BTC they buy to go up over time.
Bitcoin investment is often viewed as risky, since there is no guarantee that you will make money and cryptocurrencies can be quite volatile – more so than most stocks or other traditional investments. But a bitcoin investment is useful in a number of ways, thanks to the properties described above.
The ultimate hedge? Due to its limited supply, Bitcoin may prove – like gold – to be a popular hedge against high rates of inflation caused by unprecedented money printing. Similarly, your balance will not be eroded by negative interest rates, like money in a bank account will be.
Unconfiscatable. Bitcoin is solely controlled by the owner of the private keys that give access to an address. This means funds can’t be taken by governments in the event of bail-ins or other forms of wealth confiscation.
Privacy. While Bitcoin is not entirely anonymous, it can offer a high degree of privacy if used correctly.
Unrestricted. You can use bitcoin to transfer money anywhere in the world, quickly and for just a small fee – allowing you to send friends and relatives cash when they need it.
Bitcoin price action
Investing in bitcoin can be lucrative, but it is risky: over shorter time frames, bitcoin can be extremely volatile. If you’re asking yourself ‘Is bitcoin worth investing in?’, you have to take this into account.
There’s a good chance that your BTC will, at some point, be worth less than you paid for them. This is not a ‘safe’ investment like gilts or high-quality bonds, which maintain their value and pay regular interest. It’s more like gold or silver, which are subject to significant price swings. If you’re not comfortable with that, it’s probably time to think twice about whether this is the right investment class for you. If you are happy with it, you will still want to think about managing your risk by limiting the amount you buy, and considering in advance whether there is a point at which you would sell to prevent further losses if the price fell.
It is also a good idea to prepare yourself to hold onto your investment for a period of time – perhaps between two and five years.
Given its volatility, the question of when to invest in bitcoin is one that traders spend a lot of time studying.