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Is it Too Late to Invest in Bitcoin?

July 02, 2022 - 7 min read

As the price of Bitcoin is volatile, should an investor take the risk of buying Bitcoin?

Investors have seen the rise of Bitcoin prices over the years. Even though the losses can be upsetting for investors, they also allow those considering purchasing cryptocurrencies to examine their financial strategy and decide whether investing in the risky asset class makes sense. 

Let’s discuss if it’s too late to invest in Bitcoin. 

Introduction to Bitcoin

Bitcoin is a decentralized digital currency that does not rely on a central authority or government oversight. Instead, peer-to-peer software and cryptography are used to secure the network.

Satoshi Nakamoto, the founder of Bitcoin, originally highlighted the need for “an electronic payment system based on cryptographic proof rather than faith.”

A central ledger maintains a copy on every server to keep track of all Bitcoin transactions. These servers, or “nodes,” can be set up by anyone with access to a spare computer. Messages are sent from node to node and broadcast to the entire network. It takes miners about 10 minutes to gather these transactions into blocks, which are then permanently added to the blockchain. This process of creating legitimate blocks that add transaction information to the Bitcoin blockchain is known as Bitcoin mining.

Rise and Downfall of Bitcoin

According to data from CoinDesk, Bitcoin has fallen more than 52% from January to June 2022. As inflation and interest rates rise, investors are less willing to take on the danger of investing in Bitcoin. According to Coinbase, the price of one Bitcoin was less than $18,000 on June 18th. In addition, Bitcoin has lost about 70% of its value since peaking at around $69,000 in November 2021.

Cryptocurrencies as a whole are in the midst of a major slump. From a peak of $3 trillion in November 2021, the total market capitalization of crypto assets has fallen to less than $1 trillion. For the first time since 2021, the asset class’s value is below $1 trillion for the first time. Investors in cryptocurrencies fear the market price may fall much more as the Federal Reserve tightens interest rates to combat excessive inflation. On the other hand, many experts believe that Bitcoin’s continued existence as a digital asset is why purchasing Bitcoin in 2022 is still possible.

It’s a matter of contention for the researchers that the Bitcoin supply is limited to 21 million. Furthermore, they argue that Bitcoin’s constant supply and automatically declining supply growth make it a viable alternative investment for institutional investors. There are currently 18.5 million Bitcoins in circulation. With rising costs and dwindling purchasing power, scarcity can help preserve value.

Should you invest in Bitcoin?

It’s an excellent opportunity to invest in cryptocurrency if you’ve been on the fence. The future of cryptocurrencies is uncertain, but there is a reason to expect that prices will eventually rise again. Unfortunately, the Federal Reserve’s announcement to raise interest rates this year has put investors in a state of economic anxiety. That’s why crypto has seen a decline in investor interest.

However, this uncertainty will not endure indefinitely. Bitcoin and other virtual currencies may again experience a boom when investors are willing to take on more risk. To gain the benefits of a price rebound, you must invest now while prices are low.

According to Ivory Johnson, a certified financial planner and founder of Delancey Wealth Management in Washington, D.C., if buying cryptocurrency doesn’t meet your long-term financial goals, you shouldn’t buy it just because it’s selling at a relative discount.

What distinguishes Bitcoin as a special investment asset?

Traditional and institutional investors are drawn to Bitcoin due to its many strengths over traditional investments.

Rarity

From the perspective of experts and investors, the fact that Bitcoin is developed so that the total supply does not exceed 21 million coins gives value to the digital currency. Moreover, Bitcoin’s finite quantity makes it a secure hedge against the inflation of other assets.

Safety

You can only spend or transfer Bitcoins if you have the proper keys to sign transactions. Since Bitcoin is decentralized and not connected to any centralized authority, it basically runs on a proprietary cryptographically secure protocol that is nearly impossible to break. As a result, only the user holding the private key is entirely in control of a user’s Bitcoins.

Divisibility

The satoshi is officially the smallest Bitcoin unit. One satoshi is equal to 0.00000001 BTC. This strategy has made it much easier to deal and trade on Bitcoin, and it has also increased the likelihood that people will use it as a payment currency and encouraged them to do so.

Storage and portability

Bitcoin just requires a wallet, which can be a piece of software or a memory chip. Then, you can quickly send it all to anyone on the other side of the globe, just like email.

Liquidity

Bitcoin is probably one of the most liquid investment assets and is the most traded cryptocurrency worldwide. The overall development of cryptocurrency trading platforms, exchanges, and online brokerages makes it simple and cost-effective for investors to exchange Bitcoin for cash or other assets instantly.

What could make Bitcoin a bad investment?

It is frequently crucial for investors to weigh the advantages and disadvantages. Therefore, they must be aware of the risks associated with investing in Bitcoin.

Volatility

There are concerns about Bitcoin’s stability and acceptability as a store of value. As the price of Bitcoin always fluctuates, it is essential to keep this in mind when carrying out financial activities.

Vulnerability

Cyberattacks on Bitcoin wallets and trading platforms will increase along with the currency’s value. Although the Bitcoin blockchain has never been compromised, people can still become victims of a hack if they divulge sensitive data, such as their private keys. 

Avoid storing your Bitcoins in live wallets that are always connected to the internet since they are more likely to be hacked and cause you to lose them. In this case, a hardware wallet is definitely the best choice, and keep in mind that you are in control of the Bitcoin you have.

Is Bitcoin past its prime?

Since it will be the most resilient cryptocurrency in 2022, Bitcoin is the most excellent option for anyone looking to invest in cryptocurrencies. In addition, the first cryptocurrency currently trades at a discount of almost 60% of its peak value. However, it is predicted to restart an upward trend and break over the 2021 highs in the coming months, which is why it is included in the next wave of cryptocurrencies to erupt.

Because of this, Bitcoin has been included in our list of the following cryptos to burst. As evidence of growing investor interest in the most valuable crypto, it has already regained market dominance. Cryptocurrencies such as Bitcoin have become a haven for investors as traditional markets have collapsed.

As a result, Bitcoin has the highest investment potential among all cryptocurrencies since investors strive to get a small piece of something valuable that offers a growing reward. Additionally, El Salvador is leading the way in making Bitcoin legal tender.

Safest Way to Invest in Bitcoin

It’s more crucial than ever to practice safe investment if you’re considering getting into Bitcoin. A cryptocurrency exchange that enables you to acquire Bitcoin is required. Remember only to invest what you can afford to lose while purchasing. Diversify your holdings across a range of asset classes and risk profiles. You might consider placing some of your remaining funds into an ISA instead of investing it in Bitcoin because it’s a risky investment. Consider using a digital wallet to store your Bitcoin and ensure your password isn’t hacked or lost. Investing in Bitcoin or any other high-risk venture is critical to your success.

Final Thoughts

Since Bitcoin has consistently ranked as one of the most significant financial assets to hold throughout the last few years, you might feel you’ve arrived late to the party. However, you should think again because this popular cryptocurrency still hasn’t realized all of its potential. Nevertheless, even in 2022, it has the potential to be a valuable addition to a portfolio that has been carefully diversified.

To level up and gain a deeper knowledge of all things related to the future of the cryptocurrency industry, check out the latest content in the Supra Academy section.

Disclaimer: This article is for informational purposes only and is not financial or investment advice. This should not be used as the foundation for making investment decisions, as a suggestion to enter into any transaction, or as a suggestion to partake in any investment strategy. 

References

  1. Boyd, A. (2022, 30 May). Is it too late to buy Bitcoin for Australians?. Finty
  2. Denham, K. (2022, 20 Jun.). Should you invest in Bitcoin?. Times Money Mentor
  3. Morgan, K. (2022, 7 Jun.). The future of Bitcoin & cryptocurrency: 2022 and beyond. Unbiased
  4. Patel, N. (2022, 12 Jan.). Is it too late to buy Bitcoin in 2022?. The Motley Fool
  5. Reinicke, C. (2022, 15 Jun.). Bitcoin has lost more than 50% of its value this year. Here’s what you need to know. CNBC
  6. Sparkes, M. (2022). What is Bitcoin and how does it work?. New Scientist.

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