Is Bitcoin a Good Investment?

Is Bitcoin a Good Investment?

Questions about the value of bitcoins as an investment will likely differ depending on who you ask.

Those with a vision of a fully-distributed future in which the lack of a centralized overseer becomes key to an asset’s value will tell you that, yes, bitcoins are poised to become only more valuable in the future. Others who put more value in the traditional trust afforded by banks and government institutions would likely steer you away from bitcoins as an investment.

While determining how “good” any investment will be is ultimately a guessing game, there are some tried and true ways to determine an asset’s worth. One of the simplest ways to think about bitcoin as an investment is to consider its rise against the U.S. dollar. Recently, bitcoin prices eclipsed $1,000 and have reached beyond $1,500. If you had invested in the digital currency when its worth was still hovering around $150 just a few years ago, or when it was first introduced in 2009 and worth nothing against the dollar, you would probably be convinced that it made for a good investment.

Furthermore, an underpinning concept behind Bitcoin is that there will only ever be 21,000,000 tokens, meaning that it may stay consistently valuable or increase in value relative to other types of currency which can be printed endlessly. Other reasons that the asset seems like a good investment include its growing popularity, network effects, security, immutability and status as the first ever in a growing world of digital currencies.

That being said, there is at least one significant argument for limiting bitcoins to a small portion of your portfolio at the most. Bitcoin is known for stark jumps in price, high peaks and deep valleys that would make it difficult to have confidence in the asset as a long-term money maker that can be depended on. Tying every dime you have to such a volatile asset would be imprudent. A good rule to follow is never to invest more than what you would be willing to lose.