Bitcoin is often describe as the opposite of a safe investment. But is it still true?
Bitcoin, the leading most cryptocurrency, is making waves in the financial markets recently. Its price has moved above US$20,000 per Bitcoin in the spot crypto market and touched an all-time new high at US$24,225. At the time of writing this article, the Bitcoin price against the US Dollar (BTC/USD) was hovering around US$23,706.14.
The Bitcoin and the crypto market as a whole have matured a lot in the last few years. However, it has a long way ahead in mass adoption. However, the return it has provided in the last 8-years has helped many achieve their financial goals. Its price has increased from around US$100 to around US$24,000 now, an increase of +23,900%. This means that the BTC investors who bought Bitcoin 8-years back would have got an annualized return of over 98%.
This means in the long-term, Bitcoin is not only a safe investment option but also provides a much better yearly return than all other assets including preferred stocks, gold, etc.
If you had invested US$1,000 at the beginning of 2017, your investment could have increased by more than 2,300% by the end of 2020. The BTC/USD price has increased from around US$1,000 at the beginning of 2017 to around US$24,000 by the end of 2020.
Due to high volatility in their prices, BTC and other cryptos are not considered lowrisk investments like bill notes, money markets, certificate of deposit, municipal bonds, corporate bonds, and savings accounts. Savings bond or government bond funds are the safest investment options. However, they give a high return on investment in the long run. In fact, bitcoin investing can be more rewarding than real estate investing, common stocks, dividend stocks, index funds, mutual funds, ROTH IRA retirement funds, and investment with high returns.
Even if you invested US$100 every week from early-2017 till 2020-end by following a safer dollar-cost averaging (DCA) method, you would have invested US$15,700 till now. At the current price, your investment would have become US$40,867. Therefore, you would have earned an ROI of 160% in 3-years if you had invested by following the safer method of investing called the dollar-cost averaging method.
If you are unhappy with the return by safely investing in highyield savings accounts or money market accounts, you can definitely invest in high-yielding, high-risk assets like stocks and digital assets (BTCs, altcoins, DeFi coins, NFTs, and others). To average out the risk of investing in high-risk assets and also provide you with a decent return, adopt the DCA method while buying stocks and cryptos.
The return provided by the global cryptocurrency market is higher than the stock market return. The ROI of Bitcoin in the last 5-to-10 years is higher than most of the growth stocks.
Even if you are a short-term trader/investor, you can earn handsomely through shortterm investing in Bitcoin BTC, Ethereum ETH, and other altcoins (especially Defi coins and NFT tokens) for six months or less than one year. In fact, the proceeds from these trades can be used in paying off your mortgage or other liabilities. Always remember that when you are day trading or investing for the short term, you should always try in saving money.
However, if you are a risk-averse investor then you should continue investing in assets that offer fixed rates, fixed annuity, and low return assets (having low risks) such as treasury notes/treasury bonds/treasury bills/treasury securities, certificates of deposits CDs (lower yield CD rates), government bonds, money market funds, and other types of investments and investment options.
In fact, you can also check out lower-risk treasury inflationprotected securities. Online savings accounts can also give you a guaranteed return. In most US banks, the annual return is from 0.5% to 2%.
Considering all these facts, you should create a financial plan accordingly so that you have a well-balanced portfolio. You can also take the help of financial advisors and online brokers so that you can balance your portfolio with high-risk, high return assets (including cryptos and dividendpaying stocks) and lower risk assets. This will help in increasing your net worth in a balanced manner in the long run or till the time of your investment. Always invest in stocks and cryptos through reliable and reputed online brokerage accounts.
In the last one month, the BTC/USD pair has increased by more than 30%. 2020 has been a phenomenal year for Bitcoin investment as the price has increased by around 230% YTD (year-to-date). The BTC price has more than doubled in the last 3-months (from US$10,260.03 on September 24, 2020, to US$23,706.14 as of the early hours of European trading on December 23, 2020).
However, some traders are alarmed by this fast movement of price. With the Bitcoin price at an all-time high level, many traders are apprehensive about whether there could be any meltdown in the market. However, lots have changed in the last couple of years.
Bitcoin has reached an unprecedented high mainly on the expectation that it is finally being accepted as a viable asset in the financial market. A similar trend was seen in 2017 too. However, three years back it was a bubble as the expectation of traders was not backed by facts. The scenario has changed a lot since then.
In 2020, the Bitcoin price rally was fuelled mainly by the investments made by the institutional investors as well as the high net-worth individuals (HNIs). The big players including the institutional investors (Paypal, Square, Grayscale, MicroStrategy, life insurance companies like MassMutual, and many others) and HNIs (high net-worth individuals) have invested heavily in Bitcoin.
In fact, recent Chainanalysis data shows that the 2020-rally was fuelled mainly by the large scale investment by institutional investors. Cointelegraph Markets analyst Michaël van de Poppe and many others believe that the big players are buying at lower levels as the small crypto “traders, shitcoiners, and weak hands” sell-off.
Bitcoin and other cryptocurrencies are not generally accepted by vendors as payment methods simply because they are considered as high volatility financial instruments. However, this perception will witness a paradigm shift now as PayPal has decided to open its Bitcoin wallets.
The analysts of JPMorgan believe that Bitcoin has positioned itself as a better store of value than gold. In 2020 itself, the BTC/USD’s return is around 10-times that of gold. While the gold price increased by around 23%, the BTC price increased by 230%.
JPMorgan analysts believe that the ongoing robust performance of Bitcoin in 2021 and the years beyond, making billions of dollars worth of investment flow from gold to Bitcoin. As more and more institutional investors move their capital from gold to Bitcoin, the price will go up exponentially.
Now, everybody is asking the same question of whether Bitcoin can hold this level.
A renowned hedge-fund manager, Paul Tudor Jones, has said that Bitcoin price will do good in the coming months in 2021. He believes that the BTC price rally against the US Dollar (BTC/USD) will be mainly because the institutional investors will keep investing money in the Bitcoin market. Their sustained investment will be mainly because they believe that this asset is:
The best thing about Bitcoin is that it isn’t related to any other fiat currency (US Dollar, Euros, etc.). This asset class is inversely related to the price movements of the US Dollar. As it is decentralized in nature, Bitcoin is not subjected to the policies of any central bank.
Bill Miller, another legendary investor, also has similar views on the prospects of the upward price movement of Bitcoin in 2021. He is quite confident about Bitcoin’s success as well as a stellar performance next year.
Wall Street seems to have a consensus on an explosive bullish run for the BTC price in 2021.
“It’s based on the scarcity and relative valuation to things like gold as a percentage of GDP. Bitcoin actually has a lot of the attributes of gold and at the same time has an unusual value in terms of the transaction.”
The key takeaway is that Bitcoin investing can be highly rewarding in the long run. Therefore, you can include it in your retirement planning portfolio to beat inflation and enjoy a larger corpus for a comfortable retirement.
What are you waiting for? Give your personal finance the well-needed boost by investing in Bitcoin and other cryptocurrencies.
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However, always keep in mind that these trading bots are not get-rich-quick schemes and it doesn’t guarantee profit all the time. It can provide you astonishing returns with hourly strategies. As the crypto market is very volatile, you should expect to see losses from time to time too. If you’re not ready for that, you shouldn’t get into crypto trading in the first place.
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If you still need assistance, you can refer to the following guides: