Beware Of Bitcoin: Invested In 2011, You’d Be A Millionaire Now, Invested A Few Months Ago, You’d Be In The Red
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One of the biggest divides in the investing world over this past year is the investment in cryptocurrency. For some, it’s an investment that could make you a millionaire, while other investors believe cryptocurrency is a massive Ponzi scheme. Whatever the case may be some people who were on the fence can breath a little easy about jumping into cryptocurrency now.
The biggest reason being that if you invested in Bitcoin – the largest and most recognizable cryptocurrency – you’d see its value fluctuating massively. Just last December, the coin was at an all-time high of almost $20,000. Now? Its current trading value is about $4,000.
To further uncertainty, investors are utterly puzzled about the current status of the coin. This makes it difficult for investors to justify whether they should hold or cash out right now. And for many this is a harsh lesson of how these coins behave – extremely volatile.
Even the US Justice Department is looking into some causes. Specifically they’ve been looking at last years rally, determining if that rally was part of market manipulation. Furthermore Nasdaq is planning on launching bitcoin futures by next year as well.
This means that for many investors, cryptocurrency will be sticking around and many have some advice for it. Ric Edelman, the founder as well as executive chairman of Edelman Financial Services stated that any bitcoin investor has to be prepared to lose everything that they put into this.
“You need to invest with two attitudes: that you’re going to hold it for years, even decades and that volatility is an inherent element of the asset,” states Edelman
And volatility is in everything, but that is especially true with bitcoin. Compared to it’s starting price in January 2011, Bitcoin is up by 428,022 percent. To compare that if you invested $1,000 in the S&P 500 since 2011, with reinvestment of dividends, your return that year would’ve been about 157 percent.
That is a stark difference when compared to this years “growth” where bitcoin is down by 68 percent. It’s equivalent to a 4,000-point plunge in the Dow Jones Industrial Average. This year marked Bitcoins worst year ever.
It’s in this instance where investors should be wary of when they are jumping in. As Edelman suggested, while bitcoin is down, now would be a good time to invest a bit of money into it. It still is a gamble no matter what, however people’s attitudes towards these coins fluctuates. Much like with any stock you want to buy low and then sell high, but with cryptocurrency it’s harder to tell if it’ll climb higher or sink further. Not to mention a lot of investors go against that advice. As Edelman said as well “People were thrilled to buy bitcoin at $19,000 last year. Those same people don’t want to buy bitcoin at $4,000.”
If you want to get into the game, now would be a good time to give it a shot.