Many people ask me this question… “should I invest in cryptocurrencies/Bitcoin”? I’m never really sure how to answer them. This question is not very simple to respond to. I put it in the same category as when someone asks me “should I buy <insert your favorite stock name here>”? The answer is always… it depends!
Usually investment vehicles tend to peak people’s interest when they see that the investment has been experiencing a bull market (meaning that prices have been going up consistently over time). For example, if they see that the stock has doubled in the last month or tripled in the last year… this is when the investment vehicle reaches their ears and they start to pay attention. Bitcoin has gone up from a low of roughly $800 in a year’s time to $19,000! This is an increase of more than 20 times your investment!
Meaning, if you bought Bitcoin for only $1,000 in January 2017, by December (12 months later), you would be sitting on coins that are valued at slightly more than $20,000. By the same token (no pun intended), if you were to spend $10,000 on Bitcoin in January 2017 and held them until December, you would be sitting on $200,000 in Bitcoins today! Most people don’t even make that kind of salary from their full-time job in 3 years let alone 1 full year.
So, you can see why there is an insane amount of buzz around Bitcoin in general and other similar cryptocurrencies like Ethereum and Litecoin.
Everyone has a deadly case of FOMO (fear of missing out)
No one wants to be that person who sits there on their hands and 5 years later looks back and says “Man… everyone including my mother got into this investment and made SO MUCH MONEY and here I am living pay check by paycheck when I could also have just put in $5,000 and been a millionaire.
If you thought you missed out on the opportunity of a lifetime in the past year by not buying Bitcoin, here are some more numbers to really piss you off… If you had bought Bitcoin back in July of 2016 when Bitcoin was selling for around $8 and you only put $1,000 into it, your Bitcoins would be worth over $2,000,000!
In case you can’t see those zeros… let me write it out to you more clearly… your return from July 2016 to December 2017 (just one year and a half) would mean that you are worth TWO MILLION DOLLARS!!
Again, do you see why there is crazy amount of buzz around Bitcoin? I’m not going to sit here and lie to you… I feel the same way as you do. I wish I had bought it when I learned about Bitcoin and the blockchain technology back in 2013. Obviously, I would have experienced some up and downs in terms of what my Bitcoins are worth during that time however, I could tell you with absolute certainty that had I bought Bitcoin then, I would be a millionaire today like many others who jumped on this bandwagon when no one really understood what Bitcoin even was.
So, the question still remains… should you invest in Bitcoin today?
Again, I don’t look at Bitcoin any more differently than say a company stock. The reason being that Bitcoin gets its value from speculation just like stocks do. The speculation for Bitcoin is that the digital coins are worth something due to current and future demands. That in the future, people will be using them as regular currency to buy and sell goods. Also, that eliminating the government from being able to print as much fiat currency as it deems fit is a good thing. Those are all speculations but no one really knows if they will be true in the long run.
For a stock, the speculation would be on whether the stock will have good returns on the future quarters or bad returns. Does the stock have good future growth potentials? All those are some of the speculations that go into a stock’s potential return. So, as you can see, speculation is the constant key between the two (stocks and Bitcoin).
When someone asks me if they should invest in Bitcoin due to FOMO, I tell them the following:
It’s up to you! Buying Bitcoin is an investment. Like any other investment you will ever make in life, there is always the possibility of making money and losing money. Deciding on whether you should enter an investment should be based on how much money you have available for the investment and can you afford to lose it? If you can’t afford to lose even $1,000 today, then don’t take that money and put it into a risky investment. Put it in a safer investment vehicle like a CD which gives a very low guaranteed return or a money market fund.
The cryptocurrency markets have a lot of risk because the risk is not just on whether the coin will rise or fall in value but also, you are making a bet that the platform that you are using to purchase and store the coins on will not go out of business during the time that you have your money with them. That today, you won’t be putting in money into say Coinbase.com and tomorrow, you find out that after you sent $5,000 to Coinbase in order to purchase Bitcoins, it turns out that the company has gone under and their doors are closed. Kind of what happened with Mt. Gox.
If you don’t know what happened with Mt. Gox, check out this article that goes into more detail: What Happened With Mt. Gox?
There are also other types of risks such as missing out on buying opportunities.
For example, you could deposit funds to a cryptocurrency platform (which takes 5-7 business days to clear) and after the funds clear, the platform could be under “maintenance” in which case you will be unable to access those funds for a full day while they complete the maintenance or it could even take two additional days.
So, as you can see, there are many different kinds of risks to consider before deciding on whether you should invest in Bitcoin. My suggestion is always the same… you should be familiar with all these risks and be willing to accept them. Furthermore, you should also be willing to read. Do lots and lots of reading. Google and Youtube are your friend. Here at The Millennial Bull, we stress the importance of educating yourself. Take the time to learn about the cryptocurrency market (like what you are doing now which is how you got to this page) and try to understand what it all means.
If you are not capable of understanding it, then DO NOT invest in it. Nothing is worse than investing in something you do not understand. This is a sure way of losing all of your money!
Interested in Buying Bitcoin and other cryptocurrencies?
If you are interested in participating in the cryptocurrency market but don’t know what platform to use, I would recommend Coinbase (this is what I personally use). It is one of the more legitimate exchanges out there. However, if you are to sign up with them, I would open an account at Coinbase.com and then open a Gdax.com account as well. What you will want to do is to send money to the Coinbase account and then transfer the funds to your Gdax account. There you will buy the currencies at much lower fees (I learned this the hard way).
If you try to purchase cryptocurrencies on the Coinbase account, you will get charged an obscene amount of money! Furthermore, Gdax does not allow you to link your bank account in order to directly transfer fiat currency.
If you decide to join Coinbase, click “Join Coinbase” below:
The above link will give you an extra $10 if you purchase $100 or more of cryptocurrencies. This will also earn me $10 on my account so its a win win for us both. I’ve been using Coinbase now for about 3 months and trust the platform more than the others. I also have a Kraken account however, Kraken is too much of a pain to deal with for beginners.
If you just want to get up and running quicklu, Kraken won’t achieve that for you. With Kraken, you have to get all sorts of verification levels before you can even transfer funds. This takes weeks (based on personal experience) before you finally get around to sending your first deposit in order to make any currency purchases.
With that being said, Happy Bitcoin buying! Try to buy it when the prices are low and sell when the prices are high. Stay up to date on Bitcoin News and subscribe to my newsletter!