Is Bitcoin A Good Investment?

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It’s fair to say that Bitcoin has had a turbulent history since its inception back in 2009 with prices lurches from one extreme to the other.

But despite this short-term volatility, the price of Bitcoin has proved its resilience over the longer term. But does this make it a good investment and should you be ‘stacking sats’ in your portfolio?

BTC’s stormy trading history often raises questions about whether it can truly become a mainstay of a investment portfolio.

It’s always been considered an extremely high-risk investment, with many commentators convinced that anyone who dips their toes into the market will lose all their cash.

However, there’s no denying the explosion of institutional interest in Bitcoin and other cryptocurrencies and you’ll find an equally vocal group of financial experts expounding its virtues as a must-have in any portfolio.

For example, in 2024 the US Securities and Exchange Commission (SEC) gave the go-ahead for spot Bitcoin ETFs after pressure from huge investment firms such as BlackRock and Fidelity.

PayPal launched a cryptocurrency function, enabling account holders in the US, UK and a select number of countries to buy, sell and hold coins on its platform. Plans to role this out to other locations are in the pipeline.

And software giant MicroStrategy has gradually been growing its Bitcoin portfolio. Global investment bank Goldman Sachs has also said it now considered Bitcoin to be an investable asset – a marked U-turn on an earlier position.

These are just a couple of examples. There have been numerous reports of respected global financial institutions either adding crypto to their portfolios or considering doing so.

Additionally, it’s never been easier for retail investors (you and I) to get in on the game and grab some coins through any one of dozens of trading platforms.

What will the price of Bitcoin go up or down?

The question now is what happens next? Will the price of Bitcoin continue to fall, or will it go back up again and post even greater ATHs?

Certainly, there are some wild predictions about its future price. Depending on where you look, you can hear figures varying from anywhere between $100,000 and $1million being banded around.

True Bitcoin believers will tell you that the coin’s volatility is to be expected in this brave new world of digital finance, while others will suck their teeth and tell you they knew all along that crypto was a speculative bubble waiting to burst.

The answer is that probably no-one really knows where the price of Bitcoin will be in a year’s time, or even next month.

Certainly the blockchain technology that underpins Bitcoin and other cryptos has demonstrated a strong use case in many areas and is here to stay.

Should I dip my investing toes into cryptocurrency?

Before you make that decision you need to assess your appetite for risk – something any financial adviser will do before suggesting where your money should be invested.

Key questions to consider:

• Do you understand what you’re investing in and the technology underpinning it?
• Could you live with losing your entire investment (or potentially making incredible returns)?
• Can you weather the extreme volatility of the crypto market (and not dump your coins at the first sign of trouble)?
• Can you accept that your cryptoassets will not be covered by any protections, such as the Financial Services Compensation Scheme in the UK?

Assess your appetite for risk and do your due diligence

Like any investment you should do your own due diligence, assess your appetite for risk and accept that you need to view it as a long-term commitment.

Some people do make some quick money trading the extreme highs and lows of crypto but trying to time the market is a dangerous game to play if you don’t know what you’re doing.

Often, all it takes is a couple of headline-grabbing stories – good or bad – to shift the price dramatically and either improve investor sentiment and drive the price to the moon, or trash it overnight.

Crypto is moving to the mainstream

Crypto has always had a bit of an image problem due to its intangible nature, its association with nefarious activities and the fact that it doesn’t exist in any physical form.

But in recent years this has started to change with Bitcoin and altcoins becoming far more mainstream. Whether this is set back by the recent upheaval remains to be seen.

Some people will always view new things with suspicion. When paper money first came into circulation many people refused to accept it as they viewed it as worthless. It was only after time that fiat currency became a trusted form of payment.

Like blockchain technology, it seems highly likely that digital currency, in one form or another, is here to stay.

So if, having read this, you are still considering buying Bitcoin or any other cryptos, ensure that you make your decision with your eyes wide open and never invest more than you can afford to lose.

It’s also important to diversify. If you do add some crypto to your portfolio, ensure that you have a spread of other investments covering different asset classes to keep its balanced.

Related link: Is it too late to invest in Bitcoin?