Is it Wise to Invest in Bitcoin?

February 10, 2022

Right now, digital currencies are dominating the news, with some analysts forecasting that bitcoin’s price might reach $100,000 by 2022. Regulators and central banks have been terrified by cryptocurrencies, and bitcoin’s price has plummeted to $40,000 in January. 

So, should you join the craze or go for a run?

In and of itself, the concept of using digital money on the internet is not that difficult. Transferring money from one online bank account to another is something that most of us are familiar with.

Bitcoin is a digital currency that works in the same way as real money, but with some noticeable differences. Cryptocurrencies are a form of peer-to-peer payment that does not charge a fee to the banks for each transaction. In addition, there is no physical representation of the coins.

Other relevant bitcoin facts include:

  • Bitcoin, ethereum, and cardano are examples of cryptocurrencies that employ blockchain technology to transport data over the internet.
  • Mine each and every Bitcoin.
  • There are only 21 million bitcoins that may be mined at any given time.
  • Cryptocurrencies are “decentralized,” which means they are not governed by a financial body such as a central bank or the government.
  • Credit card purchases will be accepted on most platforms.

Exactly what is the reason for the decline in the value of bitcoin?

In December 2021, the price of bitcoin and several other major cryptocurrencies plummeted, and thus far in 2022, the price has remained on a downward trend. During the Federal Reserve’s meeting in January to discuss whether or not to raise interest rates, crypto fell along with other stocks and shares.

According to Coinbase* data, the price of bitcoin is currently around $37,261, as of January 31, 2022. Compared to November’s all-time high of $69,000, this is a significant drop.

The following factors have contributed to the recent upheavals in the world:

  • Risky assets have been selling off as a result of uncertainty about rising interest rates in the United States and the UK.
  • Transactions in cryptocurrencies are now forbidden in China.
  • Russia could ban cryptocurrency trade and mining, leading values to collapse, according to some reports.

In the future, there has been talk of more regulation for bitcoin investments.

How much should I put into bitcoin?

Bitcoin is a highly volatile currency. If you’re willing to accept the chance, be sure you know what you’re getting into and have a crypto investment plan in place. Also, be sure you’re not putting money into anything because you’re afraid you’ll miss out. 

Before you become involved, there are a few things you should think about:

  1. Do I know what I’m getting into and how the cryptocurrency and blockchain markets work?
  2. Is the level of risk acceptable to me?
  3. In comparison to a few months ago, how much more expensive is it now? If that’s the case, why do I want to buy anything if it’s more expensive? In my life, where else do I get to do that?
  4. There isn’t a lot of indication that prices may go up considerably more.
  5. Who do I think will buy it from me for that greater price if I acquire it now with the intention of selling it later for even more?
  6. Why was I not interested in an asset that was so outstanding when it was so much less expensive?
  7. Have I persuaded myself that I am “in the know” in some way?

It’s generally not a smart idea to invest if you don’t know the answers to these questions. If you do decide to buy bitcoin, make sure you’re not risking more than you need.

Before you buy in bitcoin, think about these things:

Cryptocurrency, like any other investment, has both dangers and possible rewards. Cryptocurrency is extremely dangerous when compared to other sorts of investments.

Before you make an investment, consider the following:

  • Cryptocurrency markets are not a good place to put all of your life’s savings.
  • Only invest a tiny portion of your disposable income and be prepared to lose a lot, so think of it as gambling.
  • Never put money into something you can’t afford to lose — don’t simply think about the immediate future.
  • If you don’t have a lot of money left at the end of each month, it’s preferable to focus on saving instead of investing.

First, weigh the benefits and drawbacks:

Benefits: Because cryptocurrencies are global, their value is the same in all countries and there are no exchange rates.

Drawbacks: Because cryptocurrencies are so volatile and vulnerable to market crashes and bull markets, they are a very dangerous investment. Because of technological issues, some people have had to wait a long time to get their money out.

It has been lauded as a market-disrupting liberator by supporters, but it has also been condemned as a dangerous innovation by many personal finance specialists. Bitcoin is, without a doubt, a volatile currency.

Bitcoin has had a series of significant ups and downs since December 2020. Is a bitcoin crash on the way? We’ll go over some of them below.

The issue is that there is no intrinsic value to the price of cryptocurrencies.

Is bitcoin supported by financial institutions?

Bitcoin and other cryptocurrencies are being closely scrutinized by governments, regulators, and businesses.

The following companies are using bitcoin:

  • Visa
  • Mastercard
  • PayPay

Companies that are interested in investing include:

  • BlackRock, the world’s largest asset manager, has opened two of its funds to bitcoin futures trading.
  • Ruffer Investment Management, based in the United Kingdom, added bitcoin to its multi-asset portfolios five months later, with a profit of $1.1 billion.
  • S&P Dow Jones Indices, one of the world’s largest index providers, said in December 2020 that it would begin indexing over 550 of the most popular cryptocurrencies in 2021.

The Bank of England (“Britcoin”) and other central banks are looking into the possibility of creating their own digital currencies that are backed by the central banks. As more institutional investors begin to invest in crypto assets for capital gains, price swings could become less pronounced.