Bitcoin’s growth in value over the last 30 days has been incredible. Year to date, this cryptocurrency has increased about 200% in value. So is buying bitcoin a good investment?
Bitcoin is the world’s first decentralize digital currency. It can easily be sent to anyone in the world and converted to most local currencies. BTC is accepted at over 100,000 retailers including Microsoft, Dell and Expedia.
Bitcoin was created in 2009. Its value has fluctuated significantly over its short life. In 2011 it grew from $0.30 to $32. In 2013 bitcoin hit its high of $1,242. So far in 2016, it’s traded between $363 and $779.
All amounts above are in USD.
Bitcoin’s current value
The chart below shows bitcoin’s climb over the last month (from yahoo finance).
As of today, it’s trading around $750, up from $453 a month ago. That a 66% increase in 1 month! Simple math – if you bought $1,000 worth of bitcoin on May 18th, that bitcoin would be worth $1,660 today. That’s a hell of a 1 month return.
What’s driving the increase?
I would guess speculation mostly. People are greedy, and with prices skyrocketing, more people are jumping in to purchase the digital currency. But there might be more to it than that.
There will never be more than 21 millions bitcoins. Why is this important? Well unlike the US dollar, iPhones and many other things, there is only a limited amount a BTC. This capped amount should help bitcoin maintain value into the foreseeable future.
The halving is coming. Bitcoins are still being mined. Bitcoin was designed so that after 210,000 blocks are mined, the value of each block is cut in half. When it was first created, each block mined was worth 50 BTC. Now it’s down to 25 BTC, and within the next month it should drop to 12.5 BTC.
Blockchain is changing the world. The underlying technology behind bitcoin is so sound that many different industries are looking into and starting to use bitcoin’s blockchain technology.
World markets fluctuate. When you’re looking to protect your wealth in countries like Venezuela or China, and you can’t buy precious metals, bitcoin could very well be your next best option.
Bitcoin is accepted by more and more merchants. Just the other week, a friend of mine in Chicago texted me that the restaurant he was eating in accepted BTC.
A word of caution
The recent spike in value will probably draw in more buyers looking to make a fast buck. Below are quotes from two great investors about trying to time the market.
“Be fearful when others are greedy. Be greedy when others are fearful.” – Warren Buffett
“The time of maximum pessimism is the best time to buy, and the time of maximum optimism is the best time to sell.” – John Templeton
As an investment
I own bitcoin. It’s an interesting investment, and I plan to hold it for a while. That said, I also own many other investments, and diversification is essential to any healthy investment portfolio.
I’m not an investment professional, and I’m not recommending you buy bitcoin or anything else. This post is for entertainment purposes only. You can very well lose every dollar you invest in BTC, the stock market or anything else you choose to invest in.