There was a time where I would get asked questions about Bitcoins on a daily basis. Clearly, those in the cryptocurrency space have done a great job spreading the word about cryptocurrency. I once heard a report over a podcast stating that more people have heard about cryptocurrency than have heard about Exchange Traded Funds (EFTs), mutual funds, and index funds. I find that report interesting when you consider the fact that Bitcoin has only been around since 2009. That’s right, as of the day of this writing, Bitcoin is only 14 years old. Bitcoin is still a cub in the world of investing. When describing Bitcoin, I use the word “investment” loosely. Many in the financial service industry would consider putting money in Bitcoins speculation more so than investing.
Notice, I used the words cub and speculation when talking about Bitcoin. That may explain why there have been more bear market cycles (prices falling) than there have been bull market cycles (prices rising) associated with cryptocurrency.
In recent years, cryptocurrencies have taken the world by storm. The meteoric rise of Bitcoin, Ethereum, and a plethora of other digital currencies generally referred to as altcoins have captured the imagination of both individual and institutional investors. As the world becomes increasingly digital, cryptocurrencies have emerged as a new frontier for investment. But the question on everyone’s mind is, should you invest in cryptocurrencies? That’s a diplomatic way of saying what’s on everyone’s mind. The more direct question that’s on everyone’s mind, “Are there big coins to be made in Bitcoins?” This article delves into the world of cryptocurrencies, exploring their rise and the considerations for potential investors.
Cryptocurrencies are digital or virtual currencies that use cryptography for secure financial transactions and control the creation of additional units. Unlike conventional currencies issued by central banks, cryptocurrencies operate on decentralized networks called blockchains. Cryptocurrencies offer decentralized systems that are not controlled by any central authority, making them resistant to censorship and manipulation. This decentralized nature, coupled with robust cryptographic protocols, provides enhanced security and privacy for users including increased security, transparency, and the elimination of intermediaries.
The underlying technology of cryptocurrencies, blockchain, has the potential to revolutionize various industries, including finance, supply chain management, healthcare, and more. The transparency, immutability, and efficiency of blockchain systems make them attractive for businesses seeking to streamline operations and reduce costs. The growing interest from institutional investors, corporations, and even governments has significantly contributed to the rise of cryptocurrencies. Major financial institutions have started offering cryptocurrency services, and some countries have even embraced digital currencies as legal tender, further fueling adoption.
Bitcoin was created in 2009 by an anonymous person or group known as Satoshi Nakamoto. This marked the beginning of the cryptocurrency era. Since then, thousands of cryptocurrencies have emerged, each with its own unique features and purposes. The rise of cryptocurrencies can be attributed to several factors, including growing distrust in traditional financial systems, advancements in technology, increasing mainstream adoption, and the potential for substantial returns on investment. Over the past decade, the value of Bitcoin has skyrocketed, creating millionaires overnight for many of its early adopters. In November 2021, Bitcoin’s value peaked at $67,589 per Bitcoin. In November 2022 after reaching its peak, Bitcoin’s dropped below $18,000 per Bitcoin. As of the day of this writing, Bitcoin’s value is $30,635.50 per Bitcoin. As you can see from this brief synopsis of its value fluctuation, partaking in Bitcoin is a wild ride.
While the rise of cryptocurrencies has been remarkable, it is not without risks and challenges. The volatility of prices in the cryptocurrency market is a significant concern. Prices can fluctuate dramatically, leading to both tremendous gains and substantial losses. This volatility is driven by factors such as regulatory changes, market sentiment, and speculation. Investors must carefully evaluate their risk tolerance and financial goals before investing in cryptocurrencies.
Another challenge is the presence of scams and fraudulent activities in the cryptocurrency space. As with any investment, due diligence is crucial. It is important to research and verify the credibility and security of the cryptocurrency and the platforms used for trading before investing your hard-earned money.
Recently there’s been several companies coming under scrutiny within the cryptocurrency industry. Many of which have been highly publicized. The most publicized of them have been FTX and its founder and CEO, Sam Bankman-Fried. What an interesting last name considering the decentralized banking operation that he managed has been accused of frying hopeful investors out of billions of dollars that he used for personal exploits.
The prospect of government regulations, which I think is a good thing, is another factor that potential investors must consider. While cryptocurrencies have gained acceptance in many countries, governments around the world are starting to take notice and implement regulations to ensure investor protection and prevent illicit activities such as money laundering and terrorist financing. These regulations could potentially affect the way cryptocurrencies operate and impact their value.
If you are considering investing in cryptocurrencies, it is crucial to do your due diligence. Educate yourself about the different cryptocurrencies, their underlying technology, and their potential applications. Stay updated with the latest market trends and news to make informed investment decisions. Additionally, consider diversifying your investment portfolio and only invest what you can afford to lose. I recommend that you limit your total overall investment exposure in cryptocurrency to 1 percent to 5 percent. Meaning, if you have a total of investable assets of $10,000, you cap your cryptocurrency investments to $100 to $500. Ensure that you store your cryptocurrencies securely in a reputable wallet and take precautions against hacking and fraud. By all means, remember the password to your cryptocurrency wallet. There are billions of dollars of cryptocurrency that can’t be accessed because the owner forgot their password to their cryptocurrency wallet.
Are there big coins to be made in Bitcoins? Potentially! But the risk of losing all of your hard-earned dollars chasing big coins in Bitcoins is BIGGER! Should you invest in cryptocurrencies, I urge you to enter this endeavor with knowledge, a solid financial foundation, a stomach for market fluctuations, and with money to burn.
(Damon Carr, Money Coach can be reached 412-216-1013 or visit his website at www.damonmoneycoach.com)