Bitcoin- if you are new to this investment asset, first let us in brief run you through this novel asset class that has a technological backing to it. In simple words, bitcoin or a digital token is a cryptocurrency or virtual money that can be used to pay for goods and services as in the El Salvador where it shall be adopted as the legal tender beginning September this year.
Bitcoin price volatility or ups and downs so far:
After having come into existence in 2009, bitcoin has been witness to major ups and downs.
Started trading in 2010- At a fraction of a cent
In 2011: $1 in price for the first time
In 2017: Price scaled to $5000 for the first time
On December 17,2017: Bitcoin prices hit an all time high of $19,783.06
December 6, 2020: Prices hit $20000 for the first time for a BTC
February 9, 2021: BTC scaled in price to $48,000 after Tesla purchased bitcoin worth $1.5 billion
March 13, 2021: New high of $61,701
April 13, 2021: Prices hit an all time high of $63,375 and then again a new high of $64863
April 18, 2021: biggest one day drop of 25% to $55000
May 23, 2021: Slides down in value to $31000 on environmental and other concerns such as China cryptocurrency clamdown.
July 4, 2021: Now as we write BTC quotes at a price of $34,455, which is a meaningful gain of 17.5% from January 1 price of $29411.
Considering the sharp volatility should you invest in Bitcoin?
In nearly 10 years time, Bitcoin has sharply gained in value from $1 to in 2011 to close $34500 US dollar in July 2021. While the future of any asset for that matter is hard to predict, it is even harder for cryptocurrencies and some of the experts say that their longevity cannot be doubted as store of value and media of exchange. It is even being preached that in next 50 years time dollar or for that matter currency shall be more similar to crytocurrencies than gold or silver, so with the faster adoption and divergence towards digital modes, so investments in cryptos shall only accelerate.
Also, another use case of Bitcoin that shall enable it to strengthen in value over the time is its ability to facilitate payment across geographies with no cost, delay or even currency fluctuation. So it may likely be the case that down the years bitcoin can even become the reserve currency of the world.
Another concern that can be put in here is that bitcoin lost a great deal in value after coming into limelight due to the extent it uses energy and now as stakeholders have been looking at ways of minting them in a environmental friendly way, they will be relatively safer on this front going ahead.
Thus considering the above views, while there could be some corrections or crashes due to some imminent developments, the future of bitcoin looks strong.
What can be the safe ways to invest in Bitcoin?
1. You can bet in small portions: If you are optimistic on the bitcoin prospects going ahead, at best you can put in 2 percent of your overall financial allocation into it.
2. Investors can also consider investment in stablecoin which are far more stable in value:
Those not comfortable with high volatility in cryptos can also consider investment in stablecoins that are backed by an asset and show stability in price.
3. Invest in company stocks that have good exposure in cryptos:
Good companies with good fundamentals and having some association with bitcoins or other cryptocurrencies can also be betted on as for eg: Tesla, Facebook, Microstrategy. One can even invest in trusts or funds for safer investment in cryptocurrencies.
4. Risk in cryptos can also be minimized by booking profits at frequent intervals:
As and when profit accrues in respect of your bitcoin holdings, it can be a good idea to book them. This is because with time, number of people and other stakeholders that have got into the asset class has only increased and with more of demand, considering the market forces factor, price of bitcoin have only increased.
Price Prediction for Bitcoin
The investment bank JP Morgan has set a long-term Bitcoin price target of $130,000. The idea behind the target is tat bitcoin's volatility shall fall with that of gold. And this shall in turn get in support from institutional support. So, hence JPMorgan said "the above $130,000 theoretical Bitcoin price target should be considered as a long-term target."