Should I be investing in Bitcoin?
Lately, there has been a lot of buzz among investors about Bitcoin and cryptocurrencies. What are they? Are they worth it? Will they grow in value or crash?
Bitcoin is an international phenomenon because for years it was selling for merely a few cents per coin. Now, at the time of writing this, a single bitcoin trades for around $40,000. So, if you are an investor, you might be wondering, is Bitcoin right for you?
What is Bitcoin?
Bitcoin is a digital currency that is mined from computer networks and stored in networks called blockchains. It is a form of a cryptocurrency, of which there are thousands that are mined in a similar fashion.
People who buy and sell these cryptocurrencies store them on password-protected digital “wallets” on their computers or hold them on a crypto trading platform. Either option requires some amount of courage because, if you forget your password or key, your coins are essentially lost forever. For example, there is an infamous story where one man discarded his PC’s hard drive before transferring its stored bitcoins to his new hard drive. He was never able to recover it, and all that value is gone.
Should I invest in Bitcoin?
Ultimately, your investment decisions are yours to make. However, we feel it is our responsibility as professionals to help you understand the risks.
Besides the risk of losing your password or your hard drive being damaged, cryptocurrency is also vulnerable to hacks. For example, last year KuCoin was hacked, causing $280 million worth of cryptocurrency to disappear from investors’ wallets. Since cryptocurrency is anonymous by nature, there is no mechanism to trace or retrieve them.
Additionally, cryptocurrency is extremely volatile. Recently, Bitcoin was valued at $65,000 per coin but is now worth $40,000 merely a couple of days later. Owners of Etherium, another cryptocurrency, lost $400 billion over the same two-day period in May.
Another concern investors may have is the environmental impact. Mining bitcoins requires an enormous amount of computing power, which consumes an astronomical amount of energy. Experts estimate that Bitcoin miners collectively consume about as much energy as the entire nations of Jordan or Sri Lanka.
So, should you invest in Bitcoin? There are many risks involved, and it is ecologically disastrous. However, there is also a potential to realize some gains, so you must ultimately decide for yourself if it is right for you.
Talk to a ProVise CFP® professional about Bitcoin and other investment opportunities
At ProVise Management Group, our CERTIFIED FINANCIAL PLANNER™ professionals can get to know you and your current financial circumstances, goals, risk tolerance and personal values to help you develop a plan that works for you. We can also create a written plan for you at a fiduciary standard of care. All our written plans come with an unconditional money-back guarantee. If you are unhappy with your written plan, you can return it to us, and we will refund 100% of the fee paid.
Are you ready to talk to a professional about investing? Contact ProVise today to schedule a complimentary consultation.