Should you invest in Bitcoin in 2021?
Whatever your stance on bitcoin, we can agree on one thing: it's polarizing. Some investors think it's the way of the future and others think it's a scam.
However, it is gaining popularity. The coronavirus pandemic has likely accelerated its adoption by attracting more online retailers. Now, more than a third of small and medium-sized businesses will accept bitcoin as a payment method.1 And even larger companies like Microsoft are starting to accept it.2 Additionally, bitcoin fans see it as a protection against it. 'inflation. And as the Federal Reserve prints money left to right, some worry about the dollar's future.
You might be wondering: Should I get on the Bitcoin train or run in the opposite direction? Here are four risks I want you to consider before taking the plunge:
Bitcoin is one of the most volatile investments you can make
Bitcoin is going through incredible peaks and falling in value. In July 2010, a year after the release of bitcoin to the world, a bitcoin was only worth eight cents. The value jumped everywhere until it really started to make waves in 2017. One bitcoin hit a value of $ 1,000 at first, then rose to $ 5,000 in October, then doubled to 10,000. $ in November. In mid-December, the value of a bitcoin was almost $ 20,000. The bubble finally burst and the value fell to around $ 3,500 in November 2018.3
But the value of bitcoin started to soar again in 2020. Just a few weeks ago, the value of one bitcoin hit an all-time high of just under $ 42,000, but then fell within 24 hours. at $ 34,863.
Will it continue to increase in value? We do not know it. But the reality is that volatility is always about risk. And the risk isn't bad, but you need to be aware of what it might cost in the end.
Bitcoin has a bit of an identity crisis
Does Bitcoin have more in common with the US dollar or with gold? The answer is both. While bitcoin is a currency, Uncle Sam has a different opinion. The Commodity Futures Trading Commission views bitcoin as a commodity (like gold), while the IRS treats it as property, which means, you guessed it, they can tax it.5,6
We have to keep in mind that bitcoin is still the new kid on the block. Although it's been around for over 10 years, we still don't have the proven best practices for building wealth with Bitcoin.
Bitcoin is not regulated by any central bank or nation.
Bitcoin has been shrouded in mystery since an unknown person named Satoshi Nakamoto released it to the world in 2009.7 It operates without the oversight of a bank or nation-state, meaning it is traded among peers. . It's like the Wild West of coins: there is no bailiff to enforce the law. For some, this is an interesting feature. Others recognize the risk of zero regulation.
