Bitcoin has enjoyed some pretty wild ups and downs over the past decade, but with the current value at around $43,654, there’s no denying that it’s come back in a big way in recent years. However, how will this trend fare when we look towards 2022? Is bitcoin still a good investment? And if not, what should you be looking at instead?
What is bitcoin?
This digital currency is called bitcoin with a lowercase b It’s like digital cash you can use to buy things and exchange for other currencies, except bitcoin isn’t legal tender like dollars or euros. There are no physical bitcoins — only balances kept on public ledgers that you access using a unique cryptographic key, which is kind of like a password. Bitcoins are sent from one person to another without going through banks or clearinghouses. So even though it isn’t technically legal tender, bitcoin operates more similarly to traditional currencies than most online payment methods that have been around since before e-commerce sites became popular. If you’re trying to get rich by holding onto your bitcoins for dear life, think again.
It’s also not totally anonymous, since bitcoin addresses are tied to public keys. But unlike other payment methods that provide additional information about who you are when you spend or receive money (think credit cards and PayPal), bitcoin keeps most of your personal information private. For example, you don’t need to disclose your name or address when you use a given bitcoin address; instead, you only need to share your password with businesses for payments.
All of which means that if you don’t report those earnings as income on your taxes and then get audited, there’s no way for tax authorities to know how much money is coming from where — making it virtually impossible for them to find out whether or not any earnings are taxable.
You’re probably aware that bitcoin has been around for a while now. (In fact, you might have read about how it’s too volatile to be considered real money.) And while there are certainly other cryptocurrencies out there, including litecoin and ether, bitcoin is by far the most popular and most valuable — meaning you’ll want to go here if you want to learn more about where all of these fancy coins come from.
How do you invest in Bitcoin?
When someone says they’re investing in bitcoin, they might mean one of three things:
they are either buying actual bitcoin, they are purchasing shares of a company that is heavily invested in cryptocurrency and blockchain technology (as some ETFs and mutual funds are), or they’re actually purchasing shares of an exchange that sells bitcoin. Each of these has its pros and cons; read on to learn more about them. Remember that there isn’t a single best way to invest in cryptocurrency—it’s all about where you see yourself within six months to 10 years from now, as well as how quickly you want to grow your assets and risk tolerance.
If you don’t feel comfortable with any of these options, stick with keeping your money in cryptocurrencies directly such as Bitcoin through services like Coinbase. It’s simple and easy!
- 1) Buying Bitcoins Directly The number-one way people purchase cryptocurrency today is by buying bitcoin directly through online exchanges. While there were hundreds of cryptocurrency exchanges worldwide just two years ago, now most serious traders buy bitcoin through centralized entities based mostly in Europe and North America such as Coinbase or Gemini.
- 2) Buying Shares of Bitcoin-Focused ETFs If you want to avoid buying bitcoin directly but still want exposure to cryptocurrency, one of your best options is buying shares of an exchange-traded fund that focuses on bitcoin. The first and most popular of these, which launched in 2013 and has more than $1 billion under management, is XBT Provider’s Bitcoin Tracker One. Similar offerings are available based on Ethereum, Litecoin, and more recently EOS (EOS Shares), among others. These securities trade like any other ETF; buy them through your stockbroker or transfer agent if you have an account with them. You can also purchase them through brokerage platforms such as eTrade or TD Ameritrade.
Why does it make sense to invest in Bitcoin now?
Bitcoin is going to be affected by geopolitical events, monetary policy.
It’s going to have an impact on national currencies, and those things will affect [Bitcoin]. Will that impact it one way or another long term? Who knows. But it’s something I do look at when I think about Bitcoin price. – Roger Ver, Bitcoin Evangelist & Early Investor There are many other potential applications of blockchain technology…I expect that within ten years mainstream products utilizing blockchain technology will be commonplace. – John McAfee, creator of McAfee Antivirus Software We have elected to put our money and faith in a mathematical framework that is free of politics and human error. – Tyler Winklevoss
To learn more about how it all works, watch Roger Ver’s TED Talk about why he believes bitcoin is such an important technology. And remember that even if you are skeptical of bitcoin today, there will be applications tomorrow that may change your mind. Remember John McAfee and his prediction that within ten years mainstream products will use blockchain technology and mainstream adoption will occur (although we don’t know exactly what those mainstream products and services will be yet). Ultimately, while we don’t know exactly what impact cryptocurrencies like Bitcoin will have on our lives over time, it makes sense to get involved now to find out. The worst thing you can do is wait until 2023 when Bitcoin has become ubiquitous only to realize you could have started earning or spending bitcoins five years ago.
Can we trust Bitcoin long-term as an investment asset class?
I am not an expert, but I’m not a non-believer either. It all comes down to your risk appetite and how you feel about it. What’s important here is that you should be investing based on how much money you can afford to lose, and not solely on speculation. There are plenty of folks who lost their shirts because they were caught off guard by market volatility, so always do your research and understand what you are getting into before you put your money somewhere. That being said, bitcoin has proven time and again to be one of the best-performing assets over any time period out there.
I wouldn’t go as far as saying that bitcoin is a bubble. Rather, it’s more like an asset class that remains relatively undefined and misunderstood. But can we trust it long term? I don’t know if anyone really knows. What I do know is that bitcoins are worth what someone else will pay for them and right now there are many optimistic buyers out there who believe they will go higher in value. So if you believe in their prospects, then go ahead and invest as much money as you can afford to lose into bitcoins because you might get rich quickly. Just be aware of what you are getting into first so that when shit hits the fan, you won’t regret any hasty decisions or uneducated bets on bitcoin’s future.
How do you buy your first bitcoins then?
There are two answers to that question. When you think the price of bitcoin is going to drop significantly from its current high, you should be liquidating your bitcoins as quickly as possible.
You don’t want to see a $10k drop to $7k, only for you to realize that it could have dropped another $1k if you had sold before an even bigger dip—or even worse after it has already started going back up. On average, based on what we know now, bitcoin will reach around $100k by 2022 (the more conservative experts say $80k), so just remember that if you sell some of your coins at peak value (around $25–30k) and then bitcoins crashes down after that, there’s no way back up.
You can buy bitcoins using different exchange platforms and other services that accept cryptocurrency. Two of my favorite places to buy bitcoin are either Coinmama or Coinbase. Both are very beginner-friendly and usually offer a much better deal than most exchanges, but they take longer as they use banks rather than electronic transfers. You should also be aware that you’ll need to verify your identity before you can start buying bitcoin with these services, so if you don’t have time for that, it might be best to stick with an exchange (with all its security risks).
When do I sell my Bitcoins back then?
This is a question that can only be answered when you know what’s going to happen between now and then. Just like if you’re going to go on vacation, for example, you have to first figure out where you want to go.
And since it’s impossible to predict what will happen even in just two years (the length of time between now and 2022), there’s no way anyone can answer with any certainty that Bitcoin prices will rise again by 100% over those four years. Because they could very well fall further first. So much so that some people are predicting they could hit zero dollars per coin! So it all comes down to: do you believe they’ll rebound after 2022? Or do you think they’re dead forever?
If you’re optimistic about Bitcoin, you can use tools like CoinMarketCap and CoinCap to see what it would take for prices to reach a particular price point by any date. For example, if you think BTC will reach $1 million per coin by 2022, you can use these tools to estimate what it might take for them to hit that number. And then if they don’t get there by that time, sell your coins back. If they do get there or close enough, keep them and continue profiting from their uptrends in value!
The other option, if you’re not optimistic about Bitcoin, is to sell all your coins as soon as possible and then invest them elsewhere. But remember that, unlike fiat currency, there are no guarantees when it comes to cryptocurrency. The market could crash tomorrow and wipe out any gains you may have made over these four years. In fact, history has shown that Bitcoin prices have always fallen faster than they’ve risen… which means they will likely drop lower before they rise again! So if you’re looking for more of a sure bet on cryptocurrency growth, keep reading… because I think I might have just what you’re looking for!
So you might be wondering why people keep buying bitcoins, even when they’ve lost so much value. The truth is that it’s because they believe Bitcoin has a network effect: basically, people see it being used by more and more users and merchants, which then draws even more users to it… which makes them want to buy bitcoins for themselves. When you consider the fact that companies like Microsoft have just announced support for cryptocurrency trading on their platform, you can begin to see why people feel there will be a surge of new interest coming from all directions once again!
Bitcoin is both an intriguing concept and a solid alternative to conventional currency, but it also comes with major caveats that may not necessarily change.
While bitcoin’s price may fluctuate wildly over time, there are reasons why prices go up and down. It is important to understand these reasons if you’re considering investing in bitcoin or any other cryptocurrency – doing so can give you clues as to what future price movements will look like. Bitcoin might be worth $50,000 by 2022 – or maybe it’ll crash and burn before that happens; no one knows for sure. Only time will tell!
However, there are many reasons why bitcoin might rise in value over time – or perhaps fall, depending on how you’re looking at it. For example, an increase in media coverage and public awareness of cryptocurrencies is likely to boost prices as more people become aware of bitcoin and similar cryptocurrencies. Similarly, global demand for crypto could also drive up prices as more people purchase crypto and hold onto it rather than spend it. More businesses accepting cryptocurrency is another factor that will likely influence bitcoin’s price; while cryptocurrency has been around for over 10 years now, adoption rates are still quite low compared to conventional payment methods such as credit cards. This can change with time though as more businesses decide to embrace cryptocurrency as a payment method – some have already done so.
However, there are also many reasons why bitcoin might fall in value over time – or perhaps rise, depending on how you’re looking at it. For example, increased regulation of cryptocurrency is likely to put downward pressure on prices as more countries crackdown on cryptocurrencies. Increased regulation could include stricter rules regarding ICOs (Initial Coin Offerings), which are used to generate funding for new crypto startups. Similarly, negative media coverage surrounding scams and hacks that involve cryptocurrency could potentially discourage consumers from adopting cryptocurrency as well as businesses from accepting it; negative news coverage will probably do little to quell fears about cryptocurrencies but might reduce demand for them.
While it’s impossible to predict with certainty how bitcoin will perform over the next 10 years, there are many indicators that could shed light on what future price movements might look like. This guide has discussed why bitcoin’s price rises and falls, and why bitcoin may be worth $150,000 by 2022.
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