Did you miss out on investing early in Bitcoin? Is it too late to invest? I'm going to break down some of the arguments for and against bitcoin to help you make a better investment decision.
My personal opinion is that we're still in the very early days of cryptocurrency. Let me elaborate a bit:
The Bigger Picture
If you look at the daily price of Bitcoin, it can be a bit depressing to see how much the price has fallen from it's all time high. But if you zoom out of the chart a little bit, things look very different. Although bitcoin has seen a price decline, over the past 12 months it still has experienced massive growth – far more than any stock or commodity.
So if you had invested 12 months ago, you'd still be up. It's important to remember also that similar crashes have happened before.
Bitcoin is still being mined
There is a finite supply of Bitcoin. There will be a total of 21 million mined. Currently there are around 17 million in circulation. Simple supply and demand suggests that over time, as more people buy into Bitcoin, the price will rise. You could say that Bitcoin was a fad and it's had its day in the sun. Personally I don't feel that Bitcoin has even scratched the surface of mainstream finance. There is relatively very little money invested in Bitcoin and the vast majority of people around the world own none.
Risking 1% of your net worth
When people ask me whether it's too late too invest in bitcoin, I usually tell them “I have no idea”. And that's the truth. I have no idea whats going to happen to bitcoin. Nobody else does either. There is a chance that the price of bitcoin could explode. There is a chance that it will fizzle out and die off.
If you're willing to take a risk, the upside could be huge. And that's why I usually ask people if they were to invest 1% of their net worth – could they risk losing it? If they could lose that 1% without any consequences then I say – it's never too late to invest.
Dollar Cost Averaging Bitcoin
So if it's not too late to invest – then when is the right time to invest? Again this is question that no one can answer. You can study all the charts in the world, and you'd still never be able to pick the best time to invest. The truth is bitcoin is extremely volatile and is impacted by fundamental forces that simply can't be predicted.
So your best bet for finding the perfect time to invest may be to invest smaller amounts at regular intervals. This is known as dollar cost averaging. As an investment strategy it's proven to be effective over the long term.
When you purchase Bitcoin at regular intervals, sometimes you'll buy bitcoin when the price is down, sometimes when it's up. In the long run this will average out and you'll profit from the overall price increase.
DCA with Coinbase
Coinbase has a handy feature that lets you setup regular bitcoin purchases. I would recommend setting up a weekly or monthly purchase. I think a daily purchase is just a little to frequent and might cause problems with your bank.
Investing in all cryptocurrencies
One concern people have is that Bitcoin won't be the “cryptocurrency of the future”. This is a legitimate concern. I have no idea if Bitcoin will be “the” coin. So it might be a smart strategy to expand your investments across multiple coins.
You could invest in the most popular coins by marketcap. You could do lots of research and invest in the coins you believe have the most future potential.
Investing in popular cryptocurrencies with the Crypto CopyPortfolio
The Crypto CopyPortfolio is an investment product by eToro. It's a bit like a mutual fund, but it's made up of the top cryptocurrencies. It's put together by the experts at eToro and they automatically rebalance your portfolio each month to make sure the ratios stay correct.
While the crypto CopyPortfolio is the first of this type of product, I'm sure that in the future we'll start to see many more of these funds.
The best time to invest in anything is when the price is down. So in theory you should be investing now. Don't be the fool that only invests when the hype builds and the price is up. It's easy to invest then – but you'll also lose your money. Take the harder decision and invest while you still can.