Bitcoin, is it worth investing $1,000 today?

Bitcoin has more than doubled its value since the beginning of the year and many investors are wondering whether it is worth investing $1,000 today.

For those who wish to venture into the world of cryptocurrency investments, Bitcoin is the primary choice. This preference is motivated by its established reputation and its leading role in the cryptocurrency universe.

However, for many investors, the idea of investing in Bitcoin may seem like a "gamble", given the complexity of the factors that determine its value and the unpredictable volatility of the market. As with any form of investment, Bitcoin carries inherent risk , with the possibility of rapid gains or losses due to significant price changes.

To answer the initial question, let’s try to understand why it might be convenient to invest in Bitcoin today and why it isn’t.

Why it is better to invest in Bitcoin today

Investing $1,000 in Bitcoin today could prove to be a unique opportunity for several reasons.

1) Halving
The first reason that makes investing in Bitcoin attractive today is the so-called “halving”, scheduled for April 2024. This phenomenon, which occurs every four years, implies a reduction in the reward assigned to miners of Bitcoin, helping to increase the scarcity of the asset over time. This reduction accentuates the scarcity of Bitcoin over time, helping to fuel its value.

History teaches us that significant increases in Bitcoin prices often characterize the periods around the halving. While there is no certainty in the financial markets, past performance suggests the potential for attractive profits in this cycle.

2) Bitcoin ETF Approval
The second reason in favor of investing in Bitcoin is linked to the expected approval of a series of Exchange-Traded Fund (ETF) by the Securities and Exchange Commission (SEC). This authorization would open the door to Bitcoin investments by financial giants such as BlackRock, Fidelity, and Ark, offering their millions of customers a new asset class.

The fact that these companies have to buy Bitcoin to support ETFs could generate increasing demand and, consequently, positively influence the price of Bitcoin in the long run.

3) Financial sovereignty
Bitcoin offers a unique paradigm where the investor has total control over their money. Unlike bank deposits, where the intermediary legally holds ownership of the money, Bitcoin is a sovereign asset. This gives the owner unparalleled control, but at the same time brings with it individual responsibility. However, this distinctive feature is one of the main reasons why Bitcoin is considered a valuable asset.

4) Diversification
Bitcoin’s performance has been opposite to other assets like stocks, bonds, gold, and real estate. This feature makes it particularly interesting for professional investors, allowing the creation of a portfolio of assets that are not closely linked to each other. Its independence from traditional economic and financial developments adds a crucial level of diversification.

5) Scarcity
The concept of scarcity is fundamental to understanding the value of Bitcoin. While in the traditional financial system, the quantity of printable money is virtually unlimited, Bitcoin follows the opposite logic. With just 21 million units expected for a global population of 7 billion people, Bitcoin’s scarcity helps make it an increasingly valuable asset over time.

Its digital nature, combined with the default supply limitation, prevents manipulation and provides security to investors looking for an alternative to traditional currencies.

Why it is NOT worth investing in Bitcoin today

Investing $1,000 in Bitcoin today might seem tempting, but it is essential to carefully evaluate the risks. Despite the hype surrounding cryptocurrency, there are several reasons why it may not be the best option for everyone.

1) It is not a safe haven
Anyone who sees Bitcoin as a safe haven should reconsider their investment approach. Wild price swings, both up and down, make Bitcoin a high-risk investment. While this asset has tremendous upside potential, its volatile nature implies significant uncertainty about the future.

The crucial question remains: will Bitcoin revisit 2021 records? Its past performance, characterized by significant drops followed by record recoveries, suggests that nothing is guaranteed. The statement from Kraken’s CEO appears very bold, predicting a price of Bitcoin at $200,000. However, speculation continues to drive the price of cryptocurrencies, making it difficult to predict if and when there will be a full recovery and if it will ever reach those price targets.

2) High volatility
The extreme volatility of Bitcoin is a crucial aspect to evaluate before investing. In 2018, the cryptocurrency fell 83%, before reaching new highs in 2020 and 2021. These sharp swings highlight the unpredictable nature of the cryptocurrency. Investing in Bitcoin requires a thorough awareness of the risks and a willingness to tolerate market volatility.

3) Environmental issues
The environmental issue is a topic that has caused growing concern within Bitcoin. The mining process, which supports the Bitcoin network, requires a huge amount of energy. This has led to criticism regarding the negative ecological impact, especially given the growing focus on sustainability. For example, the Bitcoin Mining Council could play a fundamental role in this sense, just as the passage of many Chinese miners to the United States could help promote the use of renewable sources, mitigating environmental concerns and improving the public acceptance of Bitcoin

Investing in Bitcoin also involves being aware of the environmental implications associated with its operation.

4) Interventions by institutions

Financial institutions and regulators are starting to take a closer look at the cryptocurrency sector. Possible regulatory interventions could significantly affect the Bitcoin market. Its large-scale adoption and legitimation as an asset could be hindered (or favored) by future government interventions. Investing in Bitcoin involves navigating still relatively uncharted waters from a regulatory point of view.

In conclusion, investing $1,000 in Bitcoin today requires a careful evaluation of the potential and risks. Its volatile nature, environmental issues related to mining, and regulatory uncertainties are crucial factors to consider. While some may see Bitcoin as an exciting challenge, ahead of the halving and approval of Spot ETFs, it is imperative to take a careful and informed approach before diving into this type of investment.

DISCLAIMER The information and considerations in this article should not be used as the sole or primary basis for making investment decisions. The reader retains full freedom in his own investment choices and full responsibility in making them, since he alone knows his risk propensity and his time horizon. The information contained in the article is provided for informational purposes only and its disclosure does not constitute and should not be considered an offer or solicitation to the public for savings.

Original article published on Money.it Italy 2023-12-04 07:49:00. Original title: Bitcoin, conviene investire 1.000 euro oggi?