It seems like everyone is talking about Bitcoin these days. That’s what happens when assets set new all-time highs. As of this writing, a single Bitcoin is worth roughly US$26,000, more than triple the price from one year ago.
Should you jump in? Here’s how to decide.
This isn’t just a fad
Bitcoin was created in 2009 by a mysterious figure called Satoshi Nakamoto. In the years that followed, it was mostly treated as an internet joke.
Today, with a market cap of US$500 billion, it’s no laughing matter. Several former skeptics have been converted to the crypto religion.
Financial historian Niall Ferguson admitted he was “wrong to think there was no use for a form of currency based on blockchain technology.” Former Business Insider editor Joe Weisenthal used to think Bitcoin was a joke, or at best a currency for clowns. “Now, I no longer think that,” he said.
Even JP Morgan Chase CEO Jamie Dimon changed his tune. He once called Bitcoin a scam, threatening to fire any traders that “were dumb enough to buy it.” Today, JP Morgan has several blockchain-backed projects and is directly involved in cryptocurrency markets.
If you think these assets are a passing fad, think again.
Should you invest in Bitcoin?
Ready to jump in? There are two things you should know beforehand.
First, just because cryptocurrencies aren’t going away anytime soon doesn’t mean you should bet the farm. These assets are incredibly volatile. If you have a short-term mindset with an expectation of immediate profit, there’s a good chance you’ll get burned. Sure, the upside is greater here, but so is the downside.
Looking forward, there are plenty of reasons to believe Bitcoin can rise another 1,000%. But there are also plenty of reasons why Shopify stock will rise 1,000%.
You can generate immense returns across dozens of asset classes, cryptocurrencies and traditional equity included. Don’t make the mistake of ignoring conventional opportunities for the new shiny thing.
At one point, many people argued that Bitcoin would go to $0. That argument is very difficult to make today. Thousands of people transact with the currency every day, and large institutional investment are getting involved, sometimes with multi-billion-dollar stakes.
Cryptocurrencies are here to stay, and it’s reasonable to have exposure. Chamath Palihapitiya, founder of Social Capital, first bought BTC at US$100. Today, he believes it’s prudent for all investors to have 1% of their assets in Bitcoin.
“This is a fantastic fundamental hedge and store of value against autocratic regimes and banking infrastructure that we know is corrosive to how the world needs to work properly,” he explained. “You cannot have central banks infinitely printing currency.”
With massive stimulus packages being rolled out around the world, and central banks generating new money supply at gargantuan rates, it’s prudent for everyone to get involved. Just keep your position sizes appropriate for your risk tolerance.
Our handpicked stocks below can rise just as fast as Bitcoin.
Renowned Canadian investor Iain Butler just named 10 stocks for Canadians to buy TODAY. So if you’re tired of reading about other people getting rich in the stock market, this might be a good day for you.
Because Motley Fool Canada is offering a full 65% off the list price of their top stock-picking service, plus a complete membership fee back guarantee on what you pay for the service. Simply click here to discover how you can take advantage of this.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Tom Gardner owns shares of Shopify. The Motley Fool owns shares of and recommends Shopify and Shopify. Fool contributor Ryan Vanzo has no position in any stocks mentioned.