This article has been reviewed by Sumeet Sinha, MBA (Emory University Goizueta Business School). Should you have any inquiries, please do not hesitate to contact at sumeet@finlightened.com.
Should I Invest in Bitcoin?
Should I invest in bitcoin? this is the most popular question I get from investors these days. I am always in favor of diversifying the portfolio within and even outside of the stock market with alternative investments. But, before we answer the question of investing in bitcoin, let’s take a look at what bitcoin is, how to buy bitcoin, how bitcoin as an investment compares against popular stocks such as Tesla, Amazon, Apple, Netflix, etc. Bonus: We will also discuss how to earn Bitcoin for FREE.
What is Bitcoin and Who Created It?
Bitcoin is an innovative payment network and a new kind of money. It was created in the year 2009 by a person (or entity) named Satoshi Nakamoto. No one knows much about Satoshi and whether such a person even exists or it was just a pseudonym created to put forth the idea of bitcoin.
Bitcoin uses peer-to-peer technology to operate with no central authority or banks; managing the transactions and the issuing of bitcoins is carried out collectively by the network. The network itself is the ‘ledger’ rather than the bank or central authority, hence there is no ‘middle man’ involved, cutting down the expenses of transactions.
Read Also: Bitcoin Whitepaper: Explained
Bitcoin is open-source – its design is transparent and available to the public hence there is no single owner who controls bitcoin. Bitcoin can be used at many places such as Home Depot and Overstock for buying products and services.
Advantages of Bitcoin – Why does Bitcoin matter?
Bitcoin offers many advantages for transactions.
- Speed: Bitcoin offers faster payments.
- Reach: Bitcoin offers easy cross-border payments.
- Cost: Bitcoin has low processing fees.
- Security: Bitcoin transactions are secured by military grade cryptography.
- Availability: Bitcoin has an ‘always-on’ network – Bitcoin always works no matter what day or time it is.
- Liability: For businesses, it is easier to accept bitcoin payments as it eliminates card processing costs (credit card fees can be very high, more than 3% of transaction value) and it does not require responsibilities associated with processing credit card information.
- Governance: The multi signature feature can enable the business to set up a governance structure that only allows an expenditure if a designated group of people authorize the transaction. It offers an expense control mechanism for businesses.
- Transparency: The blockchain can verify the transactions and balances, offering unmatched accounting transparency.
Understanding Bitcoin and Blockchain
Blockchain is a decentralized ledger for all transactions on a peer-to-peer network. So, instead of a middle man or bank or any central authority that maintains the ledger for transactions, the users on the network act as the ledger and confirm transactions.
Bitcoin is a cryptocurrency that leverages this blockchain technology. Blockchain, the underlying technology, can have many more potential applications than cryptocurrencies.
What is a Bitcoin Worth?
This is not an easy question to answer. The opinion on the ‘true value’ of bitcoin varies from $0 to more than a million dollars. In 2020 itself, we have seen the price of bitcoin fluctuate from about $5,000 to $24,000 per bitcoin within a matter of months. The price of bitcoin changes every second, 24 hours a day, 7 days a week. In 2021, Bitcoin has surpassed the $65,000 mark as well.
Bitcoin Price Today
Bitcoin Price in December 2020
[bitcoin price chart screenshot taken on Dec 24, 2020, yahoo finance]
Bitcoin Price in April 2021
[bitcoin price chart screenshot taken on April 14, 2021, google finance]
Bitcoin Price in October 2021
Bitcoin Price in September 2022
[bitcoin price chart screenshot taken on Sept 9, 2022, google finance]
Bitcoin Price in June 2023
[bitcoin price chart screenshot taken on June 9, 2023, google finance]
Read Also: What is an NFT?
Bitcoin Fear and Greed Index
The cryptocurrency market, like the stock market, is speculative in nature and is highly influenced by the sentiment of investors. The Bitcoin Fear and Greed Index encapsulates the investor sentiment of Bitcoin investors. Investors do not want to miss out on a bitcoin bull run (i.e. when the price goes up almost every day) and buy at high prices, and then on the flip side, the investors tend to panic sell when the price of bitcoin starts falling.
The Bitcoin Fear and Greed Index is an indicator that investors can use to see if the other investors are selling because they fear losses (and it may be a good opportunity for long-term believers in bitcoin to buy). The Index can be used by investors to gauge the greed of other investors who are buying at higher prices every day, no matter how high the prices go, and use this information to sell and book some profits before a price correction occurs.
The Bitcoin Fear and Greed Index is a scale that goes from 0 to 100, with 0 being Extreme Fear, and 100 being Extreme Greed. As we discussed before, “Extreme Fear” or numbers closer to 0 could suggest a buying opportunity, and “Extreme Greed” or numbers closer to 100 could suggest a selling opportunity.
Bestseller Personal Finance Books
Please note: The Bitcoin Fear and Greed Index is just an indicator and like other signals and technical analyses, it does NOT guarantee a future price movement of Bitcoin. You may consider using it to make decisions, but please inform yourself of the limitations and do your due diligence before investing.
The Bitcoin Pizza Story
On May 22, 2010, Laszlo Hanyecz used 10,000 bitcoins to buy 2 pizzas. At current market prices of $23,500 (December 2020) per bitcoin, those 10,000 bitcoins would be worth $235,000,000. Yes, $235 MILLION. Back then, while ordering the pizzas, they were worth $41 only.
At October 2021 prices of $62,000 per bitcoin, those 10,000 bitcoins would be worth $620 MILLION.
How to Buy Bitcoin
Bitcoin can be purchased at a number of locations- from bitcoin ATMs to online investing apps such as Robinhood, Webull, Coinbase, eToro, etc. Here is a list of 5 easy online ways to buy Bitcoin. Keep in mind cryptocurrency prices can be very volatile. Trading cryptocurrencies may not be suitable for investors with a low-risk appetite.
Buy Bitcoin on Binance
Binance is the largest cryptocurrency exchange in the world.
Binance allows users to buy and trade multiple cryptocurrencies including the popular ones such as Bitcoin, Ethereum, Litecoin, Cardano, etc. Binance also allows trading cryptocurrency ‘futures’ and leveraged tokens for advanced users. There are tutorials available on the app itself to make the users aware of the trade types and risks involved.
Binance also has the options for Staking and Savings accounts, using which, users can earn some passive cryptocurrencies while they hold them.
Buy Bitcoin on Coinbase
Digital Currency Exchange that allows investors to buy Bitcoin, Ethereum, Litecoin etc. However, unlike Robinhood and WeBull, buying and selling bitcoin on Coinbase is NOT commission-free.
The fees are around 4% for buying bitcoins via debit cards. Read pricing and fee structure at Coinbase for details.
Buy Bitcoin on Robinhood
The popular investing app, Robinhood, allows investors to buy bitcoin, commission-free, for as little as $1.
Buy Bitcoin on WeBull
WeBull started allowing bitcoin purchases in November 2020. You can buy Bitcoin, Ethereum, Bitcoin Cash, and Litecoin on WeBull with a $1 minimum, commission-free.
Buy Bitcoin on eToro
eToro provides tools for technical analysis for more than 40 cryptocurrency pairs. With quick order executions and no cap on daily withdrawal amounts, eToro might be the perfect fit for your cryptocurrency trading strategy. eToro also offers a virtual portfolio where you can trade without risking any money. It’s good to test the waters for new investors.
Buy Bitcoin on Paypal
Bitcoin can also be purchased on Paypal for as little as $1. Paypal ran a promotion for buying and selling bitcoin commission-free in 2020, but transaction fees were introduced in Jan 2021. Keep an eye on Paypal, they might re-run the promotion in the future as well!
There are many other cryptocurrency exchanges also where you can buy and sell bitcoin and other cryptocurrencies.
Buy Bitcoin on Moonpay
Moonpay is available in more than 150 countries, and you can buy Bitcoin on Moonpay using your local bank account in local currency or a credit card as well. You can purchase bitcoin worth as little as $30.
How to Get Bitcoin for FREE
Lolli is a website that gives ‘cashback’ to users shopping at stores (when you click and browse via Lolli) in the form of bitcoins. For example, you can go to booking.com via Lolli.com and get your vacation booked, and earn some bitcoin as ‘cashback’.
Sign up at Lolli using the link below to get FREE $10 worth of Bitcoin (for new users).
So, Should I Invest in Bitcoin?
We have talked about the advantages of bitcoin in an earlier section, but the investors speculate on the dollar value of bitcoin. Currently, [December 2021] trading at well over $48,000 per bitcoin, does bitcoin have more room to grow? The answer to that varies on a BROAD spectrum. From some experts suggesting the intrinsic value of a bitcoin is $1M+ to other experts saying it is worthless, there is no easy prediction on the bitcoin price movement in the future.
With Paypal allowing bitcoin as a payment method to its users, many believe bitcoin can become mainstream in the coming months. Institutional investors have also acquired a stake in bitcoin in the recent past and given a further boost to the theory of the HODL team who believe in buying bitcoin and Holding On for Dear Life. HODL was initially a typo (for HOLD) on Reddit, and has since then become a celebrated term for bitcoin believers!
Whether you decide to follow one school of thought (bitcoin is worth $1M) or another (bitcoin is worthless), please be cognizant of the risk of losing capital before investing in bitcoin, and invest only what you can afford to lose.
Don’t want to risk hard-earned money on bitcoin? get bitcoin FREE by signing up here.
Read also: What is NFT, Best Solana NFT Marketplaces
Should I invest in Bitcoin or S&P 500?
Bitcoin vs S&P 500 – 1 year horizon
S&P 500 has given investors a return of about 12% over the last 1 year (Christmas 2019 to Christmas 2020), whereas Bitcoin has risen 211% in the same period.
Bitcoin vs S&P 500 – 2 year horizon
S&P 500 has given investors a return of about 52% over the last 2 years, whereas Bitcoin has risen 483% in the same period.
Bitcoin vs S&P 500 – 5 year horizon
S&P 500 has given investors a return of about 79% over the last 5 years, whereas Bitcoin has risen an incredible 5,511% in the same period.
Should I invest in Bitcoin or Shopify?
Bitcoin vs Shopify – 1 year horizon
In the last 1 year, Shopify (SHOP) stock has risen 211%, showing approximately the same growth as bitcoin.
Bitcoin vs Shopify – 2 year horizon
In the last 2 years, Shopify (SHOP) stock has risen 943%, beating Bitcoin’s growth of 482% in the same period, by almost a factor of 2!
Bitcoin vs Shopify – 5 year horizon
In the last 5 years, Shopify (SHOP) stock has risen 4,939%, falling just short of Bitcoin’s growth of 5,502% in the same period!
Should I invest in Bitcoin or Tesla?
Bitcoin vs Tesla – 1 year horizon
Tesla stock (TSLA) beat Bitcoin (BTC-USD) in the 1-year investment horizon. While Tesla stock grew by almost 650%, Bitcoin price grew only about 211% between Christmas 2019 and Christmas 2020.
Bitcoin vs Tesla – 2 year horizon
Bitcoin vs Tesla – 5 year horizon
In the last 5 years, Bitcoin has seen a huge surge in its price. Bitcoin (BTC-USD) handsomely beat Tesla stock (TSLA) in the 5-year investment horizon. While Tesla stock grew by an impressive 1,288%, Bitcoin price rose by 5,511%!
Bitcoin vs MFAANG Stocks
Bitcoin vs Apple vs Netflix
Apple and Netflix are two of the favorite stocks of tech investors. Bitcoin has beaten the returns of Apple and Netflix over the 1, 2, and 5-year horizons.
Bitcoin vs Amazon
Amazon’s stock price growth story is very impressive in itself. However, Bitcoin has beaten the Amazon stock (AMZN) over the 1, 2, and 5-year horizons.
Should I invest in Bitcoin or Nio?
Bitcoin vs Nio – 1 year horizon
Nio has often been termed China’s Tesla. In the last 1 year, Nio stock (NIO) has risen 1,645%, while Bitcoin rose 211%. Nio has beaten Bitcoin significantly.
Bitcoin vs Nio – 2 year horizon
In the last 2 years, Nio stock (NIO) has risen 683%, while Bitcoin rose 482%. Nio has managed to beat Bitcoin over the two-year period as well.
Since Nio had its IPO and got listed on the stock market in September 2018, we do not have Bitcoin vs Nio comparison available for the 5-year horizon.
Bitcoin vs Ethereum: Showdown of The Two Most Popular Cryptocurrencies.
Bitcoin vs Ethereum – 1 year horizon
Ethereum (ETH) gained 379% in price in the last year, compared to Bitcoin (BTC) that gained 203%
Bitcoin vs Ethereum – 2 year horizon
Ethereum rose 427% in the last 2 years, falling just short of Bitcoin’s 486% growth over the same period.
Bitcoin vs Ethereum – 5 year horizon
Over the last 5 years, Ethereum has significantly exceeded the returns of Bitcoin. Ethereum rose an astounding 71,969% to beat Bitcoin’s already impressive 5,541% growth.
Read also: How To Buy Land In The Metaverse
IMPORTANT: Understand the Risks Before Investing in Bitcoin
While the recent momentum in the price of bitcoin has generated a lot of excitement, past performance does not guarantee future results. Investors must do due diligence and understand the risk of high volatility and losing capital before investing.
A safe way to play the bitcoin game is to earn it for FREE! Join Lolli and earn FREE bitcoin when you make purchases at your regular merchants such as Booking.com, Sam’s Club, Harry’s, 1800-Flowers and many more! New users can also get $10 worth of Bitcoin for signing up and making their first purchase!
Disclosure: We have investments in BTC, ETH, LTC, S&P500 (SPY, VOO), AAPL, AMZN, NFLX, TSLA, SHOP, NIO mentioned in the article.
Read more
Popular Topics: Stocks, ETFs, Mutual Funds, Bitcoins, Alternative Investing, Dividends, Stock Options, Credit Cards
Posts by Category: Cash Flow | Credit Cards | Debt Management | General | Invest | Mini Blogs | Insurance & Risk Mgmt | Stock Market Today | Stock Options Trading | Technology
Useful Tools
Student Loan Payoff Calculator | Mortgage Payoff Calculator | CAGR Calculator | Reverse CAGR Calculator | NPV Calculator | IRR Calculator | SIP Calculator | Future Value of Annuity Calculator
Home | Blog
Our Financial Calculator Apps
Page Contents
