It doesn’t get any bigger than Bitcoin. As the grandfather to cryptocurrency, the leading and most expensive USD equivalent coin on the market, Bitcoin reigns supreme over all else (and it likely always will).
Investing in crypto means investing in Bitcoin, because if you don’t hop on the bandwagon with the largest player in the game, then what will your portfolio really look like?
Buying Bitcoin is still a good investment in 2022, and we’re going to explain why.
How Much Money Can You Make With Bitcoin?
While Bitcoin has been the money-making machine of the cryptocurrency world, in order to really profit off of it, you would have to have bought-in years ago.
But does that mean there’s no money to be made in Bitcoin? Not exactly. While 90% of all Bitcoin has already been mined and is in circulation somewhere, the prices are only going to rise.
As it becomes regulated and recognized by more countries as a valid form of payment, it will continue to rise in price. The less it is traded, the higher the demand will be, but it’s definitely a rough barrier-to-entry in its current state.
While Bitcoin is on the way up, it’s difficult to get into at this point. Mining Bitcoin also comes with its own difficulties, which we’ll talk about later on in the article.
They may not be as exciting, but they also stand to make long-term gains just like Bitcoin did.
Is Investing in Bitcoin Risky?
Yes, and cryptocurrency investment is risky. You have to realize that cryptocurrency follows the trends of the stock market and world events.
In August of 2022 at the time of writing, the cryptocurrency market took a hit bringing it to its lowest year-to-date capitalization due to escalating global conflicts.
Because it’s touchy, to put it nicely, cryptocurrency can absolutely tank if interest is lost. It’s not like it has the same time-tested track record as the US stock market or the price of gold through the ages.
It’s new, it’s volatile, and it’s something that has made millionaires, but it’s also cost people millions of dollars as well.
The odds that cryptocurrency ever completely bottoms out is minimal, but because these coins aren’t tied to anything like businesses (stocks) or physical goods (gold, real estate), all it would take is lost faith in the market to send it spiraling.
The main threat to cryptocurrency comes from hackers, and thankfully, there are plenty of white hat hackers that have helped companies like Coinbase actually patch up security issues that could have been catastrophic.
But in theory, all it would take is one nefarious hacker to exploit a single major cryptocurrency exchanges (where people keep their money instead of in crypto wallets most of the time).
What About Your IRA?
Bitcoin can exist in the container of your self-directed IRA, along with other assets. There are companies that specialize in cryptocurrency IRAs, some of which we have reviewed already, and they offer excellent ways to put crypto into cold storage in your IRA.
As with any investment for the future, Bitcoin should not be the leading aspect of your IRA. It can be a great tool to diversify your IRA, especially if you can liquidate it down the line and be comfortable for the rest of your days with the profits.
Should You Invest in Bitcoin?
While Bitcoin is the lowest volatility of any cryptocurrency out there, crypto is still highly volatile. You should only invest in Bitcoin if you’re comfortable with losing 100% of the money that you put up for it.
Are you actually going to lose that money? It’s not likely, but it’s not impossible. We never thought the housing bubble was going to pop, but low and behold, it did.
The same goes for the dot com crash, and the same could happen from crypto (and not just because it had a rough start in 2022 with geopolitical tensions rising).
There should be healthy skepticism with cryptocurrency investments, but yes, Bitcoin is worth investing in (especially before the prices soar when regulation hits later in 2022).
If Bitcoin is regulated and the prices rise as we all anticipate, it could also pave the way for other cryptocurrencies to follow suit and rise in price.
Bitcoin Investing FAQ's
Technically, Bitcoin can be created through mining, and miners are rewarded with Bitcoin for completing difficult cryptographic transactions on their hardware.
That’s how Bitcoin keeps being created, but since Bitcoin is a decentralized global currency, it doesn’t really have a profit margin like a stock or real estate trust.
There’s no one individual who makes money off of Bitcoin; the entire blockchain benefits from the transaction model.
Bitcoin was invented by Satoshi Nakamoto with the purpose in mind of becoming more valuable over time. Because Bitcoin’s source code identifies it as finite, it becomes a commodity that can’t just endlessly be created.
Where would the value be in that? However, there are other coins like Ethereum that actually have an unlimited supply, but still work on blockchain.
There’s a more complicated web of information to identify why other coins are infinite, but Bitcoin being finite is what has helped soar its value and its difficulty to mine.
You can still mine Bitcoin. Mining Bitcoin will be possible for over one-hundred years from the point of writing this article before it hits the 21,000,000 coin market capitalization, but along that road, the amount of Bitcoin you receive will be halved over and over again, until it’s just not worth it.
Even then, it’s estimated that it would take around $35,000 in electricity costs alone to generate a single Bitcoin right now.
Mix that with the fact that you have to buy and cool mining rigs (GPUs are still in a shortage at the time of writing this article nearly two years after the start of the COVID-19 pandemic), so it’s more expensive than it’s actually worth at this time.
You would have had to mine Bitcoin in 2012-2017 for it to have really been worth it.
Cold storage, sometimes referred to as a cold wallet, is where Bitcoin code is stored offline. This means that in the event that your crypto wallet was hacked, the code for your specific and unique Bitcoin would be put into offline storage.
Imagine a big hard drive that you would store your precious files on so they couldn’t be susceptible to hackers on your own PC, but just imagine it’s Bitcoin code instead. That’s essentially what cold storage is.
If your Bitcoin is stored in your wallet, you can transfer it to a marketplace to sell it. Once you do, the cash can be transferred directly into your bank account, where it should take 2-3 business days for it to become available to you.
Every exchange has different procedures and can take different times depending on your specific transfers and account, but ultimately, this is how you sell your Bitcoin and take it out in your local currency.
Coinbase is a secure platform that makes it easy to buy, sell, and store cryptocurrency like Bitcoin, Ethereum, and more.