In the following blog section, I will share my opinion about adding Bitcoin to your investment portfolio. Also, I am going to address the recent decrease of $150 billion in the Bitcoin Valuation.
Diversification is a practice to distribute your investments among financial instruments to balance volatility and maximize your returns. It is not something new! But still, people struggle to diversify their investments.
You must have heard the saying: “Do not put all your eggs in the same basket.” Yes, it is one of the simplest ways to explain investing.
Simple it may seem, but still, most people struggle for it!
In this article, I am going to share my thoughts on investing and diversification. Also, I am going to share my analysis on why you should add Bitcoin to your portfolio.
Understanding: Bitcoin – The Biggest CryptoCurrency
Bitcoin is a decentralized form of currency. It does not require any bank, and the money is transferred via the peer-to-peer Bitcoin network. The current valuation of Bitcoin is around $43,048.10.
In February & March 2021, Bitcoin crossed an all-time high valuation of $60,000. Ever since then, cryptocurrency market valuation has been going up & down. People who had invested initially in Bitcoin have earned staggering returns.
Currently, there are more than 5 million active users on the Bitcoin network and still counting. People around the world are considering this as one of the best financial instruments. But many faced heavy losses, as they thought of it as a get-rich-quick scheme.
Yes, Bitcoin is highly volatile, but here is when diversification jumps in! You can diversify & invest some money in less volatile investment options such as blue-chip stocks, real estate, etc. On the other side, you invest some in Bitcoin to balance the volatility!
Here are some reasons why you should consider adding Bitcoin to your investment portfolio.
An Opportunity to make high profits in the short term
Bitcoin has the highest potential to become your best crypto investment ever. If you are looking for short-term gains, you can make more significant profits over time. People who invested in Bitcoin in oct-dec 2021 made a staggering return of 100% in Feb 2021. All these returns in such a short duration of 3-6 months are unmatched. Keep in mind that this may not happen with you, but if you have a high-risk appetite, you buy at a lower price and sell it for profit.
High Future Potential
Bitcoin currency has more than 5 million users. People have accepted Bitcoin as a currency for payment around the world. Hence, it is pretty evident that the currency will continue to rise amid volatility. Right now, many governments have not approved of using Bitcoin as a currency. But, as the money grows, governments have to develop a solution to make Bitcoin an official mode of payment.
Highly Reliable compared to other Cryptocurrencies
Bitcoin started a revolution to give cryptocurrency its due attention! Compared to other cryptocurrencies, Bitcoin is more reliable. It has been around for the longest time, and it is superior to others. Bitcoin’s network is more stable, and the infrastructure is a lot better. There are many efforts to protect all its users, and it is the safest cryptocurrency on the market! Hence, Bitcoin is the undisputed king in valuation, and no other cryptocurrency comes close to Bitcoin.
Is it the right time to invest in Bitcoin?
Now that I have explained the top three reasons why you should invest in Bitcoin. Let’s look at a recent incident, where more than $150 billion was wiped out from the Cryptocurrency market after China’s claimed “Bitcoin Ban.”
The China Bitcoin ban is not something new. Over the past eight years, they have imposed multiple regulatory laws over cryptocurrencies. In 2013, China banned Bitcoin as a medium of transaction, and it was recognized as virtual property. Later in 2017, countries like South Korea started using crowdfunding techniques to raise funds for cryptocurrency mining. On the other side, China again imposed a ban on all cryptocurrencies. They also warned all financial institutions not to engage in any trading, settlement, insurance, or anything else related to cryptocurrency. Irrespective of all these, many Chinese businesspeople kept their mining farms running. To stop this, China is imposing new restrictions.
Also, one of Bitcoin’s most prominent investors in Tesla has sold their significant chunk of investment. They have refused to buy more until the Bitcoin network consumes less energy. All this combined up, and the valuation of cryptocurrencies went down by $150 billion! It is still 30% below its peak valuation of $2.6 trillion recorded in May 2021.
Big Question: Should you invest in Bitcoin?
As a strategic investment advisor for the past 24 years, I would give you a straightforward answer as a yes!
You should invest in Bitcoin but remember diversification. It is an important aspect that will help you to manage volatility & get better returns.
To make this simple, I am going to put an example:
Let’s say that you have about $100,000 to invest. You can diversify your investment in three groups based on volatility:
Group 1: Medium Volatility – Stable returns
In this group, you put about 50-60% of your investments. In this case, it is about $50,000-60,000 invested in blue-chip stocks/blue-chip mutual funds/real estate. Here you invest for the long term and buy stock of companies that are market leaders. You can also research and find properties to invest in. These might not be the most luxurious properties. But you have to consider whether you can sell this house at a profit in the future.
Group 2: Low Volatility – Better than Savings Account
It is going to be the group where you put 20-30% of your money. Here it comes at $20,000-$30,000. Invest in a liquid fund or a debt fund generating 7-8% return per annum. These financial instruments are less prone to risk, and your money can be liquidated at any time.
Group 3: High Volatility – Highest Returns
This group is dedicated to high-risk investments, and you can put 10-20% of your assets here. Here you get an opportunity to invest $20,000. You can put $10,000 to some value stocks and put another $10,000 in Bitcoin. You can entirely invest the whole sum in Bitcoin, as it depends on your risk appetite.
The above mentioned is an example of how you can form your investment strategy. Do not attempt to follow this blindly!
Constantly assess your investment strategy based on your future needs & requirements.
Diversification is all about balancing the risk and returns at the same time. The right combination can help you keep your investments steady during all the crashes & lows of the market.
Summing it up, this was my blog about cryptocurrency: whether you should invest or not?
In case if you have any inquiries regarding investing or investments then please feel free to contact me here.