Few things can capture an investor's imagination like FOMO, especially when that fear of missing out is rooted in six-figure-profit stories. Such may be the case for investors who witnessed bitcoin cross the $100,000 mark for the first time on December 5.
As market forces would have it, recent price action has brought the world's first and biggest cryptocurrency back to a level where we can talk about "buying when there's blood in the streets."
Still, even with the recent correction, if you've been on the bitcoin bandwagon for a good length of time, you're probably singing a merry tune.
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But if you're among the multitudes who have shied away from what remains a volatile asset, perhaps you saw its recent peaks and started questioning your portfolio choices.
Has this bandwagon crossed the river for good? Is there still time to jump aboard?
Is it too late to invest in bitcoin?
Bitcoin past, present and future
Before you can determine if bitcoin is a good investment today, you need to be sure you understand what you're getting into.
Bitcoin is a decentralized asset, meaning there is no government or bank acting as a central authority overseeing it. This puts it in a weird regulatory grey area that also makes it susceptible to fraud and scams.
For example, in 2011, Mt. Gox, the largest bitcoin exchange at the time, was hacked. The hackers made off with millions of user funds, but even investors not directly hit took a blow when the price of BTC plummeted more than 90%.
This is important for prospective investors to keep in mind: Bitcoin can fall as fast as it can rise — if not even faster. Indeed, we just witnessed the largest liquidation event in its history on February 3.
That said, bitcoin has continued to rebound from each of these falls. It soared to new six-figure highs as President Trump kicked off his second term after previously pledging to make the U.S. "the crypto capital of the planet and the Bitcoin superpower of the world."
And it's not only the U.S. that's showing increased interest.
"Across the globe we are beginning to see federal banks purchase BTC as a reserve currency and there is massive momentum globally to establish legislative and regulatory standards," says Robert Krugman, chief digital officer at Broadridge Financial Solutions. "The next several months should be quite telling."
Bitcoin will probably continue to be a rocky ride, but experts say the chances of it going to zero are unlikely.
"Too many large institutions own cryptocurrencies," says Dan Casey, founder of Bridgeriver Advisors and Panic Proof Retirement. "Whether you understand the blockchain or not, cryptocurrency is here to stay."
Should you invest in bitcoin today?
So the question remains: Is it too late to invest in bitcoin?
"I absolutely do not think it's too late to invest in Bitcoin," Casey says. "With the SEC chair, Gary Gensler, stepping down and a very pro-crypto president taking office, Bitcoin should continue to do very well."
But there are caveats to consider. For instance, don't expect the same outsized returns, says R.J. Weiss, a certified financial planner and CEO of The Ways to Wealth. This, coupled with the fact that bitcoin is likely to continue being highly volatile, means "today's risk-reward ratio is much different than it was for early adopters."
Most advisors recommend limiting your investment in bitcoin to 1% to 5% of your net worth, he says. The real question to ask yourself isn't if now is a good time to invest in bitcoin. Rather, your focus should be on whether it "has a long-term place in your portfolio, depending on your goals and risk tolerance."
If a 50% drop will make you panic, this likely isn't the investment for you.
How to invest in bitcoin
If you've decided to invest in bitcoin today, the next question is how to do it. How do you invest in an asset that's trading around $100,000?
Luckily, modern finance is once again your friend. You can start investing in bitcoin with as little as $1 through a broker such as Fidelity or exchange that lets you buy bitcoin tokens on a per-dollar basis.
However, you'll need a place to store those coins, typically with a crypto wallet or with an exchange. Both of these methods are susceptible to hackers and scams.
Another way to invest in bitcoin is through a bitcoin ETF. These funds are designed to track the price of bitcoin, and they trade just like any of the best ETFs.
They can be easier and more familiar than buying bitcoin tokens. And they can even hold a variety of different cryptocurrencies. You also won't need to store your crypto keys in a wallet or on an exchange.
Bitcoin ETFs let you participate in bitcoin's price appreciation (or depreciation) through a more secure channel – but know that you don't own actual BTC. You own shares of the fund. These funds also come with expense ratios, so ensure the benefits outweigh the costs.
Whatever method you choose to invest in bitcoin, have an exit strategy in mind.
"Given Bitcoin's volatility and cyclical peaks, it may be wise to take profits gradually or begin exiting well before the projected cycle top," says Utkarsh Ahuja, founder and managing partner of Moon Pursuit Capital.
Ahuja notes that "institutional investors, well-versed in Bitcoin's cycles" will trade in a way that increases risk for retail investors who try to time the market.
It's important to put the same level of thought and care into how and when you'll sell as you do into whether you should invest in bitcoin in the first place.
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