Friday, April 12, 2024

Bitcoin Risks, Bitcoin Rewards


Bitcoin Risks, Bitcoin Rewards

Bitcoin risks versus Bitcoin reward? It’s a big question going into the new year. I’ve noticed a trend in referencing Bitcoin as a cryptocurrency. It’s a name that (so it seems to me) has grown over the years to represent ALL cryptocurrencies.

The way facial tissue is often known simply by the brand name Kleenex, Bitcoin does not represent all cryptocurrencies, but the name is often used to describe it. And why are people talking about Bitcoin in this way? Because some investment companies are sounding alarms about the risks of investing in cryptocurrency in 2021.

Is Bitcoin Risk Worth The Investment?

The Motley Fool is one of those, labeling cryptocurrency as a very risky investment in the new year. But why is this long-time investor-friendly company sounding those alarm bells? For a certain segment of cryptocurrency investors, I notice some of the same motivations. One? Zero barriers to entry.

What does that mean? An article on the Motley Fool official site states a complaint, “All it takes is some time and money to develop blockchain with or without a tethered digital currency.” But for some motivated investors, that’s a plus and not a negative.

Another complaint from the same article highlighting Bitcoin risks includes this; “Keep in mind that owning bitcoin isn’t the only way you can gain exposure to this dangerous investment. The Grayscale Bitcoin Trust owns 607,038 bitcoin and essentially acts as a basket fund that investors can buy.”

Know Your Risk Before You Invest

I hopped over to the Grayscale Bitcoin Trust official site, which describes itself as, “…a traditional investment vehicle with shares titled in the investor’s name, providing a familiar structure for financial and tax advisors and easy transferability to beneficiaries under estate laws.” Certain companies, like Grayscale, increase your ability to invest in Bitcoin. Grayscale is new to me at press time, and intriguing.

But why do companies like Motley Fool sound the alarm? That article I quoted above? It ends with the following quote discussing Bitcoin; “ It’s driven by short-term emotions, technical analysis, and misinformation about its scarcity, utility, and long-term potential. It’s the one investment you should strongly avoid in 2021.”

But cryptocurrency investors–at least SOME of them–would argue that in part, those objections are aimed at long-term investors looking for markets to put a substantive chunk of their money into. Is THAT what Bitcoin investors are doing?

Or are these investors putting money into Bitcoin more experimentally, even at volumes a typical investor might shy away from? Some people really do have money or access to ways to invest without substantial risk to the entire portfolio.

But there are, no doubt, SOME who DO foolishly risk a major loss of funds by putting the money they cannot afford to lose into Bitcoin, and in THESE cases, the Motley Fool investment advice is spot-on and should DEFINITELY be taken.

If you look to measure Bitcoin risk versus the rewards, the first question you should ask yourself is “Can I afford to lose this money?” If the answer is no, you should ask a lot more questions about ANY investment opportunity and NOT just Bitcoin.

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