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Bitcoin investing - a good bet or risky punt?

Bitcoin Investing: A Good Bet or just a Risky Punt?

Is Bitcoin going to the moon or to zero?

Cryptocurrencies are again becoming a hot topic but opinions are very polarised. The buzz around Bitcoin is starting again since making double digit gains in 2020 and thought it would be good to evaluate my position on this.

What do I really think about Bitcoin? And why did I invest around 10% of my net worth into cryptocurrencies with the hope that it provides a 2-5x return?

In a few weeks from when this article was published the 3rd Bitcoin Halving is taking place. This is huge and if history plays out we’ll see Bitcoin’s price dramatically increase.

The aim of this post is to consolidate what I know about the crypto space, technology and why I invested and when my longer-term strategy is.

I should make clear that I am no cryptocurrency or blockchain expert but have invested into Bitcoin, Ethereum, Litecoin, Ripple and OMG over the last few years. I have invested only what I can afford to lose should it go to zero.

Bitcoin Gold 2.0?

My Views on Bitcoin

First off it’s useful to know where I stand with Bitcoin.

Do I foresee Bitcoin, or actually any cryptocurrency today, as a means for transactional payments?

In its current form, I really doubt it.

I considered offering Bitcoin as an alternative payment for my e-Commerce store but decided against it as I believe the uptake would be simply too low to worry about.

And this is the issue.

I am sold on the use case of cryptocurrency but don’t see the point in offering this as a alternative payment solution.

I know that some services work well using cryptocurrency as a transactional payment, for example, for can buy Gold through BullionStar using Bitcoin.

At this time though, I see Bitcoin predominantly as a digital wealth storage, a digital alternative to Gold if you like.

I have never been tempted to invest in ICOs and concentrated 99% of the time buying and holding Bitcoin, and in 2017/2018 Ethereum too.

Bitcoin a form of Gold 2.0?

Bitcoin has been compared to gold, and even considered to be the new and improved version gold. Hence the term Gold 2.0.

Both Bitcoin and Gold are in finite supply.

There will ONLY be a maximum supply of 21 million Bitcoin available. Estimates suggest that so far 18 million bitcoins are in existence, but not all of these are usable as it’s believe a sizeable chunk (4 million) have been lost.

How many Bitcoin in circulation

Source: check out How many bitcoins are there

Bitcoin is the first asset ever to have a 100% predictable monetary supply. This is huge and is different from any other asset, even Gold.

Bitcoin Trading 101

As I mentioned already, I don’t trade cryptocurrencies at all. I know a few guys who do, but I have bought and sold in the early days when I dabbled with trading Litecoin, around 2017.

Most friends who have traded cryptocurrencies got out mostly due to losses. I know one person who did very well in 2013 when his holding went from 50 cents to $50, turning his Bitcoin into a seven figure profit.

Just imagine what the value would have been worth now! (he tries not too!).

I have bought and sold cryptocurrencies in the early days when I dabbled with trading Litecoin, around 2017. I managed to make a 10x return when I sold out of Litcoin, then used this profit to buy Bitcoin.

This may sound like a shrewd play on my part, but I used the profit to invest in a few bitcoin when the price was at the high price of $16k. Looking back from today this looks far from a smart investment, but in the future who knows.

Bitcoin trading

Inside a Bitcoin Mining Operation

For anyone new to Bitcoin it can be hard to conceptualise how this decentralised network is maintained and works 24/7.

I found this YouTube video, which gives a great idea of what a large Bitcoin mining operation looks like.

Upcoming Bitcoin Halving

In around 14 days there is going to be possibly one of the biggest events in Bitcoins relatively short history.

This is the much anticipated Bitcoin block reward halving of 2020.

In Bitcoins history the block chain halving has happened only twice before, in 2012 and in 2016, each time triggered a bitcoin bull run. In 2016 this saw Bitcoin reaching the high of $20k per bitcoin.

The significance of the bitcoin halving is a big drop in supply that has an inflationary impact on the prices. This is what is causing cryptocurrency speculators to get excited, me too.

The reward for mining bitcoin is 12.5 BTC per block mined and on average one Bitcoin is mined every 10 minutes. So, each day 1800 Bitcoin are “minted” into existence.

After the halving the reward will be halved (hence the name) to 6.25 BTC per block, which means miners will lose out. Then each day the number of bitcoin mined each day will be 900.

This will trigger a massive supply shock to the Bitcoin ecosystem.

Even with the same demand for Bitcoin and the supply side drop many believe (and I do too) that the price of Bitcoin will increase.

Even with the same demand for Bitcoin and the supply side drop many believe (and I do too) that the price of Bitcoin will increase. Equally though we could see big fluctuations in price as cryptocurrencies have been known to demonstrate.

The question is, how much will it increase and will Bitcoin reach all-time highs?

For more detailed information on the Bitcoin Halving check out this video from Altcoin Daily.

Interestingly the video from Altcoin Daily outlines why he believes we will see a bull run not immediately after the halving but in 6-12 months.

To find out more about the Bitcoin halving check this page out.

Why does Bitcoin halving occur?

After every 210,000 blocks, Bitcoin goes through a process called “halving.” This mechanism was integrated into the protocol by Satoshi Nakamoto himself.

After a protocol goes through “halving,” it cuts the supply of new Bitcoins in half, halving the miner’s block production rewards, as well.
Source: Blockgeeks.com

Bitcoin Speculators (Bulls)

Over the last few years there have been some serious speculating in terms of Bitcoin prices.

These are gone in both directions with respected professionals and personalities pricing Bitcoin at $100k to a million dollars, all the way down to zero.

With such a spread in the future prices in Bitcoin

I was talking about the general optimism around Bitcoin and well cryptocurrency with my friend Dirk (I interviewed him before about his 6 Figure Inc course, check it out here).

One of the most well-known Bitcoin bulls is none other than Billionaire Venture Capitalist Tim Draper. He is quoted as seeing Bitcoin valued at $250,000 by 2023, which would of course be great news for all HOLDers out there.

Interested to know more about the world of cryptocurrency?

I have recently become a member of Intelligent Cryptocurrency, which is ran by my good friend Dirk. Yes, the guy I just mentioned above.

This is a private, members only chat group where you can get daily updates on all things crypto related. It’s a paid membership though so only for those who value the information and have the means to take advantage of it.

Check it out here https://intelligentcryptocurrency.com/.

Bitcoin Naysayers (Bears)

There is no denying there are some significant challenges to Bitcoin, which has caused a number of people to doubt it’s value and use case as a true asset class or form of alternative payment.

This is one of the main arguments against Bitcoin.

Is it a safe and reliable store of wealth, trading or payment alternative?

The cost of transactions is currently too high to make micro-transactions viable but it’s possible for larger value transactions.

Another big challenge is supporting the blockchain and computing power in terms of energy. Mining operations have huge energy demands that can make them environmentally unsound.

That said, the mining operation shown in the YouTube video above uses hydro power to support its massive energy requirements.

Even if decentralisation there are possible failure points for Bitcoin. The main one being the centralisation of large mining operations that could in effect become mining cartels.

These points have only skimmed over the surface of the challenges ahead for Bitcoin. I haven’t even touched on the legal and tax implications, which is way out of the scope of this article.

Cryptocurrency Challenges

  • Legal/compliance issues – It’s come a long way but it still needs full legal compliance in every jurisdiction. In many places the legality is still vague or uncertain.
  • Insurance/safety – It’s getting better but it still needs to get safer for people to use, what happens in case of hack etc.
  • Technology – It’s become easier, but it’s still not super easy for most people to actually buy and use BTC. Still complicated and confusing to many
  • Education – How to use it, people need to know and be educated on it
  • Adoption – This is a catch 22, the more we use it, the more it will be accepted, but more people need to use it for more to accept it

Bottom Line: Good Bet or Risky Punt?

Ultimately I believe the upside is way more attractive than the downside, which is why I have invested currently 10% of my net worth into cryptocurrency.

I don’t trade Bitcoin or use them for any type of transactional payments, I simply buy and hold for the medium to long-term.

Now, there is a risk I lose the lot if it goes to zero. Do I think it will? In my mind there is a greater than 50% chance that it won’t.

So, in my personal opinion (and it’s my opinion but financial advice) it’s worth holding some cryptocurrency to see how this fares in the future. As such, I believe it’s a GOOD BET and will see prices significantly increase in 2020/2021.

What are your views on Bitcoin? Do you invest or simply stay away due to uncertainty or seeing this digital asset class as super risky? I am keen to know your thoughts, please comment below.

Further reading

  • https://intelligentcryptocurrency.com/
  • https://www.bloomberg.com/opinion/articles/2013-05-30/bitcoin-the-perfect-schmuck-insurance
  • https://www.forbes.com/sites/billybambrough/2020/01/06/one-of-the-biggest-bets-in-bitcoin-revealed-to-be-a-ruse/#5352f90949e5
  • https://hackernoon.com/what-will-bitcoin-look-like-in-twenty-years-7e75481a798c
  • https://interestingengineering.com/is-bitcoin-a-good-investment-and-how-is-it-valued
Adam Author

About the LifeHacker Guy

Hi, I'm Adam the founder of the LifeHacker Guy.

I have a First Class Honours degree in Sports Science from Brighton University, specialising in exercise physiology and nutrition. In my youth I was a competitive Triathlete and long-distance runner placing top 10 in most triathlon races I completed.

Since suffering from Chronic Fatigue Syndrome, I moved into web development, after a couple of years I then moved onto developing a number of online businesses. I've recently taken a sabbatical and I'm now looking to make big changes in my life, hopefully this may resonate with you - join me in my journey!

2 comments

  1. Hey Adam,
    great writeup and thanks for the mention of my site IC!

    Another really important contributing factor to the possible rise of Bitcoin and crypto market cap is the fact that Bitcoin is censorship-resistant and you can fully control your funds without the chance of a 3rd party blocking it.

    So… in current turbulent economic times… with potential market crashes, bank insolvencies etc. There is a real possibility in my opinion that an increasing number of people will want to safeguard a portion of their net worth or savings into a place that has the above properties of being unconfiscatable, and that may just lead to the biggest bull market we’ve ever seen!

    Time will tell. As always, DYOR and never invest what you can’t afford to lose!
    Dirk

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