Whether to invest in bitcoins
Twitter Peggy James is a CPA with 8 years of experience in corporate accounting and finance who currently works at a private university, and prior to her accounting career, she spent 18 years in newspaper advertising.
She is also a freelance writer and business consultant.
Article Reviewed on October 11, Margaret James Updated October 11, Investors nervous about the stock market might be looking for alternative investments, like Bitcoin.
Learn about investing in Bitcoin over stocks in a way that may help you decide whether adding the cryptocurrency to your portfolio is the right move for your situation. Bitcoin Risk vs.
Is Bitcoin A Good Investment?
Stock Risk Investments carry risk. The market could crash for various reasons. Companies could go bankrupt.
Or, in a positive sense, a stock could soar over time. Weighing risk is important when you decide to add different assets to your portfolio. Stocks are different because there is some guidance you can use to get an understanding of where a price might go.
David Stein, a former chief investment strategist and portfolio manager for an investment fund, also told The Balance via phone that Bitcoin lacks the predictors that stocks do.
That adds a different layer of risk because it could be replaced by other more efficient digital currencies, or it could be regulated out of existence.
Bitcoin History vs. Because stocks are more established and expected to do well, they have been historically supported. Who Is a Good Fit for Bitcoin?
Similar to any speculative investment, buying bitcoin carries some well-known risks: The price could drop precipitously and a single online hacking or crashed hard drive incident can wipe out your stash of bitcoin with no recourse. Bitcoin has seen dramatic run-ups in price followed by some painful crashes but has consistently retained a significant portion of its previous gains every time it plummets.
Cryptocurrencies like Bitcoin provide alternatives to more common assets. For most people, stocks are likely to be appropriate for the bulk of any portfolio. Plus, if you think that it will gain ground in the future due to the limits placed on production as well as potential adoption, it could be worth an investment.
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What Are the Dangers of Bitcoin? When whether to invest in bitcoins in Bitcoin, one of the biggest dangers is that it could disappear, Stein said.
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Additionally, stock markets have been around in the U. Another danger is that Bitcoin does not undergo the same Securities and Exchange Commission SEC scrutiny that regulated securities markets, like the stock exchange, do. Take the time to do your research and consider your risk tolerance before deciding if Bitcoin or stocks are the better investment for your portfolio. Key Takeaways Bitcoin has been more volatile than stocks There is the potential for dramatic growth with Bitcoin—but also for dramatic loss Because of its uncertainty, it might make sense to limit the amount of Bitcoin in an investment portfolio.