How much is bitcoin worth? Should you invest in it? If so, how do you invest in bitcoin? Great questions. And since its creation in 2009, bitcoin investing has intrigued, excited and, often, frightened market-watchers and investors alike. Notoriously volatile, the cryptocurrency traded at 8 cents per coin in 2010, to an all-time high of more than US$23,000 on Dec. 16, 2020. If you were to chart bitcoin’s worth in the intervening years, it would look like the profile of a terrifying roller coaster, with a long, slow, initial rise, followed by jagged peaks and valleys from 2017—the first time it crested US$20,000—to today.
There are other crypto investments, but bitcoin is considered the most widely traded and most successful. It has been mused that if you invested $1,000 in bitcoin at 8 cents per coin in 2010, your cryptocurrency investment would be worth $287.5 million today. Phew! No wonder bitcoin has captured so much interest.
What is bitcoin?
Bitcoin is a digital currency that many call the best cryptocurrency to buy, dubbing it “the new gold.” Of course, gold is one of the oldest currencies on earth, and currencies and methods of payment are always evolving.
What does this mean? Arthur Salzer of Northland Wealth Management offers: “Monetary value usually arises from objects that are scarce, durable and relatively easy to divide. Since the dawn of civilization, societies have used rare seashells, wampum, glass beads, and stones as money or a form of record keeping. Gold is an ideal example since it can be made into jewelry, coins and bars, but bitcoin is unique in today’s digital world since it is scarce, durable, has strong privacy characteristics.”
These days, gold is rarely used as a form of payment; it’s seen more as a store of value, and an investment or portfolio asset that is not highly correlated to stocks and bonds and cash.
Similarly, supporters and owners of cryptocurrency invest in bitcoin because they see it as a store of value, and a useful portfolio asset. Bitcoin may also work its way into a direct method of payment as well. In other words, you might one day use bitcoin to buy a car or a loaf of bread. It’s a lot quicker and easier to send digital money than to lug around bars of gold.
How to invest in cryptocurrency
Bitcoin isn’t your typical investment. In fact, as a digital currency, bitcoin is not a physical coin. Rather, a bitcoin is created and then accessed by way of a digital code. This happens over the internet.
The ledger (blockchain) where the transactions are executed and monitored is public and for all to see. That’s referred to as “open source.”