Is It Too Late to Buy Bitcoin in 2018? Things to Consider
Over the last nine years, Bitcoin has undergone significant price swings. In less than a year, Bitcoin managed to reach an all-time high of $19,500 before correcting back to its current price range between $6,000 and $7,000. This significant drop may have you wondering, is it too late to buy Bitcoin? The answer is no. Let’s consider some of the main reasons why buying Bitcoin in 2018 is a smart decision.
Volatility vs. Gains
It doesn’t take much research to determine that Bitcoin is a volatile asset. Any asset that can show 1000 percent gains in less than a year, and subsequently lose those gains, should be considered volatile. While volatility is a huge concern for traditional investment firms, it’s important to mention that Bitcoin is still up over 400 percent since May 2017.
These gains far outweigh those provided by traditional savings accounts, bonds, or the stock market. In this way, Bitcoin could be a better investment tool for those who understand how the market functions through its volatility.
Volatility can be harmful to your investment strategy when you purchase Bitcoin at its highest value. For example, if you bought a single Bitcoin ($19,500) in December 2017, and decided to hold until today, you would show significant losses of over $12,000. If you would have sold your Bitcoin after the market began its downside and reinvested on the low side, you would now be sitting on almost three complete Bitcoins.
Turning Volatility into Profit
Experienced investors make their profits during times of extreme volatility. In most instances, a savvy crypto investor will strengthen their position during times of downswing by selling their holdings at the highs. Then, once the market corrections complete, they repurchase Bitcoin at the lower rate. While this strategy is highly effective, it can be difficult for new investors to master.
Traditional Investment Funds
Numerous traditional financial firms have entered the crypto market over the last year. A recent report published by Forbes highlights how Bitcoin electronic traded futures (ETFs) could help Bitcoin see new highs in the coming year. The report explains how further regulation provided by the SEC towards Bitcoin futures could allow traditional investment capital to flood the market.
Scarcity: Is It Too Late to Buy Bitcoin?
While nobody can definitively determine the direction of the market, it is essential to consider scarcity when deciding if an asset will increase in value. There will only be 21 million Bitcoin ever produced. Of the scheduled 21 million Bitcoins slated for release, 17,323,362 are already in circulation. There are less than four million Bitcoin left that aren’t in circulation yet.
Additionally, a recent study revealed that as much as 36 percent of the circulating supply of Bitcoin might be unavailable. This percentage equates to around 6.226 million Bitcoin that are “lost, likely lost, or unmined.” The same report showed that as much as 22 percent of the current supply of Bitcoin is under the control of speculators. This information leaves you to deduce that Bitcoin is, in fact, a scarce asset, and as demand for Bitcoin increases in the coming years, the value should increase in a correlated manner.
Bitcoin’s blockchain is capable of handling up to seven transactions a second. This limited transactional processing rate contributed to the recent congestion problems you may have encountered. In comparison, Visa accommodates around 1,667 transactions per second but is capable of handling up to 56,000 transactions per second according to researchers.
For Bitcoin to one day achieve Satoshi Nakamoto’s original goal of creating a “Peer-to-Peer electronic cash system,” it will need to handle significantly more transactions per second. Bitcoinists recognized the need for additional scalability within the crypto’s network, and developers have created a couple of unique solutions to tackle these problems.
The Lightning Network
The Lightning Network is an off-chain solution to Bitcoin’s scalability concerns that utilizes private payment channels to reduce blockchain congestion. Users can send and receive infinite payments within these payment channels. Once the transactions are complete, the data registers onto the blockchain.
The Lightning Network is still in its beta testing stages. Regardless, the protocol has created a unique opportunity for Bitcoin users. Already, the emergence of Lightning Network Bitcoin vending machines promises an entirely new experience for crypto users. If the protocol is successful in solving Bitcoin’s scalability concerns, widespread crypto adoption could occur much sooner than expected.
Is It Too Late to Buy Bitcoin Because of Government Regulation?
Many countries, such as Japan, decided it was best to legalize Bitcoin as a means of legal tender. While these countries stop short of calling Bitcoin a currency, due to the fact that it is not issued by the government, they do acknowledge that crypto is a viable means of paying for goods and services.
In the United States, the SEC continues to mull over the best regulatory procedure to follow when dealing with cryptocurrencies and their byproducts. The SEC denied multiple Bitcoin ETF licenses over the last year, citing the lack of regulations as their primary reason for doing so.
Despite this decision, some members of the regulatory body, such as SEC commissioner Hester Peirce, publicly decried the decision. In a Forbes interview, Peirce expressed disappointment in the decision. Peirce represents a growing number of officials who show support for cryptocurrencies such as Bitcoin.
Traditional Market Instability
Investors look towards alternatives such as the gold market during times of global financial instability. Traditionally, gold has been the investment of choice, but recent studies show that many people now consider the crypto markets as another option during economic downswings. This belief has led to Bitcoin being referred to as digital gold by many. If Bitcoin can retain this title, it could help push the crypto to new heights.
How to Buy Bitcoin
Another vital factor to consider when debating whether or not it’s too late to buy Bitcoin in 2018 is the growing number of fiat-to-Bitcoin exchanges that are entering the market. Exchanges such as Coinbase help to bridge the gap between new investors and the crypto market. You can purchase Bitcoin directly from your mobile device using these platforms.
Is It Too Late to Buy Bitcoin in 2018: Definitive No
After hearing the reasons why Bitcoin is still a smart investment in 2018, it’s no surprise that the crypto market continues to see a stabilizing effect. Bitcoin provides the world with a form of currency, and despite the fact that specific vulnerabilities exist, you should expect to see Bitcoin prices rise in the years to come. If you would like to learn more about becoming a better crypto investor check out our guide on how to increase your crypto portfolio like a pro.
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ABOUT THE AUTHOR
ABOUT THE AUTHOR
David Hamilton aka DavidtheWriter has published thousands of cryptocurrency related articles. Currently, he resides in the epicenter of the cryptomarket – Puerto Rico. David is a strong advocate for blockchain technologies and financial sovereignty.