The crazy year 2023, when the price of Bitcoin (BTC) and other cryptocurrencies exploded 🚀, saw the arrival of many new institutional players in the crypto universe. Some have made colossal gains by investing in Bitcoin. But all is not so magical.
Let’s quickly recall what cryptocurrencies and Bitcoin are. The former, also known as crypto-assets or digital assets, are digital and decentralized currencies. BTC is, by far, the best known of them. It is also in first position of the top 50 crypto currencies (ranking according to market capitalization).
Are you wondering if you are going to buy cryptocurrencies or, to start, invest in Bitcoin? (If you have never touched cryptos, we advise you to stay on BTC only. The reason is simple: it is the oldest and therefore the safest / least risky.)
In this article we will present two reasons to invest in Bitcoin , and two arguments to dissuade you from it. So, investing in Bitcoin (BTC): good idea or bad idea 🤔?
Investing in crypto is risky and should not be taken lightly. If you are still discovering the subject, I invite you to deepen before taking the plunge. To help you with this, I have created a free program: 1 email per day for 7 days to learn about the universe of cryptocurrency investment .
Invest in Bitcoin (BTC) to diversify your investment portfolio
If you already have a lot of investments and want to diversify your portfolio , it might be a good idea to buy Bitcoins. Indeed, diversification is important in order to guard against the fall of a particular asset. Besides, some people talk about Bitcoin as a safe haven that could replace gold in this role. We must still remain nuanced on this point, because the curves recently show an increasingly strong correlation between Bitcoin and the fluctuation of technology stocks or the stock market in general . So when the stock markets go down, it often happens that the same goes for cryptocurrencies. So Bitcoin is no longer a safe haven.
Another point, cryptocurrencies being relatively recent assets, this kind of diversification will change you from real estate or euro funds ! If the market remains immature, the prospects for long-term gains are real . The more of us there are to invest, the more the risks will fade.
If you are investing for the long term, consider securing your assets by getting a wallet to store Bitcoin (BTC) .
But by investing in Bitcoin today, you will still own an asset that is considered very risky 🎢. It will thus be able to offset other more secure, or even guaranteed, assets with generally low associated returns.
In addition, Bitcoin is a special asset since its issue is limited to 21 million BTC. However, this limit will make Bitcoin a rare cryptocurrency and the increase in demand should only increase its value in the long term . At the beginning of 2022, JP Morgan calculates the long-term value of Bitcoin at around $150,000
Portfolio diversification, with its high potential return, is arguably one of the best reasons to invest in Bitcoin .
Want to diversify from the outset on several cryptos? We deliver our analysis and forecasts on Ethereum , arguably the second most famous crypto after Bitcoin.
The other good reason to buy Bitcoins is to introduce the world of cryptocurrency .
You probably know that it goes far beyond Bitcoin and there are many other cryptocurrencies. But do you know decentralized finance (DeFi) or passive income in cryptocurrencies (lending, farming) 😵? If the answer is no, you’ll probably want to know more!
Investing in Bitcoin therefore allows you to take the plunge into the world of cryptos , and the blockchain more broadly. Let’s say this is your first step towards more diverse investments within the crypto-asset ecosystem itself.
Of course, you will have to master the inherent peculiarities of DeFi before diving head first into it . You will have fantastic opportunities, but also beware of the many scams ⚠. To do this, favor crypto exchange platforms with the status of Digital Asset Service Providers (PSAN) issued by the Autorité des Marchés Financiers (AMF) .
Do not invest in Bitcoin (BTC) because it is too volatile
When looking at short-term Bitcoin price movements, it looks more like a roller coaster than a linear climb. So it’s no exaggeration to say that BTC is a VERY volatile asset . This has some negative consequences that you need to take into account if you want to buy Bitcoins.
The first is that you have to be psychologically strong 💪. Indeed, drops of 20% in 24 hours are regular in cryptocurrencies and Bitcoin! Of course, it can go up just as much, but it’s the downs you’ll remember first 😅. The psychological aspect is therefore essential.
Then, in connection with this psychological aspect, you should not keep your eyes glued to the price of BTC. Unless you do day trading , but then you are starting to have a lot of experience in the field and it has become a professional activity…
Finally, keep in mind that the cryptocurrency market is still very immature . He’s a young teenager at best. But you know that teenagers can quickly change their mood! It is therefore necessary to detach yourself from it as much as possible in order to benefit from it.
In summary, if you do not feel able to face the extreme volatility of crypto-assets , it is objectively a bad idea to invest in Bitcoin.
Despite the fact that several American and (more rarely) European banks are interested in digital assets, the financial sector remains very suspicious of Bitcoin .
For example, since El Salvador made bitcoin one of the two legal tender currencies in the country, the International Monetary Fund (IMF) has regularly attacked the Central American country. You must therefore clearly bear in mind that cryptocurrencies remain poorly perceived , regardless of whether the reason is justified or not.
You should then be aware of two risks. The first is to be in the sights of your bank. Indeed, some French banks take a dim view of investments in cryptocurrencies. Thus, they can make you sign a disclaimer. N26 and Boursorama are two of the banks most open to cryptocurrencies . They won’t ask you anything before they start buying Bitcoins. And even better, the neobank Revolut, or even Lydia allow you to invest in crypto currencies! If this is something that interests you, I invite you to consult our opinion on Revolut and our opinion on Lydia to dig into the subject.