Bitcoin (BTC) needs no introduction. Its stellar rise of more than 300 per cent in 2020 has attracted the attention of many investors, both retail and institutional. However, it is this year that may become the coin’s hottest season of all.
The BTC price hit a record high of $41,941 on Friday, January 8, bringing its market cap to more than $770bn (£562bn, €632bn) and boosting the value of the entire crypto market to over $1tr. The coin has since had a wild ride, trading at $36,000 at the time of writing, January 12.
Today, BTC is the hottest topic in the financial markets. While some remain sceptical, calling it the “mother-of-all bubbles”, others believe that the price of the cryptocurrency can go as high as $500,000.
With all the hype, many people are now wondering whether they should rush to buy the digital coin in hopes that it is not too late to start investing in Bitcoin.
If you also found yourself wondering “Should I buy Bitcoin?”, then this article is for you. Here, we review the industry's latest news and analyst forecasts to help you better understand the current market situation.
Why invest in Bitcoin: the coin’s prospects look as bright as ever
It is no secret that crypto adoption is growing at a rapid pace. In October 2020, the world-renowned digital payment service PayPal (PYPL) launched a new service, enabling its clients to buy, hold and sell Bitcoin and other digital currencies right from their accounts. Moreover, based on data from Bloomberg, nearly 26 million merchants from PayPal’s network started accepting cryptocurrencies.
In the meantime, payment service Square (SQ) bought 4,709 Bitcoins for $50m, while MicroStrategy purchased $1.13bn worth of BTC. Increased interest from billionaire investors like Stanley Druckenmiller and Paul Tudor Jones is also worth mentioning.
Speaking of the coin’s future, Rick Rieder, BlackRock’s chief investment officer of fixed income, said in his interview with CNBC that BTC “is here to stay”, adding that millennials are open to cryptocurrencies and digital payments, boosting Bitcoin adoption.
According to JP Morgan’s note from October 2020, Bitcoin now competes with gold as an “alternative” currency: “Even a modest crowding out of gold as an 'alternative' currency over the longer term would imply doubling or tripling of the Bitcoin price.”
Continued support from investors and further adoption will strengthen Bitcoin’s status not only as a means of payment but also a store of wealth.
So, are Bitcoins a good investment in 2021? And should you rush to pour all your money into the cryptocurrency?
Analyst point of view: is Bitcoin a good investment?
The founder of the Corcoran Group, Barbara Corcoran, said: “I think that Bitcoin – the other ones will disappear – is interesting to watch and could get up to a value of $60,000 if enough wealthy institutions or private individuals invest.”
Corcoran, however, noted that cryptocurrencies will not replace fiat money, at least not any time soon: “As much as we do not like US currency, aka money, I do not think it is going anywhere.”
On the other hand, Robert Herjavec, the CEO of cybersecurity firm Herjavec Group, suggests that the “concept of cash will go away one day”, as “there will be some form of a cryptocurrency that we will pay for electronically”.
However, Herjavec is not investing in crypto himself for ethical reasons, explaining that “cryptocurrency is the choice of funding and transactions for hackers. And since we are the good guys, I can't get behind that. If there was no cryptocurrency, much of the large hacks that we are seeing today wouldn’t exist.”
Antoni Trenchev, co-founder and managing partner of Nexo, also commented on Bitcoin, saying that it “continues to defy all expectations and doubters”.
Strategists at JP Morgan recently predicted that, in the long term, Bitcoin could hit $146,000. Other BTC price forecasts go from $65,000 suggested by Mike Novogratz, to $170,000 predicted by Bloomberg strategist Mike McGlone, to $318,000 prognosed by the Citibank’s Tom Fitzpatrick, and all the way up to $500,000 predicted by Tyler and Cameron Winklevoss, co-founders of crypto-exchange Gemini.
A fly in the ointment: there is also a bearish perspective
While many have a positive answer to the question: “Is Bitcoin a good investment for the future?” some seem to disagree.
A few days ago, Michael Hartnett, chief investment strategist at Bank of America Securities, released a note calling Bitcoin the “mother of all bubbles”. He compared the cryptocurrency’s impressive growth to that of Japanese stocks in the late 1980s, the technology stocks in the late 1990s and the US housing prices in the mid-2000s, which have become Wall Street’s spooky tales when they crashed after enjoying massive gains.
David Rosenberg, an economist, strategist and long-time market bear, also warned investors that Bitcoin is in a “massive bubble”.
Evaluate your risk appetite: is Bitcoin a safe investment?
In the traditional financial markets, from stocks to forex to commodities, there is no such thing as a safe investment. Every investment comes with a risk of losing money. However, such risk increases significantly when it comes to Bitcoin or any other cryptocurrency.
James Ledbetter, CNBC contributor and editor of FIN, spoke about the coin’s high volatility: “If you look historically at the price of Bitcoin, there have been a number of occasions where it really spiked and then came crashing down really quickly.”
Douglas Boneparth, a founder and president of Bone Fide Wealth, also said that “it is critically important to understand the risks” associated with crypto investments. “You do not need to look too far back in time to see how volatile it can be.”
And while increased volatility can spell big profits, it can also mean big losses.
After BTC started rapidly falling from its new all-time high, the UK's Financial Conduct Authority (FCA) warned investors: “If consumers invest in these types of products, they should be prepared to lose all their money.”
Mark Cuban, an American billionaire investor, compared BTC investing to gambling. He said in December: “It is still very much a gamble. It could go to $15,000 or zero and maybe both on the same day.”
On January 11, Cuban tweeted that the current situation in the crypto market also reminds him of the dotcom bubble, adding that Bitcoin could be among those who survive the potential crash.
Thus, before adding the cryptocurrency to your portfolio, do not forget to consider Bitcoin investment risk. Cuban suggests investing only as much money as you can afford to lose.
If you are looking how to safely invest in Bitcoin, financial planners are also hesitant to advise putting a large chunk of a portfolio into Bitcoin.
Roger Ma, a certified financial planner at Lifelaidout, said that many may now experience fear of missing out, watching the market’s latest rallies, such as that of Bitcoin, from the sidelines. In order to make the right decision, he suggests it is important to evaluate your current financial situation and keep your investment goals in mind when choosing how much money to allocate into a new asset.
Ma explained: “What does your portfolio need to do to be able to achieve your short- and long-term goals and for you to be able to lead your rich life? If your plan relies on your portfolio returning 50 to 100 per cent a year, it might make sense to rejigger your plan to make it a little more feasible.”
The bottom line: should you invest in Bitcoin now?
So, is BTC a good investment? Like with any other asset, there is no definite answer to this question; it all comes down to your personal goals, strategies and risk tolerance. The crypto market is famous for being very dynamic. Its volatility makes it difficult to predict what the price of a digital coin could be in a few hours, and let alone give long-term forecasts.
Before making any investment decisions, we recommend you do as much research as possible, taking into account the latest technical analysis, expert opinion and market trends.
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