Bitcoin Investing (+40% YTD...)
Some bullet points explaining why diversifying investments with adding some bitcoin exposure makes sense.
1. Volatility
Bitcoin is the most volatile asset in the world. This means you can make the most money if you buy and sell it at the right times. If you diversify your investments into bitcoin, then part of your portfolio will be exposed to this volatility. BUT...if you do it right, the rest of your portfolio will offset this volatility.
2. Inflation
The Federal Reserve is printing money like crazy. They are doing this because they want inflation so that people don't lose faith in their currency (which happened in Germany after World War I). This means that all other assets will go down as inflation goes up (since dollars will be worth more). But Bitcoin has no central bank printing it so there is no inflation for it. So, when inflation goes up, Bitcoin might go down a little bit but not as much as other assets. So if you diversify with some crypto exposure, you might even benefit from a little bit of inflation since your other investments will suffer more than crypto would.
3. The "store-of-value" argument
Gold bugs argue that gold is a good investment because it has always been used to store wealth throughout history and so people continue to use it today. Bitcoin has been around for 10 years now and has been used by criminals and everyone else to store wealth during those 10 years so it seems like a good bet that people will continue to use bitcoin for storing wealth going forward (especially since governments are creating so much new currency). Diversify with some BTC and enjoy future appreciation because people will continue to use BTC as a store of value.
4. The "network effect" argument
The network effect states that a technology gains more value as more people use it (like email or social media). Bitcoin has had 10 years of building its network and continues to grow every day (millions of new users every day). If someone invents a better coin tomorrow, then Bitcoin's value won't instantly drop but instead Bitcoin's value will slowly decline over time while the new coin picks up all the growth from then on out. Diversify with some BTC exposure so you can benefit from this slow decline in value over time as newer coins take over market share from bitcoin .
5. The "scarcity" argument
Goldbugs argue that gold is valuable because there is only a small amount of gold in circulation compared to how many trillions or quadrillions or whatever dollars are floating around out there in the world economy. Bitcoins have an even higher scarcity than gold does since only 21 million bitcoins will ever exist whereas there could be hundreds of thousands of tons of gold out there in circulation compared to how many trillions exist on Earth. So diversifying into some crypto could help protect against hyperinflation since eventually Bitcoins supply WILL run out unlike fiat currencies which have no limits on supply..
6. The "hedge against global uncertainty" argument
If war breaks out between Russia and Ukraine, then stocks might drop due to economic uncertainty about Europe's future but Bitcoin would probably not drop due to geopolitical uncertainty unless Russia decides to start using Bitcoins instead of Rubles or US Dollars (which seems unlikely). So diversifying into crypto gives you an extra layer of protection against economic uncertainty caused by geopolitical events such as wars breaking out or countries collapsing economically due to hyperinflation or natural disasters hitting key areas where stock markets are located .
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