Yes, I joined the herd of many who have invested in Bitcoin. And right off the bat, I think the biggest reason is so I can force myself to learn more and more about Bitcoin and how it can help world-wide commerce in the future.
Additionally, it’s crystal clear that this crypto-currency market has become a huge topic for 2017. In terms of gains, Motley Fool reported that the value of virtual currencies went past $225 billion – a 1,200% increase!
So you might say that I missed the boat and bitcoin has reached its peak, maybe but maybe not. Look at TSLA for example, I thought about investing in it back in winter of 2013 when it was hovering around $150. And at that time, I thought that it was over-valued, but even more so I didn’t know enough about the business or the electric car industry to make an informed decision. In terms of the peak point, these days TSLA trading at over $300, more than double!
I guess with so many other things in personal finance and investing, it’s better to dive into savings and investing later rather than too late.
How Bitcoin Works – I Kind of Don’t Know
So what is bitcoin and how does it work? I don’t have a great answer to that. I can say that many call it a virtual currency. So there are no physical coins. There is a public record available on the web that tracks how much you own in bitcoin. I also know that some merchants accept Bitcoin as a form of payment. Some of these include Overstock, Intuit, Microsoft, Expedia and Subway!
I like to test things out myself I went over to Overstock and added something to my cart and signed on with my credentials. Right before submitting the order, which I didn’t do anyway since I was testing, the Payment Information section had an option for Bitcoin:
And so I nervously clicked Submit Order. Then I realized it didn’t actually submit the order, but took me to another screen where Overstock waits for payment thru the submission of the appropriate bitcoin amount – not to mention I went back to my profile and orders to make sure it didn’t go through 🙂
So that is my hypothetical usage of bitcoin. For many of us consumers, it’s just a means of payment.
Bitcoin Potential Is Huge
You can trade Bitcoin with anyone in the world. That’s the first time something like this has been introduced, at least to my knowledge. Also, it’s the first currency form that is not regulated by any bank. This can also be seen as a risk of course.
It’s been around since 2009 and I haven’t heard of any major issues with the usage of bitcoin from other participants.
My Exposure To Bitcoin Is Low
I’ve invested about .004% of my net worth in bitcoin. So if I lose all of it, at least I won’t lose my sleep along with it. And actually, part of me is expecting to lose it all. If it does it happen, well life will go on and it won’t affect my overall financial plan. If Bitcoin surges and it pays off, I’ll treat that as a bonus or something pleasantly unexpected J
Additionally, I’ve followed the top 5 tips outlined by Forbes for new Bitcoin investors like myself.
And to add to this, the most important would be to start small and make sure you have your core bases in personal finance covered. Your core bases in my opinion and BEFORE investing in Bitcoin should be:
- Are you contributing a healthy or ideally maximum amount to your 401k?
- Are you contributing to an IRA?
- Do you have an emergency account established and funded?
- Do you have most or all of your debt paid off (especially high interest credit card debt)?
- Are you invested in an after-tax account? Is the account diversified across the market?
Still, There’s Risk in Bitcoin Investing
Maybe this trend will lose steam. Maybe someone will find a major flaw in the software used to track Bitcoin. Maybe this can lead to a cyber-attack resulting in lost or stolen information. These and others are the risks are clear and deserve an investor’s attention.
There’s also the risk of the unknown. I don’t claim to know much about Bitcoin at all. There are all these terms like terminal, mining, block chain, verification key, public ledger, open source code that I don’t fully understand. And unless you’re a computer geek, you may not either. So this presence of the unknown in and of itself presents an inherent risk.
As this is a high-risk investment, it should be treated as such and the word use by Forbes says it all – with caution.
How to Buy Bitcoin
The easiest way to buy bitcoin is through Coinbase – a medium used to buy and exchange bitcoin with other investors. I signed up (which is very easy to do through the Coinbase smart phone app) and used my credit card to make an investment so I can get points in the process J
How do you all feel about bitcoin? Is it the future of currency? Do you own bitcoin or would you not touch it with a ten-foot pole?
I use Personal Capital because (1) it’s free, (2) it tracks all of my accounts and overall net worth, (3) my account balances automatically update, (4) it shows how my investments are diversified and allocated in various sectors, and (5) can use built-in tools like “Investment Checkup” to get….wait for it…free personalized advice!