As Bitcoin has matured, it’s become an investment that’s impossible to ignore.
After a rocky period when it first exploded into the public consciousness in 2013, Bitcoin has outgained virtually every investment class. The price of Bitcoin rose 35% in 2015, 123% in 2016, and then skyrocketed more than 1,800% in 2017.
Along the way, Bitcoin has shown it can survive a variety of disasters – including an unsavory association with illegal drug-buying and the bankruptcy of what was its biggest exchange.
Bitcoin’s resilience and extraordinary gains have earned it a reputation as “digital gold” – a store of value for the 21st century.
Even after its spectacular rise over the past couple of years, Bitcoin’s share of global investment remains relatively tiny – less than half of a percent. That’s why some experts foresee the price of Bitcoin rising to $50,000, $100,000 or even $1 million over the next decade. With increases like that, even a modest investment of $1,000 now could turn into the payoff of your life.
While there will be inevitable pullbacks, Bitcoin is built to continue appreciating over time…
One of the biggest and often-overlooked reasons for Bitcoin’s potential lies in the most basic of economic concepts: supply and demand.
The software that controls Bitcoin doles out new coins approximately every 10 minutes, as “Bitcoin miners” create the blocks that make up the foundation of the digital currency.
But the number of coins generated declines over time, tightening the supply.
When Bitcoin launched in 2009, the reward for mining one block was 50 bitcoins. That was cut to 25 bitcoins in 2012. And the reward was halved again in 2016, to 12.5 bitcoins. The next halving is expected in 2021.
As time goes on, the supply of new bitcoins will get smaller and smaller, becoming a trickle until the very last bitcoin is mined in 2140.
And that’s it. No more new bitcoins. The Bitcoin supply will never grow beyond 21 million.
Now contrast this to fiat currency, such as the U.S. dollar.
The central banks that print fiat money have no limits. They just print more to pay the bills run up by free-spending governments.
But over the years, the constant printing of new dollars has eroded 97% of the buying power of existing dollars. What cost $1 in 1913 would cost more than $24 today.
That can’t happen with Bitcoin. It’s controlled by a software algorithm, not governments.
But supply is only half of the Bitcoin price increase equation…
The other piece of the Bitcoin story is demand. And it’s on the rise.
Bitcoin has a growing reputation as a safe-haven investment. We know this because the Bitcoin price has spiked each time a monetary crisis has erupted, be it the Cyprus bank “bail-in” of 2013, the imposition of capital controls in Greece in 2015, or the shocking Brexit vote in 2016.
Just as importantly, adoption continues to grow as the financial world realizes how it can benefit from Bitcoin’s underlying technology, the blockchain. Bitcoin startups continue to proliferate, attracting hundreds of millions of dollars in venture capital.
This rising demand is reflected in the growing number of confirmed daily Bitcoin transactions. Between 2014 and 2017, daily Bitcoin transactions grew sevenfold.
Another key aspect of Bitcoin is that it benefits from something known as the “network effect.”
Simply put, the more people adopt a technology, the more useful it becomes. In other words, having e-mail back in the 1990s wasn't very useful, as only a handful of people had it. But once a critical mass of people had it, e-mail became a virtual necessity to communicate.
Because part of Bitcoin's utility rests on the number of people using it, growth in its adoption rate feeds on itself, drawing more and more people in. And that will supercharge the already rising demand within the Bitcoin market.
It means that, despite tremendous gains so far, the Bitcoin revolution is in its infancy. You still have time to add this unique investment to your portfolio.
To join the massive Bitcoin revolution, you need only know how to buy bitcoins.
That’s why Money Morning has put together this guide.
You have a lot of options…
Many investors will want to use conventional methods to invest in Bitcoin.
Some investors may prefer to own the real thing. One way to buy Bitcoin directly is through a Bitcoin ATM.
But the most common way to buy bitcoins directly is through a Bitcoin exchange.
Buying from a Bitcoin exchange may make some investors nervous, given the negative news stories of the past few years. There was the 2014 Mt. Gox bankruptcy, in which 750,000 customer bitcoins were lost, and numerous hacks of smaller exchanges since then, in which many bitcoins were stolen.
For more detailed answers to your questions about Bitcoin investing, take a look at these stories.
When Should I Sell My Bitcoin?
Bitcoin Gains Are Taxable – What You Need to Know
What Kind of Annual Returns Has Bitcoin Delivered?
Should I Open a Bitcoin IRA?
But the survivors have learned from these incidents. Bitcoin exchanges today are safer now. One caveat: Many still struggle to keep up with customer orders during dramatic swings in the price of Bitcoin.
Bitcoin exchanges do charge fees, and most require some form of customer verification (that’s a good thing, as it shows a concern for security). Here are the top four.
