Bitcoin has returned to 18,000 yuan. Is it too late to invest now?

The value of Bitcoin is soaring, with the cryptocurrency hitting new highs over the past few months. In May of this year, the open-source digital currency soared to nearly $3,000. In May of last year, Bitcoin was only $450. However, this growth is no accident. The overall trend of Bitcoin's value has been rising since 2008 (although there have been several sharp drops in the meantime). Yet many people are still hesitant to invest in Bitcoin.

There are many reasons for investors’ hesitation, including the infamous theft of tens of thousands of bitcoins from the Mt. Gox bitcoin exchange, which still haunts investors. Or perhaps it’s the high volatility of bitcoin, which is 26 times more volatile than the S&P 500, and the lack of government regulation that has speculators predicting potential disasters. This is understandable, as bitcoin is not backed by any precious metals, countries or banks. Although there are obvious advantages to the structure of the market, there are also many serious obstacles and dangers that should not be ignored. However, if you are willing to take the risk, investing in bitcoin may be a worthwhile endeavor.

Should You Still Invest in Bitcoin?

1. Bitcoin is experiencing incredible growth.

Investor confidence in Bitcoin was severely damaged by the theft of millions of dollars in Bitcoin in 2014, but two years later, Bitcoin has recovered at a fairly fast pace and is now experiencing rapid growth.

In February this year, the price of Bitcoin successfully surpassed the price of 1 ounce of gold. Now Bitcoin's lead over gold has further expanded. If you happened to invest in Bitcoin in 2011 and never sold it, you can now get a huge profit. For example, if you spent $100 to invest in Bitcoin in 2011, if you sold it in May this year, you can get nearly $600,000.

2. The total supply of Bitcoin is fixed.

Bitcoin's total supply is set to 21 million by code. No more, no less. All Bitcoins are expected to be mined by 2140. As mining difficulty increases, the amount of new Bitcoins in circulation will decrease each year. This fixed supply of currency may seem counter-intuitive to some people. Fiat currency is printed on demand. As time goes by, there will be more fiat currency in circulation.

“Bitcoin will tend to be inflationary in its early stages, but will become stable later on… With a stable monetary base and a stable economy, the value of the currency should remain constant.”

While it is conceivable that a lower supply would lead to hoarding and deflation, this is the least likely scenario due to the predictable fixed supply of Bitcoin.

3. Bitcoin may be an effective way to achieve investment diversification.

Investors are taking Bitcoin more seriously. In 2011, Bitcoin was barely known. Today, Bitcoin makes headlines in major mainstream media. Newsstands dedicated to Bitcoin trading are popping up. The digital currency is increasingly being used for daily transactions, international trade and as an investment tool.

Bitcoin adoption is rising and trust in the digital currency is steadily strengthening. Cryptocurrencies themselves are also expanding, with dozens of competing cryptocurrencies based on Bitcoin technology (commonly known as altcoins) flooding the market. JPMorgan Chase, Intel, and Microsoft even came together to form the Enterprise Ethereum Alliance (EEA).

Bobby Cho wrote in The Street:

“More and more investors are looking for unique opportunities outside of the traditional arena. Bitcoin is becoming a viable alternative asset class for both institutional and retail investors. Bitcoin has huge investment potential that is unlike any other investment product in the world today.”

Investment Tools

Bitcoin has grown exponentially. But the digital currency’s ascent has not been unimpeded. The Mt. Gox debacle highlighted concerns about the fickle nature of the peer-to-peer digital currency. Millions of dollars were lost in undetected thefts, raising concerns among Bitcoin supporters and skeptics about its security and long-term viability. However, Bitcoin quickly shook off those losses, and the blockchain currency has surpassed its pre-Mt. Gox price this year, hitting two all-time highs in the past few months.

This primitive public ledger offers unique opportunities for investors willing to stay ahead in recessions and stay calm in surges. Bitcoin’s supply is fixed, which makes the cryptocurrency stable over time.

Additionally, trust in blockchain currencies is expanding as giants like JPMorgan Chase, Intel, and Microsoft have shown support for cryptocurrencies.

As a result, Bitcoin is currently experiencing wider adoption and is being taken seriously as an investment tool.

If you are serious about adding Bitcoin to your portfolio, then you need to proceed with caution. When investing in cryptocurrencies, you should consider the risk you are willing to take. Continue to do your own research, monitor Bitcoin's growth and assess the currency's weaknesses. With thorough research, smart investing can actually lead to huge returns.