The COVID-19 pandemic has caused massive disruptions in financial markets around the world, leading to what the IMF has termed as "the worst financial crisis since the Great Depression." Businesses around the world are suffering reduced revenues, and even closures and most traditional investments have taken a significant hit. As a result, investors are scrambling for safe-haven assets, and a lot of them are still wondering if investing in Bitcoin is a wise investment decision. Below is a discussion about what Bitcoins are and why you should consider investing in them during these tough times.
What Are Bitcoins
Bitcoin is a finite, math-based, open-sourced, verifiable, decentralized virtual currency whose security is based on cryptography. Unless you have been living under a rock for the last few years, you have heard about Bitcoin and other cryptocurrencies. Bitcoin is used as a store of value and a means of exchange for goods and services.
Can You Make Money Investing In Bitcoin?
With all the fluctuations that are associated with the Bitcoin market, you may be wondering if it is worthy of your attention as an investor or whether it is a viable investment vehicle with which you can make money. Although this is not the purpose for which the cryptocurrency was designed, there is no reason why you shouldn't invest in it. Just be sure to choose a reliable Bitcoin exchange if you do decide to invest.
Even before the coronavirus pandemic and the resultant economic turmoil, experts were already recommending some degree of exposure to Bitcoin and other cryptocurrencies within investment portfolios. For instance, Mike Novogratz, the chairman of Galaxy Digital, argued that with all the printing of money that central banks are engaging in, people have to start thinking of buying Bitcoin. Robert Kiyosaki, the author of Rich Dad Poor Dad, also believes that fiat currency is almost dead, and people should consider investing their stimulus money in Bitcoin.
Bitcoin's Supply is Fixed
One of the unique features of the economics of Bitcoin has to do with the certainty of its supply. The rate of Bitcoin mining is relatively predictable, and unlike other currencies, commodities, and assets, its supply is fixed. When all Bitcoins are finally mined, there will never be more than 21 million Bitcoins in circulation. Therefore, no matter how high the demand and price of Bitcoin may go, miners will not be able to mine even a single extra Bitcoin after the 21 million coins.
Why Is Bitcoin A Great Investment During These Tough Economic Times?
As coronavirus wreaks havoc in the global financial markets, Bitcoin is starting to look like a safe haven for investors. Its attractiveness to investors can be attributed to its inelastic supply. The problem with fiat currencies is that central banks keep printing more of them, and this has the effect of causing inflation, which leads to them diminishing in value. On the other hand, Bitcoin has a cap on the quantity that will ever be mined, and this means that its relative value against traditional currencies, whose value is continuously depreciating, is quite a safe bet. Besides, the demand for Bitcoin keeps going up as more and more people continue accepting it as a store of value and a means of exchange. This rising demand explains why the relative value of Bitcoin keeps going up. Last but not least, Bitcoin is one of the most liquid assets in the financial markets today. It is traded on many different platforms, and this means that you can liquidate your investment anytime you want.
The Bottom Line
Overall, it is apparent that if you are looking for a safe investment haven during these difficult times, the Bitcoin is an excellent financial instrument to consider. Its demand and relative value are rising, and there is nothing to suggest that this trend is going to change anytime soon.