At the outset of 2017, questions about bitcoin largely surrounded its price and practical value.
The cryptocurrency was showing signs of sustained, high value, and it seemed more logical than ever to discuss where and how it could be used, and what sort of place it might have in day-to-day life moving forward.
Over the course of the year, however, the conversation changed. While it can technically be used as both, bitcoin became as much or more a commodity as a currency, and people began asking questions not about how it could be used, but how to invest in it.
Here we’ll address a few important points for people looking at bitcoin this way.
Declaring Bitcoin’s Status
Practically speaking, it doesn’t actually matter whether bitcoin is a currency or a commodity, so long as you’re able to buy it as an investment.
For purposes of evaluation, however, it’s a good idea to go ahead and define its status as best you can. For reference, one of the more recent significant takes on this topic came from Goldman Sachs, where a head of commodities declared that bitcoin is more like gold than the U.S. dollar, and thus more like a commodity than a currency.
It’s helpful to get into that mindset if you’re looking to buy into bitcoin (or other cryptocurrencies, which we’ll address below) as a means of investment.
Assessing Value & Movement
The most important thing to know about bitcoin before investing in it is that it’s somewhat erratic in its movements. Sometimes larger trends can be traced to specific factors – usually regulatory changes in large markets – but from one day to another, bitcoin can move dramatically.
Assessing where it will be in a matter of hours or days is extraordinarily difficult, even as commodities go. So instead, you should do your best to look at broader trends and try to assess its overall value and movement as best you can.
Deciding On A Wallet
Because a wallet acts effectively as a bank account for the cryptocurrency, it’s more important than it might sound in the investment process.
The wallet you choose will dictate how you handle your bitcoin, and how easy (and secure) it is to make transactions. Most software wallets are available on several platforms, making them perhaps the most convenient to use – and certainly the quickest.
However, hardware wallets carry the added benefit of being disconnected from the web, meaning they’re invulnerable to hacking, if somewhat trickier to use. You should take your time to research all the available options before buying any cryptocurrency, but know going in that the wallet choice is important.
Considering Alternatives
For anybody considering a bitcoin investment, other cryptocurrencies are worth looking into as well.
The correlation between most major alternative cryptocurrencies (litecoin, bitcoin cash, ethereum, etc.) and bitcoin tends to be fairly strong, which means investments can work pretty similarly.
You may want to read up on some of the alternatives so that you can effectively choose one that makes the most sense as an investment for you.
Considering Predictions
Just about everybody is making predictions about bitcoin’s future. In fact, one of the more recent articles on this subject was about a theory that Nostradamus predicted the rise of bitcoin (which is almost certainly nonsense).
That’s just to give you an idea of how many different takes are out there. Everyone from current bitcoin investors to financial firm owners, to experienced stock market pros seems to want to weigh in on where this new and exciting commodity is heading.
The important thing to you is not to take anyone prediction too seriously, but rather consider the lot of them and weigh their merits on your own.
Have you considered getting into bitcoin? I would love to hear your thoughts on this in the comments section below.
Cheers!
