Investing in Bitcoin During a Pandemic

The Evolution of Bitcoin

Bitcoin was developed as an alternative to the existing fiat. After the 2008 economic crisis that exposed the vulnerability of currencies, Satoshi Nakamoto developed Bitcoin. And by 2017, Bitcoin almost reached $20,000 that created a crypto-mania worldwide.

Fast forward 2020, the world is experiencing a pandemic and economies are entering a recession. And the recession would mean inflation. Could this mean that more people will try to safeguard their assets into the number one cryptocurrency today?

For the Singapore-based bank DBS Bank economist Taimur Baig, he believes that there is a chance that this could be happening. He mentioned that people’s involvement in crypto before the pandemic was highly speculative. Some would simply place 1% of their asset and see if it is going to yield profits or not. However, it’s a different ball game this time around.

On paper, Bitcoin was designed as digital gold. Between gold and Bitcoin, you can add gold in case someone discovers it but no one can add a single Bitcoin to the fixed 21 million bitcoins that exist.

According to JP Morgan, the younger generation have flocked towards Bitcoin ETFs to invest their money while the older generations still opted to go for gold ETFs.

Don’t Invest During a Pandemic

There’s also someone who has a different opinion when it comes to investing in Bitcoin during the height of a full-blown pandemic. Peter Mallouk who is the president and the chief investment officer of Creative Planning mentioned that Bitcoin is not a good investment given that it is highly speculative.

Mallouk also mentioned that now is not the time to invest in assets such as gold and silver which he also viewed as a highly speculative asset. Instead, he believes that stocks of “traditionally stable” companies should be the go-to investment during this time.  

Know Your Risk Tolerance

At the end of the day, you will have to choose whether or not to buy Bitcoin or even other more volatile altcoins. Before you even do anything, be sure that you understand the technology well. On top of that, you have to also know your risk tolerance. Cryptocurrencies are known to be highly volatile. In 2017, Bitcoin started from $900 reaching $17,000 by December. But it isn’t just something that goes up. You also have to understand fully the risk that you might lose a significant amount of your asset.

The number one rule in investing is that you never put all your eggs in one basket. It means that you shouldn’t just rely on Bitcoin to minimize the losses from your assets.

You might also want to take a closer look at other assets such as real estate. Under normal circumstances, real estate goes up over time. But during the pandemic, it might be a good call to also explore these kinds of assets if your goal is to one day yield profits.

Buying Bitcoin during the pandemic might still sound risky, but it is something that could potentially offer long term benefits especially now that big institutions are taking a closer look at digital assets.