Bitcoin hit the news a few weeks ago when the price jettisoned to $64,000. Investors across the globe were asking themselves, "Should I invest in Bitcoin?" and, "Is Bitcoin a good investment 2021?"
So, is it better to invest in stocks or Bitcoin? Are there different risks for stocks to Bitcoin? And, how do you decide whether you should invest in stocks or Bitcoin?
There are many options for investing. Most new investors consider investing in stocks but have no idea where to start. But with the rise of cryptocurrencies, are they a better alternative to the stock market? Is it better to invest in stocks or Bitcoin? And what are the risks?
Your levels of investment depend on many factors. What are your investment goals? What is your long-term plan for your investment portfolio, and what are your risk tolerance levels?
Is Bitcoin riskier than stocks? Many financial investment experts say that your investment portfolio may be more at risk with Bitcoin. So, is it better to invest in stocks or Bitcoin?
What factors should you consider, and how do you decide to invest in stocks or Bitcoin?
In this guide, we will compare stocks vs Bitcoin and find out if it is better to invest in stocks or Bitcoin?
You'll discover if Bitcoin is a good investment for 2021 and what will Bitcoin be worth in 2025. In conclusion, you will decide, Bitcoin vs stocks and which is best for your portfolio.
- Bitcoin Risk vs Stock Risk
- Bitcoin History vs Stock History
- Who Is a Good Fit for Bitcoin?
- Who Is a Good Fit for Stocks?
- Is it Still Worth Investing in Bitcoin?
- What Are the Dangers of Bitcoin?
- Recap of Should you Invest in Stocks or Bitcoin?
Bitcoin Risk vs Stock Risk
The stock market is a risky financial arena but is Bitcoin any less risky?
The stock market prices are dependent on so many factors. Shares are sensitive to company news releases but also reactive to market conditions. Stock market crashes are sudden and unpredictable, and companies can go bankrupt without warning.
But, equally, your stock investments could grow, and you may receive regular dividends. Should you be investing in stocks, or Is Bitcoin a better risk than stocks?
Your risk tolerance is a major factor when deciding where and how to invest and add to your investment portfolio.
Is it better to invest in stocks or Bitcoin? In truth, investing in stocks may be less risky than Bitcoin?
If you invest in face value, investing in stocks is a known quantity with historical data you can research. Investing in Bitcoin is an uncalculated risk.
In December 2017, the Bitcoin price was almost $20,000.
By December 2018, you could buy Bitcoin for $3,500.
Today (May 26th 2021), the price is $28,500.
A month ago, the Bitcoin price was $64,000.
As an investor, how would you have coped with these dramatic price swings?
The worst thing you can do as an investor in stocks is to go in blind or buy on impulse.
The foundations for success for investing in stocks is to research and select established and stable stocks, such as the S&P 500.
You can study the P/E ratio (price-to-earnings) and read company statements. It's relatively easy to ascertain the financial health of a company.
Bitcoin is harder to evaluate.
Your investment in Bitcoin can only be speculative because the Bitcoin price is subject to supply and demand.
Despite the rising price of Bitcoin, it's still a relatively small market. Bitcoin is subject to volatile price swings. A month ago (April 2021), the Bitcoin price was $64k. A month later, the Bitcoin price was just below $30k. That's one heck of a price drop.
Right now, Bitcoin is a decentralised currency. Should Bitcoin become centralised, the goalposts could change radically.
Regulation could force Bitcoin into extinction.
Bitcoin History vs Stock History
The history of Bitcoin price shows massive fluctuation. In 2015, the price of Bitcoin hovered between $200 and $500 per Bitcoin.
By late December 2017, Bitcoin was just under $20,000. Experts were predicting a rise to $100,000, but a year later, Bitcoin was $3,500.
A few days ago, the Bitcoin price was $37,890, and today it is $28,500 representing almost a $10k drop in a matter of days.
Investing in Bitcoin is risky. At what price do you buy Bitcoin? Is Bitcoin a good investment in 2021? Or is it best to wait for the Bitcoin price to settle to a lower price?
Looking back to December 2018, $3,500 would have been an excellent buy for Bitcoin investors. But, at the time, who knew Bitcoin would reach $64k two and a half years later?
Bitcoin is volatile. The potential rewards are significant, but the potential for a devasting and dramatic loss is equally possible.
Investing in stocks is not as dramatic as investing in Bitcoin.
The stock market has been relatively stable since 2015.
The S&P 500 is $4193 today (May 25th 2021).
In 2015, the S&P 500 price was around $2,000.
100% increase in seven years is modest growth, and there was nothing massively volatile in the stock market during that time, apart from the market crash in 2008.
The Dow Jones Industrial Average (DJIA) today is $34,370.
In early 2015, the Dow Jones price was around $18,000. At that time, Bitcoin was just under $20,000.
The issue with Bitcoin is that market sentiment governs the price. Novice investors mistakenly buy high, greedy for profits and pushing the price up. Then they panic and start selling off their Bitcoin to avoid losses, and suddenly, Bitcoin drops like a stone.
That's not to say there aren't ups and downs with stocks, but compared to Bitcoin, there is more long-term historical support for stocks. The prices tend to more stable with steady price fluctuations rather than the massive swings of Bitcoin.
Stock investors expect their stocks to rise, but Bitcoin investors have no idea what Bitcoin might do next. Your investment in Bitcoin could be wiped out in a heartbeat.
Bitcoin, in reality, could be defined as a boom or bust investment.
Historically, the stock market returns a steady 10% average annual gain.
Historically with Bitcoin, your investment is unlikely to have a steady return. Indeed, you could double, treble or quadruple your investment or lose the lot while you went off to get a cup of tea.
We aren't saying you don't invest in Bitcoin, but it's necessary to explore who is a good fit for Bitcoin.
Who Is a Good Fit for Bitcoin?
If you want to invest in Bitcoin, it's advisable not to sink all of your investment into Bitcoin. It's far better to have a diverse portfolio. At the right time, add a little Bitcoin to your portfolio. Investing in Bitcoin is a high risk, but the rest of your portfolio could be low to medium risk.
One benefit of all cryptocurrencies is that they are decentralised and not attached to the dollar. As most assets link to the dollar, it makes sense to have something in your portfolio not aligned to the dollar.
Because of the high-risk volatility of Bitcoin, experts suggest an investment of no more than 1% to 5% of your total portfolio and with the attitude that Bitcoin could bring a massive return or you could lose your investment.
To invest in Bitcoin now, you would need significant capital. There have been some massive price swings over the last month, and until the Bitcoin market settles down, there's no clear entry for a signal to buy Bitcoin.
As a Bitcoin investor, it would help if you had a high-risk tolerance.
There's no doubt you will witness your Bitcoin investment swinging about through the highs and lows of Bitcoin volatility.
If you have a low-risk tolerance, you will panic and start selling off when the Bitcoin price plummets, which it will at some point. And, shortly after you fold, you may see Bitcoin shoot for the stars.
Read Also: Should You Buy Bitcoin?
Who Is a Good Fit for Stocks?
Stocks may form the bulk of most investment portfolios. The stock market is a more stable environment than Bitcoin and many other financial instruments.
The stock market is not without volatility, but it is liquid. If you select established companies rather than new or emerging companies, your investments are likely to be relatively stable and earn an average of 10% a year.
Diversity is the secret sauce to investing in stocks.
Never put all your eggs in one basket. Spread the risk, and you have more chance of maintaining and growing your investments over time.
Typically stock investors have a long-term plan. You may expect to hold your stocks for several years. During that time, you can be investigating adding more financial instruments to your portfolio and gathering regular dividends from your stock portfolio from a few select companies.
Is it Still Worth Investing in Bitcoin?
It seems unlikely that Bitcoin could return to lows of $1000 or less per coin.
This year Bitcoin volatility has been intense and dangerous for new investors. At what stage do you consider investing in Bitcoin?
The Bitcoin Network capped Bitcoin production at 21 million coins, and, right now, 18 million Bitcoin have been created.
What happens when Bitcoin reaches 21 million coins in production? What will happen to Bitcoin price then?
Nobody knows the answer to these questions, but it's something to consider. There's also the risk that one day in the future, Bitcoin could become centralised.
Supply and demand is the factoring force for Bitcoin prices, so with the limits placed on production, could demand far exceed supply and skyrocket Bitcoin prices?
What will Bitcoin be worth in 2030? Could the price of Bitcoin hit $500,000?
But, looking not so far away, what will Bitcoin be worth in 2025?
What will Bitcoin be Worth in 2025?
Investing in Bitcoin could prove to be the best thing or the worst thing for your portfolio.
According to The Independent, a panel of 35 academics and cryptocurrency industry experts anticipate that Bitcoin will reach $360,000 by 2025.
Joel Kruger, a cryptocurrency strategist at LMAX Group, said, "The only question that needs asking in terms of longer-term valuation is whether you think bitcoin will be around in 2025,"
"If the answer is 'yes', the economics support a much higher valuation. It's as simple as that."
Today's Bitcoin price is $28,500.
If the experts think Bitcoin price of $360,000 is realistic, is it possible that Bitcoin could rise to $500,000 or higher by 2030?
At $48,500, Bitcoin is a high-ticket item. And, many things can change in five years. Will governments allow Bitcoin to remain decentralised and pose a threat to fiat currency. What are the prospects of Bitcoin disappearing? What are the dangers of Bitcoin?
Read More: Bitcoin Price Prediction for 2025 and 2030
What Are the Dangers of Bitcoin?
The main danger of investing in Bitcoin is that it could disappear.
If Bitcoin became a centralised currency, the epic price rise predicted by crypto industry experts would likely stop.
But, cryptocurrency is here to stay, and there are thousands of other coins you can add to your portfolio and at a much more realistic price. Ethereum is the one to watch. Experts are predicting that Ethereum could be the new Bitcoin.
The stock markets were established in the United States in the 1700s. With the right portfolio of stocks, the dangers are less than Bitcoin. Bitcoin is unchartered territory for risk and reward potential.
With stocks, you can map out historical prices and research the company to assess future growth. Bitcoin? Well, your investment results could depend on a wing and a prayer.
One significant benefit of the stock market is that it's protected by the SEC (Securities and Exchange Commission), and they regulate the securities market.
Bitcoin has no such regulating governing bodies.
Recap of Should you Invest in Stocks or Bitcoin?
Should you invest in stocks or Bitcoin?
This guide outlines that, generally, the stock market is more stable than Bitcoin. With careful selection, your stocks could return a market average of 10% a year without a lot of drama. Investing in stocks is a long term investment strategy, and you may have to hold onto your stocks for several years.
If you choose to invest in Bitcoin, at what price do you buy Bitcoin?
How do you know the best price to buy Bitcoin? These are the real dangers, and nobody knows the best price to buy Bitcoin. That's the problem. You can study charts and price action and take a calculated risk and still end up losing your investment.
If you plan to invest in Bitcoin, think long-term. Buy at the best price possible and wait out the volatile price swings. Buy with money that you can afford to lose and that you don't need to access.
Eventually, if the experts are correct, and barring centralisation, your Bitcoin could be the best investment you make.
If you have a high-risk tolerance, add a little Bitcoin to your portfolio. If you have a low-risk tolerance, stick to investing in stocks.
If you want to add cryptocurrency to your investment portfolio, thousands of emerging cryptos are available to buy at a reasonable price.
Crypto experts suggest the best digiat currencies to buy in 2021 are Litecoin, Ethereum, Cardano, Binance Coin, Ripple, Dogecoin and TRON.
Some of these cryptocurrencies are only a few cents each.
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Is Bitcoin riskier than stocks?
Bitcoin is volatile and unpredictable. But, if the price continues to rise over the next five years, your returns could be staggering. Stock investments are steadier, averaging a 10% annual gain.
Is it better to invest in stocks or Bitcoin?
No one knows what is best to invest in stocks or Bitcoin. It is better to diversify your portfolio to have a percentage of stocks and add a small percentage of Bitcoin or other emerging cryptocurrencies like Ethereum, LTC etc.
Is Bitcoin a good investment in 2021?
Over the last month, Bitcoin rose to $64k and dropped below $30k. At what price is it best to buy Bitcoin?
Expert advice is never to buy at the high, but no one knows where the low might be.
It's unlikely Bitcoin will drop to $3,500 again, but never say never.
Bitcoin is a good investment if you can buy at a reasonable price, and the price then rises. But, as we all know, Bitcoin often surprises us. There are no guarantees, which is why it is risky to invest in Bitcoin than stocks.
What percentage of my portfolio should be Bitcoin?
As Bitcoin is more volatile than stocks, your portfolio percentage of Bitcoin is minimal, somewhere between 1% to 5% and only what you can afford to lose.
What will Bitcoin be worth in 2030?
Some experts are suggesting that Bitcoin could rise to $360,000 by 2025. So, five years on from that, in 2030, could Bitcoin make $500,000? Nobody can truly predict the price of Bitcoin, through the expert consensus is that, over time, the price will continue to reach new highs. But, expect significant price pullbacks before new highs for Bitcoin.
Please note that the above information is not providing advice on tax, investment, or financial services. We provide the above information without consideration for risk tolerance and a specific investor's financial circumstances.
Trading or investing in financial instruments such as stocks or Bitcoin may not be suitable for all investors. It does involve risk and the possibility of a loss of capital.