Is Bitcoin a Good Investment Option to Add to Your Portfolio? (2024)

FAQs

Should I add Bitcoin to my portfolio? ›

Most financial experts recommend limiting crypto exposure to less than 5% of your total portfolio. Crypto is considered a high-risk asset class. Limiting allocation helps manage overall volatility and risk. Those new to crypto investing may start with 1% to 2% as an introduction.

Bitcoin is a risky investment with high volatility, and generally should be considered only if you have a high risk tolerance, are in a strong financial position already and can afford to lose some or all of your investment.

The significant volatility is often unsettling for investors and holds the potential to register complete loss without meticulous supervision. Furthermore, cryptocurrencies often fall victim to hacking and cyberattacks that can hand a significant blow to investors' aspirations.

Therefore, our results suggest that investors should include Bitcoin in their portfolio as it generates substantial higher risk-adjusted returns.

A good rule of thumb is to limit cryptocurrency to between 5% and 10% of your overall portfolio at most. If your cryptocurrency investments increase in value, you may need to sell some so that your portfolio doesn't get too crypto-heavy.

Most financial advisors aren't permitted to recommend the new spot bitcoin ETFs to clients. Most advisors aren't permitted to talk to clients about the so-called spot Bitcoin funds, of which there are now 11, unless they ask, according to Matt Apkarian, an associate director with Cerulli & Associates.

Bitcoin is extremely volatile and high risk. For investors willing to take the risk, understanding what they are investing in, having a crypto investment strategy and have having considered appropriate financial advice* could be good ideas. Investors should only invest what they can afford to lose.

Bitcoin's price today is US$58,009.05, with a 24-hour trading volume of $44.79 B. BTC is -5.15% in the last 24 hours. It is currently -13.04% from its 7-day all-time high of $66,705.84, and 2.57% from its 7-day all-time low of $56,554.96. BTC has a circulating supply of 19.69 M BTC and a max supply of 21 M BTC.

The advantages of cryptocurrencies include cheaper and faster money transfers and decentralized systems that do not collapse at a single point of failure. The disadvantages of cryptocurrencies include their price volatility, high energy consumption for mining activities, and use in criminal activities.

What is better than Bitcoin to invest in? ›

Together, the market caps of Bitcoin and Ether make up about 70% of the global cryptocurrency market. Bitcoin's $1.3 trillion market cap dwarfs Ether's $460 billion market cap, but Ether's market cap is more than four times larger than any other crypto's.

Crypto is often highly volatile, being subject to sudden market moves, firm failure and poor segregation of client funds or cyberattacks are all a risk of investing in crypto. If you decide to invest in crypto then you should be prepared to lose all your money.

Several potential drawbacks of Bitcoin include include:

Bitcoin comes with high transaction costs, and the transactions can take several minutes to complete. A large amount of Bitcoin and Ethereum mining is based in China and the Chinese government has shut mining and transactions down.

A bitcoin has value because it can be exchanged for and used in place of fiat currency, but it maintains a high exchange rate primarily because it is in demand by investors interested in the possibility of returns. Of course, many other factors influence Bitcoin's value.

However, some estimates can be made based on blockchain data and surveys of Bitcoin holders. According to data from Bitinfocharts, as of March 2023, there are approximately 827,000 addresses that hold 1 bitcoin or more, representing around 4.5% of all addresses on the Bitcoin network.

So, 10 times from those levels would mean that Bitcoin could go as high as $350,000, Saylor said. If this is the case, you would need to own 2.86 BTC to become a millionaire. It would cost around $190,000 today.

Bitcoin Spot ETF approvals in January 2024 and following price increases make a strong case for holding. Severe drops followed by a horizontal market, such as the crypto winter of 2022 and 2023, make a strong case for selling.