The difference between investing in and trading Bitcoin.
Bitcoin is an investment.
It is a long-term store of value asset.
Bitcoin is a hedge.
Bitcoin is not a trade.
Bitcoin could’ve been a “great trade” between 2011–2017. Now, like with most investments, trading Bitcoin should be left to the few, not the many.
Bitcoin is also not a get rich quick scheme.
Bitcoin is a don’t get poor slowly strategy.
Bitcoin was born in the aftermath of the 2007–2008 financial crisis. It’s just over a decade old, making it a relatively young asset.
Bitcoin reinforces its use case as a long-term store of value asset every year that it survives.
On May 22, 2010, Laszlo Hanyecz bought two pizzas for the price of 10,000 BTC. This is known as Bitcoin Pizza Day.
Prior to Bitcoin Pizza Day, Bitcoin had no real value.
It wasn’t even until 2011 and the short-lived Mt. Gox exchange that Bitcoin accrued larger consensus market value.
So, as of writing, Bitcoin is roughly ten years old.
Despite its youth, Bitcoin is the best performing asset of the last decade. It has returned just over a 200% annually.
In early 2021, Bitcoin crossed the $1 trillion market cap for the first time. Like its unit price, Bitcoin’s market cap is also in discovery mode.
Bitcoin has returned 200% on average year over year but, yes, it is a volatile asset that is not for the faint of heart.
That said, to reject Bitcoin due to its volatility is a mistake. Upward volatility is incredibly valuable.
Bitcoin goes through market cycles.
We might be in the middle of a Bitcoin Supercycle.
That means that although Bitcoin typically experiences a period of bullish sentiment followed by a bearish pullback, it could witness a longer bullish half of the cycle this time due to increased interest and overall user growth since the last market cycle.
Bitcoiner Dan Held has also entertained an interesting take that Bitcoin really isn’t volatile, but in fact stable. How could this be?
Put Bitcoin’s price aside.
- The protocol is nuclear proof.
- Bitcoin has 99.98% uptime.
- It survives and thrives despite little to no backing from banks, governments, or universities.
The constantly changing price is an expression of how volatile everything else in the world is.
It’s more a thought exercise than anything else, but it is important to look at Bitcoin beyond its price. Overall adoption is proof of concept that Bitcoin is serving a need in a changing world.
Day Trading Is Not for Everyone
In fact, it’s for very few people.
This is not financial advice, but I don’t recommend day trading and attempting to capitalize on Bitcoin’s volatility.
Because Bitcoin has performed so well since its inception, and because it’s receiving increased institutional support, the world’s largest cryptocurrency is better seen as a store of value asset.
Bitcoin is like digital gold.
Bitcoin is meant to be a store of value asset that one accumulates over the long-term. It is not a trade, or at least shouldn’t be, for most people.
In the crypto community, accumulating Bitcoin over the long-term is referred to as stacking sats.
Trading Bitcoin, whether for USD profit or to accumulate more Bitcoin, is difficult to do — even for the pros.
Calling a market top or bottom correctly is near impossible, especially for a young asset in a larger, nascent industry.
What’s the best way to approach Bitcoin?
Ignoring it completely means that you are likely missing out on one of the biggest phenomenons since the Internet.
If you plan to treat Bitcoin as an investment, you can dollar cost average into a position over the long run.
If you are still interested in “trading” Bitcoin, perhaps you should look to correlated, more classically traded assets.
There are a number of large and small publicly traded companies that either hold Bitcoin on their balance sheets or that mine Bitcoin. Here’s a list of “Bitcoin” stocks that you can do more research on.
Although this is not financial advice, most people do not make money day trading stocks either. Instead, long-term investing, utilizing strategies such as dollar cost averaging, suits most people.
Bitcoin is an investment.
Bitcoin is an investment that is ushering in a new era of globally accessible and versatile monetary assets.
Bitcoin is gold 2.0. It’s here to stay. Contrary to popular belief, Bitcoin is already a heavily regulated asset.
In the United States for example, both the Office of the Comptroller of the Currency (OCC) and the Internal Revenue Service (IRS) have standing regulations and guidance for use and reporting of Bitcoin.
There is also increased commentary on Bitcoin and the cryptocurrency space as a whole from both the Securities and Exchange Commission (SEC) and the Department of the Treasury.
While the world sorts out its feelings around Bitcoin, HODLers (long-term holders) can rest assured that Bitcoin will be here tomorrow despite the volatility or news headlines.
Thanks for reading my post! This is not financial advice — just info about Bitcoin and where it fits in the world. Let me know what you think about Bitcoin.