What is Bitcoin Investing?

Advantages of bitcoin investment

The primary way that bitcoin differs from other sources of currency is that it's completely decentralized — no government can interfere with its value or functioning.

Instead, the bitcoin network is dispersed across machines all over the world that work together to mine bitcoins. That means transactions across international borders are seamless, with no currency exchange required.

As a digital asset, bitcoin is also convenient because it doesn't rely on conventional banks. You can register a bitcoin account in seconds and begin trading immediately — no paperwork, qualifying process or hidden fees like there might be at a conventional bank.

For example, international transfers, which can be a costly hassle at many banks, are a non-issue for bitcoin with its unique global transferability.

State of the bitcoin market

Like investing in most emerging technologies, investing in bitcoin is a risky venture. Its price suffered one of its biggest-ever one day drops in March 2020, when more than US$1 billion in long positions were liquidated — the bitcoin price halved within eight hours, dropping to a low of US$3,600.

"The main catalyst of the sudden 50 percent decline in the price of Bitcoin within a span of eight hours was the 9.99% drop of the Dow Jones Industrial Average," Cointelegraph reported at the time. "The United States stock market experienced its worst sell-off since 1987, as panic over the coronavirus pandemic intensified to unprecedented levels." Within days, however, the price of the cryptocurrency had rebounded.

The digital currency's suffered another record-breaking drop in May 2021, when the value of a bitcoin sunk by 53 percent, wiping out a staggering US$1 trillion in value from the cryptocurrency market in one week.

Yet over the last four years, the bitcoin market cap has risen exponentially, jumping from about US$237 billion to a level of more than US$1.1 trillion — quite a substantial increase.

Speaking to the Investing News Network about cryptocurrency-backed exchange-traded products, Elliot Johnson, chief investment officer and chief operating officer with Evolve ETFs, noted that cryptocurrencies can be risky, but there are many investors that are still keen on the opportunity.

"Some investors right now, they like the volatility, they view that as the cost of opportunity, and I think there's some truth to that," said Johnson, who believes that cryptocurrency investments will stabilize as they gain wider mainstream appeal. "To be perfectly honest, I think there are a lot of investors out there who are waiting for volatility to drop before they get in."