The Bitcoin Stock Debate: Practical Investment Advice for the Long-term Investor

Bitcoin currency
Photo by Aleksi Räisä

You can’t go to cryptocurrency forums, subreddits, or Twitter chats for an hour without hearing Holder’s advice.

It summarizes the advice to hold your assets, even in a volatile market. Holders think that blockchain will win in the long run. Therefore, investments in Bitcoin, Ethereum, and other currencies should be long term.

With these conversations about long-term holdings, the Bitcoin share split is growing. Investors want to know where to place their assets to maximize growth while avoiding risk.

Many credible research reports predict the financial future. Like Doug Casey, who signals socialism and, if he’s right, we all have to worry about our financial futures.

Long-term investments in cryptocurrency are at a critical point. Now, institutional and private investors are starting to pay attention to the profit that could be made from the cryptocurrency.

Legitimate investment instruments such as mutual funds and portfolio balancers are gaining momentum. The Bitcoin index (NYXBT) is even listed on the New York Stock Exchange.

Crypto is no longer a foreign subculture. It is rapidly gaining recognition and legitimacy.

The rise of crypto as a legitimate investment has left many investors curious. Is it possible to invest in cryptography for decades? Is it a good idea to invest retirement savings in cryptography?

While I am sure that some cryptologists will enthusiastically say yes, this article takes a more balanced and neutral approach.

If you are talking about real long-term investments, for decades, adding diversified cryptocurrency as part of a full portfolio has some advantages.

There are also severe disadvantages, which means that you should continue to invest in the regular stock market. However, there should be no splitting of Bitcoin shares at all if you adopt the right strategy.

Bitcoin Growth Potential

There is no doubt that investment in Bitcoin and other cryptocurrencies has enormous growth potential. Between January 1, 2017, and January 1, 2018, the S&P 500 grew by 22%. That is a massive year for the stock market.

During the same period, Bitcoin increased by 1300%. It is unbelievable that a trader who trades cryptocurrency can see the return on investment.

2017 was indeed a massive year for Bitcoin and other cryptocurrencies. A comparison of Bitcoin stocks is not entirely fair for 2017. The truth is that we do not yet have enough historical data on Bitcoin to predict the average annual return. 2017 was such a large anomaly of the year that we are wrong to assume that all years will be the same.

For the foreseeable future, there is a strong possibility that many cryptocurrencies will continue to rise in price. The implementation of the blockchain is only accelerating, and many projects will become more and more valuable.

The overall growth potential of long-term cryptocurrency investments far outweighs the potential for investment in the stock market.

Volatility

The massive inverted and shredding side is the two sides of the same coin when it comes to crypto. In the normal market, any investment made at the peak is rapidly deteriorating.

While the blockchain and distributed books are likely to win in the end, there is no guarantee that any of the current blockchain projects in the market will eventually succeed.

Ideas that seem like a good idea today could fail next year. That is the reality of long-term investments in crypto space. The challenge is to choose the winners and stay on top of your investment when things look like they might start going wrong.

That is a lot of work and risk for a retirement fund or a college savings plan for your child. Investing in cryptocurrency is still so speculative that it seems ridiculous to think about it in the context of a retirement fund or a college savings plan.

Volatility and speculation are the main reasons why the traditional stock market still makes sense as an investment vehicle for long-term, predictable returns.

However, there are no guarantees there either. If you planned to retire in 2009, you probably had to work for another five years before your portfolio stabilized. Overall, however, we can predict the stock market much easier than cryptocurrencies. Very rarely do shares of a public company drop down to zero.

Diversification

One way to reduce the volatility of long-term investments is through diversification.

Instead of putting it all your eggs in one basket, think about buying a small share in many investments. One look at a Bitcoin on a regular day is enough to understand why it makes sense.

At any given time, some investments are gaining momentum. Others are losing. Diversification helps to avert profits and losses. It softens up the considerable growth potential, but it also tempts losses.

Diversification makes cryptocurrency a more attractive investment that still has excellent growth potential with less volatility. However, determining which investments to invest in and where to allocate funds can always be time-consuming.

Besides, you will need to rebalance your portfolio regularly so that it does not become too heavy for one investment.

You will also need to review the list of investments in your portfolio frequently. Make sure you keep up to date with the news about these investments.

Index Investing

A new direction in the field of investment in cryptocurrency is index funds. These funds monitor the best cryptocurrencies and automatically restore the balance depending on market conditions.

Instead of buying cryptocurrency directly, you buy a share in an index fund. That automates most of the research and diversification process. Alternatively, you now track the overall movement of the cryptocurrency market.

For example, an index fund can hold a proportional share of the 50 largest cryptocurrencies. If a project starts to slip and fall out of the top 50, the fund automatically sells these coins for any new investment in the top 50. As a result, your assets are distributed among 50 different coins, and you get access to the whole market.

Index investment is also popular in the traditional stock market. Warren Buffett highly appreciated index investment as the best way for individual investors to take advantage of the entire stock market.

He even instructed his assets to remain 90% invested in the S&P 500 index after his death. Over the years, the combined interest in investing in the index will pay huge dividends over the decades.

Taxes

One of the serious considerations for long-term investors is reducing tax liability. The United States has no tax protection for cryptocurrency investments.

Every time you sell, you will have to pay a capital gains tax on your crypto. These taxes can seriously eat up your income.

On the other hand, the U.S. government offers tax breaks on retirement, college savings, and other forms of the long-term stock market investment.

Most people do not understand to what extent taxes should influence the decision made in the Bitcoin stock market.

The situation will vary per case basis. However, consider taxes when considering the long-term benefits of this investment strategy.

The Bottom Line

For most investors interested in long-term investment in cryptocurrency, it makes sense to have a diversified crypto portfolio along with a diversified stock portfolio.

Bitcoin and cryptocurrencies should be part of your overall investment strategy. However, do not neglect the stability and tax advantages of the stock market, and do not invest more in cryptocurrency than you can afford to lose.

About Vishaal Bhat 551 Articles
Student,Teacher, Father, Pharmacologist, Chess enthusiast, Blogger and Right-of-center political views