Bitcoin is often seen as digital gold, and on platforms like social media, it kind of feels like a new gold rush.
On TikTok, the cryptocurrency wave promotes a lavish lifestyle, exemplified by content like a self-proclaimed interview showcasing a Bitcoin Millionaire flaunting luxury cars.
Bitcoin’s journey began back in 2009 as a form of digital currency that lets users trade online without the need for traditional banks. Presently, the value of one Bitcoin hovers around $110,000.
So, is it too late to jump on the Bitcoin bandwagon? Here are some insights.
Claim: It’s never too late to profit from Bitcoin
- “Why isn’t it too late to buy Bitcoin?” (YouTube)
- “Bitcoin: The Ultimate Store of Wealth!” (TikTok)
- “Check out the youngest Bitcoin billionaires with their $100 million car collection” (TikTok)
Understanding Bitcoin
In the realm of cryptocurrency, Bitcoin is the biggest name by far. With a market cap of over $2 trillion, it surpasses the value of companies like Costco, Walmart, and Netflix combined. Just like stocks, Bitcoin’s price can vary dramatically day by day.
Purchasing cryptocurrencies is pretty straightforward. You can buy Bitcoin (or fractions of it) using USD on platforms like Coinbase or traditional trading apps like Robinhood.
All transactions are recorded on a blockchain—a secure, decentralized digital ledger that isn’t controlled by banks or governments.
Jennifer Schulp from the Cato Institute notes that overemphasizing quick profits from Bitcoin can be detrimental. She warns, “Viewing it only as a way to make quick money isn’t healthy for the long-term innovations this field can bring.”
The challenges of profiting from Bitcoin
Bitcoin prices are notoriously unpredictable. Like other investments—stocks, gold—their values can rise or fall carelessly. Historically, Bitcoin has been more volatile than traditional assets. Although it has generally increased in value over time, fluctuations are expected.
If you bought Bitcoin during its November 2021 peak, your investment could have dropped by half in just three months. In contrast, I bought Bitcoin in early February 2024 and saw around a 60% profit in just a month.
Sometimes these swings reflect the overall excitement in the market rather than solid, genuine economic indicators.
Brian Armour, from Morningstar, adds that Bitcoin tends to be less volatile than many individual stocks—surprisingly even for well-known names like Meta, NVIDIA, and Tesla.
Bitcoin’s relative newness
Bitcoin is fairly young—it’s only been around for 16 years—while the New York Stock Exchange has a history of hundreds of years. As time passes, more data will help investors gauge potential future movements in the stock market.
Historical data shows that since its inception in 1957, the S&P 500 has yielded an average annual return of about 10%.
Bitcoin has shown impressive gains in the last decade, averaging nearly 50% annual returns, but there’s no guarantee this pattern will continue.
“How Bitcoin behaves in times of financial distress is still uncertain,” Schulp observes.
Moreover, while stocks denote actual corporate ownership, Bitcoin lacks backing from tangible assets. This “digital gold” analogy has its limits; gold is something you can physically hold, while Bitcoin doesn’t have the same foundational support.
The uncertain regulatory landscape for Bitcoin
The regulatory framework for digital assets in the U.S. is still developing, with some regulations and bills making their way through the system.
“A major concern is how regulations will shape up in the coming years,” Armor explains.
Some Bitcoin advocates are optimistic, viewing the current administration as friendly towards cryptocurrency, potentially leading to favorable policies. However, the enduring uncertainty surrounding regulations renders Bitcoin a risky investment.
Overall investor sentiment towards Bitcoin
Well-known investors like Ray Dalio have mixed feelings about Bitcoin, once dubbing it a “remarkable invention” but warning of governmental backlash should it succeed. He stated that, “If Bitcoin becomes a major success, the government will likely take measures to undermine it.”
In 2023, Dalio admitted to holding a small portion of Bitcoin but acknowledged its risks.
Other prominent figures, such as Warren Buffett and Jamie Dimon, have expressed skepticism about cryptocurrencies for quite some time.
General public opinion seems cautious too. About 63% of respondents believe their current methods of trading or investing in cryptocurrencies are not secure. According to research, only 17% of U.S. adults have actively engaged with cryptocurrencies.
