Dear Happy Investor, Is long-term investing in Bitcoin and crypto currencies wise or not? The answer is completely person-specific. Moreover, no one can predict the future. If you ask me, the truth in this case lies in the middle: be curious but careful. Investing long-term in Bitcoin and crypto has potential, but also very high risk.
In this article I share my personal opinion from different angles. It is not a tome. For the sake of brevity, the article is therefore not complete. Nevertheless, I expect that my insights can help you in your journey to financial freedom.
Personal note from Happy Investors on Bitcoin and crypto
My personal opinion is this: I invest for financial freedom and independence. To achieve this, I don't necessarily need to take unnecessary risks, such as long-term investing in Bitcoin and crypto. With the best stocks and ETFs, I reach my goal. And for me, those offer relatively more certainty at the moment.
But suppose you can spare a small amount, then long-term crypto investing is worth considering. I personally apply 2.5%. Consider it lost. Invest it possibly in the top 5 largest crypto coins, and wait 20 years. After all, the technology is revolutionary. The only question is: how will it develop for investors?
I find it interesting to allocate a small percentage to Ethereum (and Solana). However, that is a personal question 😉 . Are you risk-averse? Are you not willing to lose >50% of your money? Then you should avoid it.
Long-term investing in Bitcoin and Crypto currencies: the future
Let's start optimistically regarding long-term investing in Bitcoin and crypto. It was a summer day in 2017. I came across Bitcoin at the time (and unfortunately not before). However, I found the second article I read more interesting. That one was about Ethereum and blockchain technology. I decided to buy Ethereum (and some other speculation) after more research.
Whether long term investing in Bitcoin and crypto currencies is wise I don't know. Perhaps it is more a matter of rock-solid faith here. Those who buy now and hold for 20 years have a real chance of returns during this period. Maybe a lot. Or maybe nothing at all. What I do believe in, however, is blockchain technology.
Do you want to make long-term investments in Bitcoin and crypto currencies? As far as I'm concerned, then we should look at the software.
1. Software for decentralization and transparency
The number one reason to choose long-term investing in Bitcoin and crypto currencies is because of the software. Bitcoin is a software. A blockchain technology. This software stands for, among other things, decentralization and transparency. Real crypto experts can explain this in detail.
Let's modernize from this perspective. Which crypto currencies currently have the most advanced software based on blockchain technology? Which crypto software is being used extensively right now? It is these crypto currencies that can increase in value in the long run. This is why I bought Ethereum at the time (and later Solana).
In my opinion, the highest chance of success for long-term investing in Bitcoin and crypto lies in the most advanced software and/or ecosystem or network effect. What are your thoughts on this?
2. Bitcoin mining based on clean energy
My biggest objection to Bitcoin is the mining thing. Bitcoin mining is getting slower and slower. More power is needed. And okay, if Bitcoin has a real Use Case then I understand. But for now, its function is mainly to act as a speculative investment. It's not exactly stable in value. And how many people use Bitcoin as a real digital currency?
Please note that I am not a Bitcoin expert. Experts will possibly provide convincing, factual counter-arguments.
Okay, why long term investing in Bitcoin and crypto currencies?
The other day I came across a speech by Kevin O'Leary. And, again, as an investor, I'm not a fan of Bitcoin. But he raised an interesting point. What if the growing push for Bitcoin mining (and other crypto with Proof-of-Work) could lead to increased investment in renewable energy? After all, large cryptominers must now buy off carbon certificates (see investing in carbon credits) as an offset to its energy consumption in mining.
100% crypto mining on renewable energy is still a long way off. But if I am optimistic it does offer long term potential for Bitcoin & Co.
3. Global adoption of stablecoins?
A third point, also mentioned by Kevin O'Leary, is the potential global acceptance of stablecoins. To me, stablecoins make much more sense as a digital currency (than Bitcoin). Okay, stablecoins do need to have the right financial backing. But it offers prospects as a borderless, reliable digital payment currency.
By the way, all major global pension funds and the like have little to no investment in crypto. This is a strong argument in favor of long-term investing in Bitcoin. Do the math: this is about trillions.
And yes, there are other reasons (like Bitcoin as an inflation hedge? Bitcoin as digital gold? Or the fixed supply of Bitcoin?).
2 dangers of long-term investing in Bitcoin and crypto currencies
As an optimist, I definitely see opportunities for long-term investing in Bitcoin and crypto. I don't believe in Bitcoin, but I do believe in the software of certain crypto projects. It can be lucrative to buy 5 of the larger crypto coins with advanced blockchain technology (software) for the long term. However, be aware of the many risks when investing in crypto currencies.
1. What is the real use case of Bitcoin and crypto currencies?
One of the biggest dangers for long-term investors in Bitcoin and crypto currencies is the Use Case. By this I mean: what is it used for? Bitcoin has some advantages. It is the first, the largest, fixed supply, et cetera. But how useful is Bitcoin really? Also, many crypto currencies have no use case. It's a hoax. A scam. And completely hopeless.
Want to successfully make long-term crypto investments? Be sensible. Conduct rigorous research on crypto with potential. Which crypto will be in higher demand in the long run?
2. High probability that >95% of all crypto currencies fail as a long-term investment
The crypto market is still (still) in its infancy. Think of it as start-ups. The risk/return profile is high. And in the long run a drastic shake-out takes place (this is scientific innovation theory). That means: the losers drop out. And if you ask me, >95% of all crypto currencies right now are losers (DogeCoin, Shiba Inu, et cetera). Avoid loss, avoid the losers.
Read more about the risks of cryptocurrency.
A few final remarks: I am not a "crypto expert". I am an optimistic investor who believes in new technologies. On the other hand, I have a preference for sustainable investments. And most importantly: my focus is on investing for financial freedom. This implies that I want as much control as possible. And the only way to do that is through extensive research.
My "problem" with crypto is that no fundamental analysis is possible. Crypto experts claim otherwise. I think that's nonsense. Fundamental analysis involves examining a company for strategic and financial aspects. Crypto coins don't make money. You can't really value them. All that's left is technical analysis and faith. For me, that is insufficient in relation to who I am, where I am now and what I want to achieve with investing (risk/return).
Do I believe in it? Yes, I do believe in blockchain technology. So I still have a little money on Ethereum (and Solana) from my initial investment in 2017.
How do you feel about long-term investing in Bitcoin and crypto currencies?