Is Bitcoin Too Expensive? How to Invest in Bitcoin?

Indeed, Bitcoin is expensive, and most retail investors are thinking if it is too late to buy Bitcoin. Millennials love cryptocurrencies because no one can touch their money, and critics call the cryptocurrencies’ bubbles that can burst’ any moment. 

Written by Fatima Amir

It is an exciting investment nonetheless for anyone out there who wants to get rich slowly or quickly. 

Major retailers such as Starbucks, Microsoft, Overstock, Home Depot, and recently, Tesla, along with many others, have started accepting payments in Bitcoin, which made it a convenient means of exchange online. 

Since crypto-philic celebrities started tweeting about bitcoin, the cryptocurrency went through some wild price swings in the early months of 2021. 

Summary of Price Changes 

Starting from December of 2020, Bitcoin has undergone some dramatic fluctuations that have stunned investors and made several news headlines. 

The following is a summary of these movements;

  • In December 2020, Bitcoin hit the record high at $20,000, and by the 31st, it was trading at $29,001. 
  • Within the first three days of 2020, Bitcoin reached $34,000.
  • Tesla bought $1.5 bn worth of Bitcoin, and it hit a new record high of $48,000.
  • In February, price hits $58,354 and three days later, falls to $44,845 in one day.
  • Mid-March Bitcoin is trading at a new record high of $61,701.
  • In March, Tesla starts accepting payments in Bitcoin.
  • In mid-April, it hits $63,375 and 5 days later undergoes a 25% decrease in one day, falling to $55,000. 
  • On May 10, 2021, Bitcoin was trading at 55,777.

Future Price of Bitcoin 

So, the million-dollar question is: What will be the price of Bitcoin in the future? 

The defining factor of crypto-curries is their price volatility, and Bitcoin, of all, has been through a very bumpy ride lately. It is worth mentioning that the price of Bitcoin has increased more than 500% since last year. 

If we look at the data we have of Bitcoin’s performance from December 2013 to December 2017, it increased from $964 to more than $19,000. 

Although the sharp ups and downs are causing bear and bull cycles, there are certain ways to invest money effectively in Bitcoin. Dollar-cost averaging is a tried and tested method. It helps investors to slowly, and steadily, invest their money when the markets are shaky.

Read on to understand it and find out why dollar-cost averaging is the right way to invest in Bitcoin today.

Dollar-Cost Averaging

Instead of lumpsum investing, investors manage risk by breaking down the investment funds into several smaller amounts. They periodically invest units in the same investment venture to decrease the risk of a sharp increase and decrease in prices. 

For example, John wants to invest $1000 in mutual funds. But the stock market is shaky, and John is a risk-averse investor. He starts investing $100 per month and invests the entire amount over ten months. What John achieves with this method is the benefit of investing more units when the stock prices were low and investing fewer units when the stock price was high. The dollar-cost averaging method lowers the average price paid for the investment.

Why is Investing Abruptly Risky? 

Putting a huge lumpsum in an investment as volatile as Bitcoin is the nightmare of every risk-averse investor. As such, the dollar-cost averaging method that is used by some very experienced investors, including Warren Buffet is safer.

There is no right way when it comes to investing in Bitcoin. People have lost money, and people have also made money. How you are going to make money from it is entirely dependent on how you invest.

Let’s look at how Bitcoin has gone up and down over one year. If you had invested a lumpsum amount at the beginning of 2017 and sold all of it by the end of 2017, you would have incurred a loss of 73%. On the other hand, if you had invested a lumpsum at the beginning of 2020 to buy Bitcoin, by the end of 2021, you would have gained a 300% profit. 

Accumulating Bitcoin with Dollar-Cost Averaging Method

Not just independent investors, but large corporations invest in Bitcoin slowly to expose the corporation to health risk. Break the lumpsum amount into numerous smaller units. Ideally, the units should be of equal amounts. 

Invest a unit every week or every day, depending on how you are comfortable investing. With the mobile trading app, you will be able to invest seamlessly every day, and you will be much more confident of your investment.

If you are not a day trader, you are probably not interested in monitoring the rate every hour and have other things on your list, making dollar-cost averaging the best way to invest. Day trading is not a successful method either. Statistics show that 80-95% of individuals who day trade Bitcoin lose money. 

Look at an example of investing in Bitcoin with the reliable investing method under discussion. You plan to invest $10,000 in Bitcoin, and you plan to invest this money within four months, so you divide the lumpsum of $10,000 into 16 payments of $625 each. 

You can invest the $625 every week at once or invest them daily or twice a day ( if you have the time). If Bitcoin is trading at a higher price on some days and low on other days, you won’t be gambling your money at one price. Even if you invest a sum on a day when the price upsurges, you will surely be able to make up for it when you invest on days when it dwindles. 

Bottom Line

It is never too expensive or late to invest in crypto-currencies. Bitcoin is the future of money, and many analysts are confident that Bitcoin will cross $100,000 in 2030. 

The dollar-cost averaging method of investing in Bitcoin may not be as flashy as other programs you come across on the internet that offer high returns overnight. But it is for sure, a tried and tested method that is reliable and used by many investors.

When you invest money slowly and steadily, not only are you more in control and aware of what happens with your money, but you also learn several valuable lessons along the way to build long-term wealth.