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Why Millennials are Investing in Bitcoin

If you were a teenager or young adult during the financial crisis of 2008, you witnessed the implosion of major banks during your formative years. You were powerless to launch your career. You developed a permanent distrust of financial institutions. You were probably also an early smartphone adopter, or grew up with one. Imagine finding a new form of currency that offered you security, transparency, and anonymous, networked transactions that could be performed through your device without involving a central bank. Wouldn’t you buy it?

If you’re reading this, you don’t have to imagine. You’re already familiar with Bitcoin. You may be an older investor or a younger one, but chances are that you’re between 18 and 35 years old, which places you in the generational cohort defined as millennials. This generation’s life experiences dramatically shaped their perceptions of finance and technology. Sociological factors, along with unique habits and preferences, reveal why millennials are the core of Bitcoin’s rapidly growing user base.

Demographics of Bitcoin Users

Part of Bitcoin’s appeal is its privacy. Because Bitcoin users are anonymous, it’s difficult to obtain demographic information about them. Studies over the past few years have struggled to find metrics by which to accurately measure the number of users. The total number of wallets is up to 12 million as of spring 2017, but some users may own multiple wallets. Transactions cannot predict the number because some users conduct more transactions than others.

The available data can’t show us how many people use Bitcoin. We do know, however, that most users are millennials. A 2014 poll by technology research firm Accenture showed that millennials were heavier users of Bitcoin than the general population, with 13% of millennials reporting using digital currencies and 26% saying they were likely to use them one day. Another 2014 study, by the University of Illinois Urbana-Champaign, found the age of the average Bitcoin user to be 33. Meanwhile, a self-reporting poll on Bitcointalk showed that the majority of users were between 22 and 30 years old. It’s evident that millennials are driving Bitcoin’s increasing popularity.

Effects of the Recession

Millennials are drawn to Bitcoin for both sociological and psychological reasons. For those who were young adults in 2008, the Great Recession created an effect that can only be described as having the financial rug pulled out from under your feet. As big banks folded and the economy crashed, older millennials were left struggling with large amounts of student loan debt and an anemic job market. Most desirable (or available) jobs were located in urban areas with skyrocketing housing costs.

This situation left behind a bitter taste. It was a betrayal of expectations. Millennials found that traditional paths to financial and career stability had been either blocked or destroyed. The aftermath of recovery added to the disillusionment, as big banks were bailed out without being held accountable for the damage caused. Studies have shown that the cumulative effect of graduating in a bad economy can persist for decades, resulting in incalculable amounts of lost wages. Millennials felt the full brunt of these effects.

For millennials who came of age during the recession, Bitcoin offers an antidote to the corruption and unreliability of the old financial system. Bitcoin is decentralized and fully transparent, allowing users to verify transactions without relying on a bank or other central authority. Fees are low, and transactions can occur easily across national borders, allowing for global reach. The lack of government or bank involvement means that Bitcoin users feel a sense of control over their investments – the sense of control that millennials wanted, but never got. Millennials view Bitcoin as a hedge against future instability in the traditional market and a better way to save for loan repayment or retirement.

Technological Revolution

Millennials, especially those on the younger side of the curve, are tech-savvy. Many of them grew up with smartphones and thrive in the internet landscape. For them, Bitcoin — an internet of money – needs no explanation. It’s a natural development in line with the rest of technological progress.

Unlike big banking, the internet is a system that most millennials instinctively trust and understand. Bitcoin’s internet-native structure appeals to them. Because of this, millennials are more willing than older generations to put their funds into cryptocurrency, even when volatility is a given. Some are openly speculating on cryptocurrency markets, hoping for a moonshot that makes them millionaires, while others are more patiently waiting for their investments to develop. Still others are taking the initiative to found their own cryptocurrencies.

The tech boom of the past ten years has made most millennials enthusiastic about technology and its potential. Young tech entrepreneurs like Snapchat co-founder Evan Spiegel have already made Forbes’ billionaire list. Bitcoin investors believe that a similar boom in cryptocurrency is about to happen, and invest accordingly. As the internet’s influence on society and culture grows, so does Bitcoin’s influence.

The cashless convenience of Bitcoin is another appealing factor for millennials, who tend not to carry cash and use their phones for transactions. Credit card companies also dominate millennial transactions, but rising fees, interest rates, and debt may cause more millennials to choose Bitcoin over cards in the near future.

Bitcoin’s Sociopolitical Impact

Millennials are a socially-aware generation. While some invest in Bitcoin for simple profit, others do so because Bitcoin’s platform appeals to their political and economic views. Surveys from 2013-2015 show that 37% of Bitcoin users considered themselves to be Libertarian or anarcho-capitalist. These users prefer Bitcoin because it offers value based on a free market and is not regulated by banking or government authorities. If Bitcoin takes the place of traditional financial systems, the Libertarian economic ideal may become a global reality.

Some cryptocurrency advocates are driven by utopian visions for the future of economics. These users see Bitcoin as a revolution in finance that will globalize and reshape the meaning of economic value. With its open, public ledger system, blockchain could change the entire paradigm of business. Millennials who are entrepreneurial and looking towards the future view cryptocurrency as a tool for transforming the financial world into a more ideal, fair, and streamlined space.


The true influence of Bitcoin is yet to be seen. As more investors and businesses adopt cryptocurrency, the financial landscape is changing dramatically. Technological progress is driving the expansion of Bitcoin and Bitcoin’s price. Millennials, society’s greatest technology users, are leading this charge. Their shared historical experience, coupled with their natural instinct for the internet, makes them a key demographic for Bitcoin’s widespread adoption.

As new technology pervades more aspects of life, digital currency will become a mainstream reality. General adoption of Bitcoin will pull a diverse demographic of users. Until then, millennials will continue to drive the cryptocurrency’s evolution.

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4 Things You Need to Know About Bitcoin IRA Custodian Relationships

Investing for retirement is a long process that requires you to make many important decisions that could determine your financial stability during retirement. Interestingly, many people are getting increasingly tired of managed retirement accounts because the returns are often meager, the fund managers take a big cut, and the rest of the money left for the investors won’t keep up with inflation. Now, many investors are choosing self-directed IRAs so that they can choose investments with potential for bigger returns such as Bitcoin.

However, you can’t go it alone with a self-directed IRA and the IRS demands that you keep your retirement funds with a custodian. IRS Publication 590 says “An individual retirement account is a trust or custodial account set up in the United States for the exclusive benefit of you or your beneficiaries… The trustee or custodian must be a bank, a federally insured credit union, a savings and loan association, or an entity approved by the IRS to act as trustee or custodian…”

An IRA custodian can be generally defined as a firm that is saddled with the responsibility of keeping records of the assets and safekeeping the said assets of its clients. IRA custodians undertake an important function as set out in the Internal Revenue Code (IRC) that requires that IRA assets must be held by a custodian to provide overseer functions to people taking a hands-on approach to retirement investors. However, choosing an IRA custodian is an important decision that should never be taken with levity. This article provides you with insight into four things you need to understand about IRA custodians.

You have greater control over your IRA account

The first thing you need to understand in your relationship with a Bitcoin IRA custodian is that you’ll have a great control over the affairs of your self-directed IRA account. The custodian firm holds your retirement savings in an account but the responsibility of choosing the type of assets to be placed in the account will be transferred to you. Of course, you can choose to have Bitcoin, real estate, precious metals, and stocks among other things in your account.

However, since you are most likely setting up a Bitcoin IRA account or doing a 401K rollover to Bitcoin, you won’t need to bother yourself on doing due diligence on different kinds of assets and their tax implications for your retirement portfolio. However, a good custodian will have resources in place to provide you with up to date information, rules, and regulation about any asset you want to add to your portfolio.

With greater control comes greater responsibility

It has already been established that setting up a self-directed Bitcoin IRA under the watch of a custodian gives you greater control on your retirement portfolio. However, you should note that you’d be saddled with the responsibility of understanding the tax implications of your investment decisions. For instance, the law permits you to take annual distributions from your self-directed IRA once you are 70 and half years old. However, you’ll need to calculate the value of your assets in order to make the correct annually required minimum distribution.

Custodians charge different fees but you should seek value for money

The third point that you must understand is that the service of custodians are seldom free but the value they provide varies. Different custodians charge different kind of fees and the differences in the fee structure of one custodian doesn’t necessarily make the custodian superior or inferior to its competitors.  For instance, some custodians charge a monthly, quarter, or annual maintenance fees while others won’t bother you about a maintenance fee.

Apart from maintenance fees, you can reasonable expect your custodian to charge transaction fees and commissions when you make trades in your self-directed IRA. However, the fact that you are setting up a Bitcoin IRA suggests that your retirement portfolio will be exclusively loaded with Bitcoin. Hence, you might not have many reasons to be worried about paying fees and commissions on multiple trades.

There’s a code of specialization among custodians

It is easy to assume that all IRA custodians are the same because they are saddled with the singular responsibility of keeping your retirement funds; however, nothing could be further from the truth.  To start with, traditional IRA custodians have a core competency in helping you invest in traditionally stable assets such as bonds, mutual funds, ETFs, and some stocks.

Conversely, self-directed IRA custodians typically allow you put your money into alternative investments. Even then, self-directed IRA custodians specialize along the lines of helping you invest in Bitcoin, private company stock, and precious metals such as gold and silver among other alternative assets. It is important that you work with an IRA custodian whose specialty matches your investment vehicle, strategies, and goals.

What’s The Best Way to Invest in Bitcoin: Bitcoin IRA VS GBTC (Bitcoin Investment Trust)

Bitcoin is probably the currently most exciting development with an appeal that cuts across a wide variety of industries. Bitcoin a digital currency; hence, it has applications in the finance industry, e-commerce, technology, global economy and trade, and it could even upend geopolitical paradigms.

Al Gore, 45th Vice President of the United States says “ I think the fact that within the bitcoin universe an algorithm replaces the functions of [the government] … is actually pretty cool. I am a big fan of Bitcoin” More so, Ben Bernanke, former Chairman of the Federal Reserve says “[Virtual Currencies] may hold long-term promise, particularly if the innovations promote a faster, more secure and more efficient payment system.”

The fact that Bitcoin holds such a widespread appeal and the fact that it has the potential to rewrite the history of the world has brought it into limelight in the investment community. Now, investors are looking for ways to invest in Bitcoin in order to get a first-mover advantage. This article provides insight into two of the major opportunities for investing in Bitcoin.

Meet Bitcoin IRA

Bitcoin IRA is the smartest way to invest in Bitcoin especially for smart folks who understand that the government is not likely to keep its end of the bargain if social security fails during their retirement. A BitcoinIRA package provides you with a great opportunity to invest exclusively in Bitcoin for retirement instead of dividing your retirement portfolio between bonds, stocks and other IRA-eligible assets.

With BitcoinIRA, you’ll buy Bitcoin directly from exchanges and keep them in your digital wallet in secured vaults. After buying the Bitcoin, you’ll sit back and watch your investment grow as the adoption of Bitcoin continues to accelerate.

Meet GBTC (Bitcoin Investment Trust)

GBTC (Bitcoin Investment Trust) provides investors with an opportunity to invest in Bitcoin through the familiar vehicle of a publicly traded security. Bitcoin Investment Trust was established in 2013 with the symbol “GBTC”. It has about $102.77M in assets, shares outstanding of 1.86M, and each share of GBTC will buy you about 0.09414055 BTC.

The main selling point of GBTC is that it allows you to invest in Bitcoin without worrying about buying, storing, or selling your Bitcoin. More so, you can easily buy or sell GBTC shares during a trading session at USD prices without having to do complex calculations on how much your Bitcoin is worth per time.


The first difference between BitcoinIRA and GBTC is that BitcoinIRA gives you direct exposure to Bitcoin while GBTC gives you an indirect exposure to the digital currency. In essence, the value of your Bitcoin IRA portfolio is influenced by the fundamental forces of demand on and supply on Bitcoin.

Conversely, the value of your GBTC holdings will be influenced by fundamental factors, technical analysis, speculation, spread, volatility index, momentum, and volume price actions among other things. Hence, many things could potentially go wrong with an indirect investment in Bitcoin using GBTC than through a direct investment with BitcoinIRA.

Secondly a direct investment in Bitcoin through Bitcoin IRA could be potentially more rewarding than an indirect investment through GBTC. A unit of Bitcoin currently trades around $612 while a share of GBTC trades for about $87. Interestingly, Bitcoin has a market value of $9.733B with total Bitcoin mined at 15,914,350. In contrast, GBTC has about $102.77M in assets, shares outstanding of 1.86M.

In the last one year, Bitcoin has gained 151.57% from October 7, 2015 to October 6, 2016. Bitcoin started at $243.27 one year ago, it made a one-year high of $768 in June, and it currently trades around $612. In the same period, specifically from January 25, 2016 to October 6, 2016, GBTC has gained 81.03%.

Thirdly, BitcoinIRA offers you much more freedom than a GBTC portfolio. Once you have set up a self-directed IRA, you can buy and invest in Bitcoin for retirement by setting up a contribution schedule. More so, you can easily rollover your 401k or rollover your IRA into a Bitcoin IRA for bigger returns. In contrast, GBTC is subject to many constraints such as being a pre-approved investor. More so, GBTC subjects investors to a 2% annual fee on their portfolio.

Final words,

There are advantages to direct Bitcoin investments through BitcoinIRA and indirect Bitcoin investments though GBTC. However, the individual investor will be better served opting for a direct Bitcoin investment through BitcoinIRA because it gives you greater control over your portfolio.

Is Bitcoin the New Gold: Similarities and Contrasts for Investors Seeking Stability?

Investors are always on the lookout for ways to preserve their wealth, increase ROI, and grow their wealth. However, wealth preservation now seems to top the list as the U.S. Presidential elections draw near and the realities of the Brexit vote starts to sink in. Hence, investors tend to seek refuge and stability for their investments in safe-haven assets and alternative investments. Interestingly, gold and Bitcoin are two alternative investments that tend to attract the most attention.

Gold is a naturally occurring element that has been behind civilization, government, war, and trade for thousands of years. Bitcoin is a modern digital cryptocurrency that provides a virtual peer-to-peer platform to facilitate electronic trade. This article seeks to compare and contrast gold and Bitcoin in order to help investors make educated decisions for wealth preservation.

Similarities between gold and Bitcoin

1. Both are gold and Bitcoin are mined

Both gold and Bitcoin are mined by “miners” even though they use different skills and equipment. The changes in the supply of gold of gold are often determined by the discovery of new gold deposits and the development of more efficient mining techniques for extracting gold from ores. Likewise, powerful algorithms determine the volume of Bitcoin in circulation. The said algorithms determine how Bitcoin miners are rewarded when they add new Bitcoin transactions to the blockchain.

2. Finite supply but infinite demand and application

Another similarity between gold and Bitcoin is that they both have a finite supply but a practically infinite demand, use, and application. Gold is mined from the ground and the amount of gold available in the world is finite between 120,000 to 140,000 tons (above ground) at an estimated worth of $1.8 trillion). Likewise, Bitcoin is finite because the total number of Bitcoin that can be mined is 21 million Bitcoin.

However, the demand, usage, and applications of gold and Bitcoin is practically endless. Gold and Bitcoin offer a safe haven in times of financial instability. Gold has some industrial applications and Bitcoin meets the security and transparency needs of a digital economy. More so, some countries have started considering minting physical Bitcoin in order to endorse it as currency.

3. Neither gold nor Bitcoin is tied to a government currency

Another interesting similarity between gold and Bitcoin is that they are both free from direct government influence because neither asset is tied to a government currency. Hence, the government can’t make a move to set their exchange rate, devalue them, or determine how much of either gold or Bitcoin are in circulation.

The fact that neither gold nor Bitcoin is tied to a government currency makes them a good hedge against economic and geopolitical instability. Gold and Bitcoin will always be a legal tender irrespective of country, religion, nationality, or language barriers. Hence, if any world government runs into a mess leading to economic instability, both gold and Bitcoin are unlikely to lose their value; rather, they’ll tend to record an increase in their value during periods of economic instability.

4. Both gold and Bitcoin have a mutual enemy in central banks

Central Banks do not like the fact that gold could render their fiat currencies useless and they always try to undermine the yellow metal at every possible opportunity. The chatter about U.S. Federal Reserve’s plan to raise interest rates in order to reduce the safe-haven appeal of gold is a point in case. Interestingly, these central banks have started transferring their distaste for gold to angst for Bitcoin.

The emergence of Bitcoin as a world currency could potentially erode the necessity of central banks in the global economic landscape. For one, Bitcoin is an electronic money; hence, there’s little need for a national money supply. More so, the low transaction cost associated with Bitcoin transactions will eliminate the need for the interest rates that central banks set in line with economic trends.

Differences between gold and Bitcoin

Despite the interesting similarities between Gold and Bitcoin, it is important to point out some stark contrasts. To start with, gold is physical whereas Bitcoin is purely electronic; hence, Bitcoin is more suitable to the digital economy than gold. The physical nature of gold attracts the attendant risks of theft, being misplaced, and being destroyed (highly unlikely but plausible nonetheless). Bitcoin is digitalized and it would require a serious intent to steal Bitcoin – it could happen but you are not likely to be the only victim.

Secondly, Bitcoin could potentially be a better investment than gold because of the fundamentals of demand and supply and the effect of market forces. The price of gold is subject to many factors such as demand and supply, U.S. interest rates, USD Exchange rates, government policies, and geopolitical tensions. Hence, you can never really know what to expect and gold is an unstable way to seek stability in periods of economic and political uncertainty. Bitcoin has once surpassed gold when it traded for $1,242 and the factors are still much in place to make Bitcoin a more valuable alternative currency than gold.

5 Things You should Know about Investing in Bitcoin for Retirement With a Solo 401(k)

Capital preservation is important and you are not likely to have any money left to spend during your retirement if don’t understand the principles of capital preservation. Nonetheless, capital gains ensures that your wealth keeps up with inflation and uncertain economic trends; hence, the goal of the astute investor should not be capital preservation but capital appreciation. Bitcoin is one of the few assets that promises an exponential ROI on a 401(K) plan in sharp contrast to the mutual funds that IRA managers tend to peddle.

Bitcoin is a relatively new asset and naysayers are quick to claim that it has not been time-tested and proven. However, it is important to remind you that in November 2010, the number of Bitcoin mined was about $1,000,000 and $1 was equal to 2BTC. As at February 2011, Bitcoin was on par with the USD and now 1BTC trades around $600. Hence, investors can only expect Bitcoin’s value to increase with time.

If you have a boring 401(K) plan or another IRA account, this article provides insight into five things you need to understand about investing in Bitcoin for retirement.

1. Legality

It is perfectly legal for you to use Bitcoin to fund your 401k retirement plan or to convert the funds in your 401k plan to Bitcoin. One of the many factors that attest to the legality of Bitcoin for 401k plans is that the IRS has determined that Bitcoin is a virtual currency that has “an equivalent value in real currency”.

In fact, the IRS explicitly refers to Bitcoin in its IRS Virtual Currency Guidance: Notice 2014-21. The IRS notes that “Bitcoin can be digitally traded between users and can be purchased for, or exchanged into U.S. dollars, Euros, and other real or virtual currencies”. In essence, the IRS is claiming that the direct convertibility of Bitcoin for real currencies such as USD and Euros qualifies it as a legal tender. In essence, you can choose to fortify your 401K plan with Bitcoin without

2. Duration of investment

The kinds of assets that you’ll naturally want to keep in your IRA are long-term investments that will have enough time to mature and yield full returns. However, many of those long-term assets tend to be conservative investments with low rewards; hence, you are not likely to get to your financial goals in good time. However, having Bitcoin in an IRA plan gives you an opportunity to score the big gains that accompany speculative investments.

Nonetheless, the question” how long should I keep Bitcoin in my IRA?” cannot be answered at the surface level because there’s no one size fits all answer.  For one, people have different risk levels and people do not have the same number of years ahead until retirement. Hence, the duration for keeping Bitcoin in your retirement account can only be made in consultation with a professional financial adviser who will examine your unique position.

3. Cashing out Bitcoin from your retirement account

Irrespective of how much money you have in your retirement account or how much returns you recorded, you’ll eventually need to cash out or liquidate your Bitcoin IRA. Cashing out or liquidating a Bitcoin IRA account is quite easy. You can choose to liquidate your Bitcoin to cash directly from a Bitcoin exchange.

More so, you can choose to take “physical” possession of the Bitcoin and spend it on goods and services in store where Bitcoin is accepted. Microsoft collects Bitcoin payments for apps, games, hardware and software. Dell accepts Bitcoin and you’ll have a 10% discount when you pay with Bitcoin. Newegg, Target, Amazon, Tesla, Expedia, PayPal, and CVS Pharmacy are just few out of the hundred businesses that accept Bitcoin payments.

4. A word or two on taxes

Death and taxes are about two of the most certain things in life and you are not likely to escape either of the two. Hence, investors often try to minimize the taxes they pay on their investments decisions or on capital gains they make when such investments are profitable. Interestingly, you won’t incur any taxes if you rollover your annuity, pension plan, 457(b), 403(b) or 401(K) into Bitcoin. In fact, rolling over most retirement accounts qualifies for a tax-free Bitcoin IRA rollover.

5. Eligibility

You can rollover your 401k into Bitcoin if you are willing to through the quick process of applying for a self-directed IRA. Interestingly, if you have a ROTH IRA, Traditional IRA SIMPLE or SEP account, you can choose to set up a Bitcoin Investment Trust. More so, people with 401K, 403B, and Thrift Savings Plans (TSP) are also can also set up a Bitcoin IRA with their original 401K plans. Some specific type of pension plans and some select annuities are also eligible for a Bitcoin 401K rollover.

Bitcoin is turning out to be a very solid asset class

Should you invest in Bitcoin?

BTC investment-2013-chartIf you require portfolio diversity and strong upside potential, the short answer to the question is “yes.”

However, a recent Forbes article astutely points out that investors might be reluctant to add bitcoin to their portfolios because they don’t entirely understand it. We couldn’t agree more. Bitcoin is an entirely new asset class, and has to be understood in terms of its own value and market dynamics.

In defining something unfamiliar, it’s occasionally helpful to point out what that entity isn’t, before considering what it actually is. So let’s first take a quick glance at what bitcoin isn’t.

Bitcoin is certainly not a stock.

When you own, say, $1,000 worth of stock, you actually own part of a company. If that company is strong and profitable, it may even pay dividends – although the fact that a company regularly pays dividends doesn’t automatically mean its stock represents a wise investment.

Make no mistake. While some stocks are clearly better than others, all stocks are, at best, paper assets. Despite any comfortable feeling you may have about a particular stock, you need to routinely monitor its progress. Blockbuster, Enron, General Foods and TWA are all examples of companies once considered Wall Street “darlings,” and are no longer in business. Had you held shares in any of them till the very last minute in hope of a reversal, you would have lost all your money.

Bitcoin is also not a commodity.

When we use the word “commodity” in a discussion about investing, we’re usually referring to a physical good like lumber, silver or even the orange juice we drink, as a tradable entity on an established commodity market.

Commodities are either traded on the spot or the futures market. On the spot market, a commodity is traded in real time for immediate delivery. More often, commodities are traded on the futures market. In these instances, what is actually being traded is not the physical commodity itself, but a contract to buy or sell the commodity at some specified future date. An investor who calls the price correctly at the contract’s expiration date stands to make a windfall. On the other hand, an investor who misses the mark can easily be wiped out. Commodity investing is not for the unseasoned investor not for the faint of heart, and it’s most certainly not a venue for one’s retirement funds.

But then if bitcoin is not a stock or a commodity, can we call it a currency?

The generally accepted notion of currency is that it’s a form of money – either in paper or coin form – used to purchase goods and services. Traditional currencies are issued by the government of a specific country; and some, like the U.S. dollar, are honored in several countries.

Currencies are traded on the foreign exchange – FX or forex – market. It is, by far, the largest financial market in the world. The most active participant/traders are banks and other financial institutions. Like the futures market, this one is not for amateurs or private investors. Trying to gain a foothold in this market would be akin to wiring your entire house with just a “Dummies” book as your only guide.


Bitcoin is a currency in the sense you can use it to purchase goods and services, but it is not tied to a particular country. Indeed, one of the principal benefits of bitcoin is that it’s a peer-to-peer transaction. When you purchase using bitcoin, you bypass the intermediary of a bank or other financial institution, thus assuring yourself of a transaction with enhanced privacy, security and efficiency.

Also, while some forex brokers will now accept bitcoin, we recommend you steer clear of such a transaction. Forex markets have not yet entirely accommodated the differences and idiosyncrasies of bitcoin. Add to that problem the normal risks of the forex markets, and you stand to lose your entire initial investment too easily.

That said, bitcoin has some similarities to all of the above asset classes. But its differences are so conspicuous that many experts feel it deserves to be classified as a separate asset class. One thing’s for sure – bitcoin’s price is uncorrelated to that of any of the traditional assets.

invest in bitcoin

Invest in Bitcoin : Look out for the right signs

Invest in Bitcoin?

It is clearly he front runner among all the various cryptocurrencies and has steadily consolidated its presence. As more people invest it bitcoin, it is reflected in the increased trading volumes across the exchanges around the world. With more investors taking it seriously and using it as portfolio diversification tool, Bitcoin has proven to be a reliable channel for temporary hedging. Owing to these characteristics, it is being considered as digital gold since its supply is also limited. As we have an estimate of when its production comes to a halt, long term investments in Bitcoin are feasible. Based on historical data and trade driven analysis, here are a few scenarios where mid to long term investments in Bitcoin might be a good idea:

Governments working towards adopting Bitcoin:

Any news which promotes the adoption of Bitcoin, especially by the Government strengthens the positive sentiment towards it, more people decide to invest in bitcoin. When Silk Road was closed and bitcoins were seized, the currency came under a negative light. But when the US Senate held a hearing in the later part of 2013, under the title “Beyond Silk Road: Potential Risks, Threats, and Promises of Virtual Currencies” and many  senators came to consensus that Bitcoin holds great promise, the trading price of Bitcoin boosted remarkably ( $685-$1072 in 10 days).

Later in 2015 New York State Department of Financial Services released a set of customized rules. These were meant to regulate Bitcoin and digital currency businesses.  They were the first ever set of rules directly targeted at digital currency businesses. There was a significant rallying in price which shows how positive, their adoption is for the market sentiment.

Major firms adopting Bitcoin as a payment method:

When mainstream companies adopt Bitcoin as a payment method, more people invest in bitcoin and it has a positive impact on prices. These opportunities would be ideal for mid-term trades. This is owing to the fact that something as nascent as Bitcoin has found roots in the existing system which strengthens its credibility and onsets positive sentiment. This was clearly observed when companies like Microsoft, Dell, Paypal and embedded Bitcoin in their payment systems.

Launch of new Bitcoin exchanges:

Whenever a reputed firm in the Bitcoin world undergoes change, it will have implications on trading prices. The launch of new Bitcoin exchanges or structural expansion of wallet companies or blockchain technology companies into newer areas is always a positive sentiment marker which encourages more people to invest in bitcoin. (Coinbase and Gemini exchanges are good examples). Depending on the sheer volume of the change or launch, mid or long term investments can be planned.

Global acceptance or macroeconomic factors:

In early 2013 when People’s Bank of China accepted Bitcoin, new trading volume started flowing in. The price of a bitcoin shot up by $ 400 in a span of 10 days and the market went berserk. A similar sentiment was observed when EU declared that there would be no VAT (Value Added Tax) on Bitcoin Trades.

Though China took a negative stance on Bitcoin, increased volumes in Bitcoin trading while Yuan was devaluated were observed. Major global events where people look at Bitcoin as a hedging option, always drive up its trading prices. This makes these events ideal scenarios for investing.

Basing on these factors and clever entry positions, one can plan profitable investments in Bitcoin that are assured to give good returns.

Bitcoin IRA is similar to a Bitcoin Safe Haven

Bitcoin Safe Haven: 5 Times Bitcoin Performed

Bitcoin Safe Haven

Global markets are always affected by macroeconomic issues that majorly impact a particular country or region. Many a times, mere speculation about an impending event causes volatility and moves the markets significantly. Whenever this happens, investors scurry to find a safe haven so as to move their investments and shield themselves from the negative impact of the event. Traditionally, gold has been the safe haven whenever there was a massive shift in the trading prices. But this bubble was burst with the ‘Oil Slump’ of 2014, where the fall in oil prices affected other commodities. Gold and other precious metals marked historic lows and the market participants were left with limited options to safeguard their assets.

The introduction of crypto-currencies and their increasing trading volumes (especially Bitcoin), caught the eyes of many investors. They proceeded to diversify their portfolios using Bitcoin as a major instrument.  This could be substantiated from the trading prices of Bitcoin during the oil slump which experienced a short term boost. This happened time and again when there was an imminent threat to any economy which could have an impact globally. Let us look at five such instances when Bitcoin was looked at as a good stand in investment.

Greek Crisis:

There was heavy  speculation around Greece facing a possible exit from Eurozone by defaulting on its debt obligations. This created tension in the European Commodities market which had been seeing a sharp drop in prices accompanied by strong trading volume. When the Greek economy was collapsing there was a rise in the price of Bitcoin. This was majorly attributed to the increase in volumes. It came on account of those Greek users who were shut out of their bank accounts and were hence driven to use the digital currency. But later when the situation became dire, there was a sharp drop in the trading price of commodities. During this period, Bitcoin price moved up the ladder with good trading volume. This was attributed to investors moving their funds into Bitcoin to hedge against drastic price drops in commodities.

Russian Ruble drop:

The economy of Russia was majorly impacted because of the oil slump leading to a sharp dip of Russian Ruble. The general population swapped currency for products to hold the value. However, the investors decided to trade heavily in Bitcoin to temporarily hold till their currency gets a strong footing again. This was observed in the drastic increase of trades on the Bulgaria based cryptocurrency BTC-e.

Scottish Independence Referendum:

Though the Scots voted against leaving the United Kingdom, the speculation surrounding the event drove the trading prices of pound low. During this period, there was a significant increase in the trading price of Bitcoin. This was fueled by the fact that Bitcoin was being looked up to as an alternate for British Pound in the event Scotland votes for Independence.

Yuan Devaluation:

Bitcoin marked a two year high in June 2016 owing to the devaluation of the Yuan in China. While the devaluation impacted the global economy adversely, the rise in the price of Bitcoin was attributed to heavy investments being shifted towards it.

UK leaving European Union: ‘Brexit’

With speculation around UK leaving the European Union, there was high volatility in the price of Bitcoin. But the volatility was observed to be in an upward trend. This is made it clear that the market players are moving their funds into Bitcoin to avoid the repercussions of the Brexit. This can be observed from the low volumes in the European trading platforms and increased volumes in the Bitcoin platforms.

Hence it is indeed true that Bitcoin can in fact be the safe haven at least for short duration. Chris Burniske, a block chain analyst and products lead at investment manager ARK Invest opines:

“Bitcoin[and Gold] shares those same characteristics: Both have an extremely limited supply and a relatively inert state. While gold has had a bit of a run in 2016, over the last five year period it’s been a terrible performing asset. So you’ve got people starting to wonder where there are safe havens to store their assets. I think you have lot of people saying ‘Hey we want to diversify a little bit’ making allocations to bitcoin’.”

Hence Bitcoin can in fact be termed as ‘Digital Gold’.

Bitcoin versus Gold

Bitcoin Versus Gold

Bitcoin as an investment?

It’s natural for economists to give gold a better score when comparing Bitcoin versus Gold for investment purposes. Gold has been studied, traded and invested in for over a thousands of years. It has been an integral part of human civilization for a long time and has an undeniable track record that can be traced to the earliest civilizations on earth.

So it makes sense that a majority of economists (Paul Krugman included) have more faith in the precious metal than the relatively new digital currency.

However, for the believers, one reason that pushes them towards the credibility of bitcoin versus gold as an investment is that it is only about five years old. and, it is already competing with gold.

But, the golden question here is.

Are there similarities between gold and bitcoin?

After all, bitcoin has taken the world by storm and there is speculation that it will soon surpass gold in terms of popularity. Here are a few attributes that are inherent in both bitcoin and gold

Looking at the Bitcoin versus Gold Price Movement

Bitcoin versus Gold price

Limited Availability of the two assets

Gold’s cultural value and importance comes from its scarcity. Gold is available in limited quantities to meet its demand. It is estimated that in the entire history of man kind only 171,300 tonnes of gold have been extracted.

The story is similar for bitcoins. There will only ever be a limited quantity of 21 million bitcoins in circulation, which is probably going to be reached far off into the future, the majority opinion is 2141.

Those are just a few of the reasons why people think both gold and bitcoins are precious when analyzing Bitcoin versus Gold.

No Backing

Bitcoin and gold are backed by no one. While there are real market values for both, they are neither controlled nor governed by any central agency. This makes the prices of both adjust according to demands in a transparent manner.

Both have value due to the reason that society has faith that they will keep said value over time. Some say gold has industrial use, but the majority of gold is purchased for investment. Don’t forget, both gold and bitcoin are open source.

No Intrinsic Value

Both gold and bitcoin have no intrinsic value in my opinion. They are of no use if, say, an apocalypse arrives. They have demand but are not something which can be used to meet our basic needs like food and water.

Sure, you can use gold to get money but it is again due to the fact that society has faith in it. In many places the situation for bitcoin is the same.

When it comes to Bitcoin versus Gold

Bitcoin is built with the ubiquitous internet revolution in mind. It has some ideal attributes of the online world: decentralization, transparency, cryptography and is peer to peer. Gold has none of this and it is really heavy to move.

As a contemporary payment system, bitcoin could be used globally with security and speed.

John Browne from Euro Pacific Capital opines:

“the advent of crypto-currencies represents the increasing popular demand for a currency insulated from political debasement and bank profiteering. Crypto-currencies represent a legitimate attempt by private citizens to reassert their sovereignty over such government actions.”

No matter what the economists say about bitcoin, these attributes give bitcoin a healthy advantage.

Bitcoin and Brexit

Bitcoin and Brexit

On June 24, 2016, immediately after the final Brexit vote was publicized, the pound sterling plunged to its lowest level since 1985; conversely, the US dollar and the Japanese yen rose to new levels.

It’s telling, though, that the price of bitcoin actually rose 6.5% in the 24 hours after the results of the Brexit referendum became publicized. Bitcoin had already been up 25% prior to the vote for reasons not directly related to Brexit.

Clearly, those who jumped in to bitcoin to drive up the price were looking for an alternative to conventional currency during a time of political unrest.

Bitcoin briefly became less volatile than the British Pound

In that role, bitcoin performs much like gold – an uncorrelated asset to which traders flock during times of geopolitical uncertainty. According to Coinbase data, the Brexit movement had a positive impact on bitcoin prices even before the referendum. In the week just before the vote, Coinbase, which offers a well-known bitcoin wallet and a bitcoin exchange, encountered a 55% increase in new account applications and a 350% increase in bitcoin purchases from the UK.

On the day of the referendum, the anticipation of Brexit affected bitcoin purchases before the actual vote, and Coinbase saw an 86% increase in UK signups. One Coinbase official observed a similar reaction with bitcoin when it served as an effective safe haven against the debt morass in Greece, and the capital regulations in China.

Founded in 2012, Coinbase now has 4 million users and operates in 32 countries. It launched in the UK only a year ago, and is making it possible for Brits to buy bitcoin in pounds, euros, or dollars.

Bitcoin and China

China is attempting to outdo the West in bitcoin activity by making large investments in server farms and carrying on immense speculative trading on Chinese bitcoin exchanges. In fact, Chinese exchanges account for 42% of all bitcoin transactions in 2016, according to a Chainalysis report commissioned by The New York Times.

2016 Bitcoins Movement

Just last week, the giant Chinese internet company, Baidu, along with three Chinese banks invested in the popular American Bitcoin company Circle.

Again, we would like to emphasize the effectiveness of a combined bitcoin/gold investment. Gold, of course, is a traditional risk-off safe haven for investors and traders looking to protect their wealth against the uncertainty of paper assets. Bitcoin, on the other hand, presents an excellent speculative opportunity for an investor looking for aggressive upside return. The combined bitcoin/gold strategy can be especially effective since the digital currency and the yellow metal are both non-correlated assets.

The current market cap of all bitcoins is now $10.7 billion.

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