We asked successful investors: will you add bitcoin to your wallet?

There is a recent fad that is taking over the investing world, and it’s called cryptocurrency. Since the Bitcoin.com domain name was registered in 2008, the world has seen Bitcoin (CRYPTO: BTC) rise and fall, reaching just under $ 50,000 per token on February 15, 2021.

While many people are optimistic about the prospects for Bitcoin, many others feel that it is simply too risky for the average investor to hold in their wallet. Which side are you on? We asked three Motley Fool contributors if they plan to add it to their portfolio, and why or why not.

The best cryptocurrency to buy

Jon Quast: When building a portfolio, investors should focus more on stocks than cryptocurrencies. Shares represent interests in real companies with intrinsic value. In contrast, cryptocurrencies are all zeros and ones – they don’t own anything, don’t generate income, or have visions to create shareholder value. Some have practical utility, which is great. But the lack of intrinsic value makes investing in cryptocurrencies risky; this is an essential difference between them and actions.

Having said that, I would invest in a cryptocurrency, but Bitcoin is the only one I would buy at the moment. The prices of cryptocurrencies are determined by supply and demand. The supply side of the Bitcoin equation is extremely straightforward. New tokens are continually “unlocked” and put into circulation through mining. There are already 18.6 million in circulation, according to Blockchain.com, and there is only a trickle of around 900 new tokens per day as Bitcoin heads towards its cap. Its source code limits the total number of tokens to 21 million.

Other cryptocurrencies also have limited supplies. However, the demand for Bitcoin sets it apart – it’s the one people want to own. Many other cryptocurrencies have been launched, correcting the various shortcomings of Bitcoin. Nonetheless, Bitcoin remains the cryptocurrency with the greatest brand recognition. So it’s always the one that people plan to buy first, and I don’t see that changing anytime soon.

The increasing adoption creates a sort of network effect. After all, it’s not that scary to buy some bitcoin once someone you know or trust has bought it. I believe we have seen this trend among individual investors in recent years. But in the last few months, I think we’ve started to see it on Wall Street as well. You’re here wasn’t the first public company to buy Bitcoin, but its $ 1.5 billion purchase could be a watershed moment.

Tesla management has indicated that it bought Bitcoin as a small hedge against inflation. What if more companies followed Tesla’s lead, taking just 1% of the value of their assets and putting them in Bitcoin? If only a fraction of SOEs did this, demand would easily exceed new supply for much of 2021, pushing prices up. If adoption by institutions and businesses grows in this way, I wouldn’t be surprised to see Bitcoin hit $ 100,000 per token this year.

However, to be clear, I personally am not buying Bitcoin at this time as I bought some in 2018. And its recent price spike has elevated the cryptocurrency to a significant position in my wallet. With a winning stock, I would be tempted to “double down” and add to my winner. But I don’t intend to do this with a cryptocurrency like Bitcoin. I want to entrust the majority of my investments to companies that create shareholder value in the real world.

In short, I think there are good reasons to own Bitcoin – but not at the expense of owning stakes in the big companies that are changing our world for the better.

Bitcoin for a retirement port?

Barbara Eisner Bayer: Seven or eight years ago, a friend in his twenties introduced me to a new type of currency that he thought would take over the world. It was Bitcoin, and he had bought quite a bit of it, even though he had no investment experience. He wanted my advice and, as a long and conservative investor, I thought the cryptocurrency was too speculative and there was no way I would ever buy it.

Fast forward to today, and Bitcoin has come a long way. He made his television debut on The good woman in 2012. Large companies like Microsoft, Burger King and Home Depot started accepting it for payment, and Elon Musk’s Tesla recently bought it for $ 1.5 billion. Even Bill Gates once said “digital money is good”.

In other words, Bitcoin has become mainstream. In fact, it recently traded for almost $ 50,000 per token, and venture capitalist Jeremy Liew claims it could be worth $ 500,000 per token by 2030.

I was equally impressed and stunned by the growth of Bitcoin in the real world, and sometimes I’m a little upset that I didn’t buy any when my friend first mentioned it to me. But only a little upset, as my wallet is on a focused path to fund my retirement, and I don’t think Bitcoin has a place there.

First of all, it’s extremely volatile. It reached huge heights, but once lost 80% of its value. For a retirement portfolio, this type of fluctuation is too ulcerative – especially since, as I get closer to living on my savings, I want to preserve my wealth. With Bitcoin, the risks are just too high.

Moreover, there is no guarantee that it will ultimately be successful as a medium of currency, although more and more companies are starting to take it up. But you never know. At this point, I see investing in Bitcoin as a game of chance, and I’m not ready to take that chance just yet.

Call me chicken, call me short-sighted, call me old-fashioned: I stay away from cryptocurrencies. As Bill Gates told Bloomberg, “If you have less money than Elon [Musk], you should probably be careful. “Since my fortune is nowhere near Musk’s, I will take the advice of the founder of Microsoft and stay away.

Skip the hottest investment of the past decade

Sean Williams: I’m not going to beat around the bush: I don’t intend to add Bitcoin to my wallet. While I believe there is a future for blockchain technology and understand that Bitcoin is enjoying its first-mover advantage in the crypto space, there are a handful of reasons why I choose not to invest in the world’s largest digital currency.

Perhaps the biggest problem with Bitcoin is its utility. Although more companies are ready to accept Bitcoin as a payment method, or even add it to their balance sheets, Fundera’s research indicates that only 2,300 companies in the United States accept Bitcoin. That’s over 30 million businesses registered in the United States, of which 7.7 million are large enough to have at least one employee.

To build on this, about 2% of all Bitcoin owner accounts hold more than 95% of the circulating supply, according to Flipside Crypto. Even though tokens are divisible to eight decimal places (1 / 100,000,000 of a Bitcoin token is a “satoshi”), there aren’t enough tokens for Bitcoin to offer a game-changing utility.

I am also concerned that Bitcoin is lacking in power. There is no doubt that it is the most popular cryptocurrency around. But among the blockchains focused on the financial sector, this is not even the best option. For example, transactions on Stellarof (CRYPTO: XLM) network with Lumen Room (XLM) can be enabled and set up in seconds. During this time, the average Bitcoin transaction takes more than 10 minutes to validate and settle.

It’s a big improvement over traditional banking networks, but far from the best among blockchain projects focused on the financial sector. In my opinion, this makes Bitcoin replaceable – especially given the virtually non-existent barrier to entry into the crypto space.

History gives me my last reason to stay away. I’ve seen many large-scale investments rise to the sky – the internet, business-to-business, genomics, 3D printing, marijuana, and blockchain – and the one constant is that all bubbles burst. That’s not to say that the winners won’t break out of these trends, but investors almost always overestimate the speed of their adoption and their short-term potential.

Instead of adding Bitcoin to my wallet, I’m perfectly happy to buy and hold ancillary cryptocurrency stocks that will benefit Bitcoin no matter what. For example, I bought fintech stocks Square (NYSE: SQ) during the coronavirus crash of March 2020, and would consider adding more on the significant setbacks. Square Cash App’s peer-to-peer payment platform has seen a major increase in Bitcoin trading over the past year, which has dramatically increased revenue. And Cash App can remain a major growth engine no matter what happens to the price of Bitcoin.