With the recent launch of new crypto exchange-traded funds (ETFs), it's never been easier to buy Bitcoin (BTC -2.37%) for your portfolio. You no longer need any specialized knowledge about crypto to get started, you no longer need to open a separate account with a cryptocurrency exchange, and you no longer need to create a digital wallet to hold your Bitcoin.
That said, you might still have reservations about investing a large chunk of change ($10,000 or more) into what has historically been a very volatile asset. Some of the most famous investors in history -- including Warren Buffett and Charlie Munger -- have steered clear of Bitcoin, so why should you be any different? Here are three compelling reasons you should be buying Bitcoin right now.
Bitcoin has unmatched upside potential
Since 2011, Bitcoin has soared in value from $1 to today's price of more than $62,000. Yes, there have been some missteps along the way -- such as in 2022, when Bitcoin lost 65% of its value. But, for more than a decade, Bitcoin has been the top-performing asset in the world, and it's not even close.
For example, from 2011 to 2021, Bitcoin outperformed every single other asset class by a wide margin. Bitcoin's annualized return was 230% per year. That trounced the returns of high-growth tech stocks, which were up 20% per year. It was the same story in 2023, when Bitcoin was up 150%, making it the top-performing asset class in the world. And, if Bitcoin keeps up the same blistering pace it has had thus far in 2024, it could be true again this year.
Bitcoin is a hedge against inflation and financial uncertainty
If that doesn't grab your attention, what if I told you that Bitcoin is also a potential hedge against inflation and financial uncertainty? In fact, many institutional investors now refer to Bitcoin as "digital gold." As such, they view it as a safe asset capable of maintaining its value through both good times and bad times.
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While it's possible to poke holes in this "digital gold" analogy, the fact remains that Bitcoin has several inherent properties that make it very similar to gold. Just as the world's physical gold supply has a known theoretical limit, so too does the world's Bitcoin supply. Bitcoin has a limited lifetime supply of just 21 million coins. Already, 19.6 million coins are in circulation, so the relative scarcity of Bitcoin will only increase over time.
Investors particularly love the idea that Bitcoin, just like gold, is a potential hedge against inflation. Unlike with traditional fiat currency, there's no way to print more Bitcoin if you need to inflate your way out of an economic mess. That's because the rate of new Bitcoin creation is carefully controlled by an algorithm. If too much Bitcoin is being created, the difficulty rate of Bitcoin mining goes up, and less Bitcoin gets created. Imagine if central bankers had to play by the same rules!
Bitcoin is the future of money
And, finally, there's one more reason to invest your hard-earned $10,000 into Bitcoin. And that's because Bitcoin is the future of money. You don't need to be a financial historian to realize that money has evolved over time. Currencies backed by precious metals (e.g., gold coins) have given way to paper currencies backed by nothing more than a promise. The next evolution will be purely digital money, and that's where Bitcoin enters the picture.
If you read through the original Bitcoin whitepaper from 2008, it's hard not to be blown away by its theoretical underpinnings. First described as a "peer-to-peer electronic cash system," Bitcoin was originally intended to overcome all the problems that brought about the financial crisis of 2008. In fact, the very first block of the Bitcoin blockchain contains a reference to bank bailouts, irresponsible monetary policy, and mismanaged fiscal policy.
Bitcoin's risk-reward profile
By investing in Bitcoin, you get access to nearly unbeatable upside potential, combined with a built-in hedge against inflation and economic uncertainty. From my perspective, that's an unmatched risk-reward profile.
And if you think Bitcoin's best days are behind it, think again. The conventional wisdom these days is that Bitcoin could eclipse the $100,000 price point by the end of 2024. Over the long haul, its price might soar as high as $1.48 million, according to Cathie Wood of Ark Invest. That's potentially 100-fold upside on a $10,000 investment today. That makes Bitcoin a no-brainer investment for me.
