The COVID-19 pandemic has shaken the global economy. At a time like this, some are wondering whether bitcoin is a good investment. However, anyone considering investing during the pandemic, or any time, should remember that all investments involve some risk, whether they're stocks, commodities, or cryptocurrencies such as bitcoin.
Is bitcoin a good investment in 2020?
Bitcoin's price has risen more than 60 percent this year. Meanwhile, the S&P 500 has risen 3 percent, and the blue-chip Dow Jones Industrial Average has dropped 5 percent. Investors have piled into bitcoin amid the COVID-19 pandemic because they're looking to hedge their portfolios. In these uncertain times, they're putting their money in assets that are unrelated to central banks or the traditional financial system. As bitcoin operates on a decentralized network and may be less susceptible to adverse events in the conventional financial system, it carries some investment hedging appeal right now.
Is investing in bitcoin a good idea?
Those who want to hold an asset that's resistant to inflation may find investing in bitcoin to be a good idea. Central banks are currently pumping more money into the economy to avoid a recession, but that also raises inflation risk. While the central banks can print an infinite amount of fiat currencies, the quantity of bitcoin that will ever exist is limited and fixed—its supply is capped at 21 million units, according to bitcoin creator Satoshi Nakamoto. Therefore, there's no risk of inflation diluting bitcoin’s value, as is the case with fiat currencies.
Is bitcoin a good investment now?
Bitcoin launched in 2009, shortly after the 2008 global financial meltdown. Whether bitcoin was built for a financial crisis may be subject to debate. But here we are, facing a global financial crisis because of the coronavirus outbreak.
Whereas both Warren Buffett and Donald Trump are on the same page about bitcoin, in that they generally see it as having "no value," billionaire investor Chamath Palihapitiya of Social Capital disagrees. Palihapitiya sees bitcoin’s price rising to $1 million and recommends that investors dedicate 1 percent of their investment portfolio to bitcoin or cryptocurrencies. Bitcoin has gained massively since Buffett discredited it and Trump said its value was based on “thin air.”
Is bitcoin dead in 2020 as COVID-19 shakes up the global financial system?
Will bitcoin crash this year under the weight of COVID-19? No one can predict the future, much less that of emerging digital assets such as bitcoin. But the fact that bitcoin has continued to beat the stock market this year amid the COVID-19 situation shows investors are confident it will weather the storm. In fact, some investors think another currency is doomed: the US dollar. Rich Dad Poor Dad author Robert Kiyosaki thinks the "dollar is dying." The author also recommends using the government’s economic stimulus checks to invest in bitcoin.