Cryptocurrency is a new type of internet money and a popular form of investment. Its qualities as a store of value often see it compared to gold, with the obvious difference that it is entirely digital.
We’ve dedicated an entire article to explaining how a cryptocurrency like Bitcoin can have no physical properties, yet work as an excellent store of value, so we aren’t going to unpack that here.
Tl’dr: Bitcoin is backed by something meaningful
– thousands of computers that work to secure
the network. What is relevant is that Bitcoin’s revolutionary design and youth – just twelve years old – relative to gold, in use for over 6,000 years, means that its complex value proposition is still being understood and validated.
People expressing their opinion about Bitcoin’s value, by either buying or selling, is what makes it so volatile, especially when looked at over short time frames.
Over longer time frames, Bitcoin has increased in value, despite dramatic drawdowns along the way. Bitcoin can fall dramatically within seconds, as well as over prolonged periods (known as a Bear market), but it has always bounced back, eventually climbing to new all time highs.
Between 2009 and 2020, anyone who bought BTC (the currency symbol for Bitcoin) and held onto it would be in profit. This is remarkable for such a new asset, and there are plenty of credible bitcoin models and price predictions suggesting six figure price targets are not out of the question.
Holding Bitcoin for the potential of long term appreciation, rather than speculating on short term gain, is described as Passive Ownership. In our journey through ways to earn cryptocurrency this is the first point where you are risking your capital rather than just your time. Past performance doesn’t guarantee future success, so that risk is real and should be taken seriously.
Passive Ownership may sound a little pedestrian, but overcoming your desire to play the market might be the best financial decision you ever make. It does require an initial investment – with inherent risk – but once you have bought (and we have an article explaining how) there is little more you need to do beyond storing your cryptocurrency securely, other than trusting in it fulfilling its potential.
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