If you do any looking, you can easily find articles articles about bitcoin all over the internet. I’m talking about trusted media sources like Forbes, Wired, CNN and The Wall Street Journal just to name a few. What’s interesting about all of these publications is that they all make note of how volatile and risky it is to put your money into bitcoin yet not enough of them highlight the opportunities that Bitcoin creates.
Is there no opportunity for gain with Bitcoin? or is it just one massive risk? Surely if there’s a risk then there is a potential reward for that risk, right? Well, allow me to show you how opportunity for gain with Bitcoin is much greater than the risk of loss.
To explain risk, I am going to use some gambling terms that you might be familiar with since gambling is such a massive risk.
“Even money” is a common term at almost every Casino. For every dollar you wager on an even-money bet, you will get an additional dollar back if you win. You risk 100% of your bet in an attempt to win a 100% profit but you are only capable of gaining what you are willing to risk. If you ask any investor, a 100% gain is unbelievably good but not if you are risking 100% of your investment to get it. This is why it’s smart to put money into stocks, mutual funds and all those other legacy finance tools. These are often a safe risk with a safe return.
Now, what about betting on the calculated risk of Bitcoin? Let’s take a look at both the risk or loss and the opportunity for gain. For this observation we are going to use the price of Bitcoin from February 3rd 2016 of $350 USD
Bitcoin and The Risk of Loss
If Bitcoin completely fails, you will lose 100% of your investment. This outcome is very unlikely because you will almost certainly sell it before the price hits the bottom so you probably aren’t “risking it all”. So, let’s just say that something terrible happens and the price of bitcoin falls to $180 and then you decide to sell it cause you think it will only go lower. That means that you losses would be somewhere between 0% – 50%.
Now lets look at bitcoin’s upside.
Bitcoin and The Opportunity for Gain
If bitcoin “succeeds” and achieves mass adoption, the price will increase substantially with market demand. I don’t know how substantially but a single coin went from being worth just fractions of a penny to now being worth about $350 USD at todays price. To date, the highest price that Bitcoin has ever reached is $1,216.73 USD which happened back in 2013. That’s about 325% more than todays price. So in comparison to todays price, the opportunity for long-term gain is at least 0% – 325% (since we have already observed it going so high before) and since the supply of bitcoins is steadily decreasing while the awareness and demand are steadily increasing, it wouldn’t be surprising if we see that create upward pressure on the price over time.
Although we have no idea what will happen in years to come, we can make educated guesses as to what will happen as bitcoin’s scarcity grows so why not take a calculated risk on one of the worlds most exciting emerging markets and bet on the long term success of a unique new open-source software called bitcoin. I think you will be glad you did.
What are the risks and opportunities with your local currency? Let us know with a comment below or a tweet at @BitcoinReasons