If you’re wondering whether now is a good time to buy bitcoin, this guide provides the rational answer you’ve been looking for.
The short answer to whether you should buy bitcoin in 2020 is “probably.” The slightly longer answer is “sure, so long as you can afford to lock up that capital for a few months.” And the full answer, well, read on to discover everything you need to know about the merits of buying bitcoin in 2020. You’ll learn:
- Whether you should buy bitcoin
- If so, how much bitcoin to buy
- Where to buy it
- Where to store it
- How long you should hold bitcoin before selling it
- How much you can make off your investment
This guide assumes, incidentally, that you’re considering buying bitcoin as an investment, rather than for the dozens of other useful functions it facilitates.
Should I Buy Bitcoin?
tl;dr: Yes, if you can afford to and don’t mind having to wait six months or more to make a profit.
The trouble with asking the internet whether bitcoin is a sound investment is that the internet is awash with opinions, most of them conflicting and many of them wrong. When it comes to bitcoin, this problem is compounded because the people encouraging you to buy BTC already own bitcoin, and thus it is in their interests to shill you it.
Bitcoin is not a ponzi scheme, despite what its detractors may claim, but it’s obvious that the more demand there is for an asset, the higher its price will go. Thus you can’t necessarily trust bitcoiners, as be it due to financial incentives or simply bitcoin bias, they’re going to tell you to buy BTC. That said, you shouldn’t take advice from people who’ve never owned bitcoin either, as they’re prone to viewing the asset with suspicion, and are inherently biased against it.
Asking whether you should buy bitcoin is a bit like asking whether you should wear boardshorts. The answer depends on your circumstances and on what you’re planning to do. Do NOT buy bitcoin if you:
- Want to get rich quick
- Have minimal savings
- Would have to sell the BTC to cover emergency bills
- Are dependant upon making a profit from BTC (e.g. to pay off student debt)
- Would be borrowing credit to buy bitcoin
- Were told you could “double your money” or multiply your coins through sending them to a certain wallet or website
- Are doing so because you know someone who got rich off buying bitcoin
Conversely, you should consider buying bitcoin if you:
- Have low time preference (i.e. are happy to wait a while before cashing out)
- Appreciate that it may take 6-12 months or longer to realize a profit
- In a worst case scenario can afford to lose your investment
- Will be emotionally unfazed by dramatic price swings
- Can cite a fundamental reason why you believe bitcoin to be a sound investment (e.g. fixed and knowable supply; unseizable form of savings; antidote to endless fiat printing)
This latter point isn’t essential – it’s possible to buy bitcoin while knowing next to nothing about it – but it’s indicative of having done your homework. And if you can list a compelling reason why bitcoin may be a sound investment, odds are you know what else comes with the territory: the volatility, the media scare stories, tax agency threats for non-disclosure, and all the rest.
Just remember that bitcoin is legal to buy, store, and use, and should you decide to exercise that right, it’s nobody else’s business.
How Much Bitcoin Should You Buy?
As we’ve already established, this guide is not about shilling you on bitcoin’s merits; that’s a matter for you to decide. If you’re still reading, though, you’re evidently still interested in buying bitcoin. That being the case, how much BTC should you buy? Well, if you’ve done your research, you’ll be aware that one bitcoin can be divided into 100 million parts, so you can buy as small a fraction of a coin as you like.
If you wanna buy $5 of bitcoin, go ahead. If you’d like to purchase $10,000 of bitcoin, likewise. The key here isn’t so much the dollar amount you’re spending. Rather, it’s what percentage of your net worth that sum represents. There’s no right and wrong answer to the question, “How much bitcoin should I buy?” but here’s a rule of thumb:
- If you are a low-risk investor, allocate 5% of your portfolio (i.e. money you were planning to invest in stocks, bonds, real estate etc) to bitcoin.
- If you are a medium-risk investor, allocate 10%.
- If you are a high-risk investor, allocate 20-30%.
There, that was easy.
Incidentally, don’t feel obliged to buy all your bitcoin in one go; there’s nothing to stop you making weekly or monthly purchases as your paycheck permits, or from dollar cost averaging. That way, you’ll steadily acquire a stack of bitcoin without discernibly denting your finances.
Where to Buy Bitcoin
This topic is explored in detail in other Bidl guides, so we’ll keep this brief.
- If you are okay with having to complete KYC and disclose your activity, you can buy bitcoin with debit card through services such as Binance, Coinbase, and Wirex.
- If you would rather retain your privacy, you can purchase bitcoin directly from other people using a reputable peer-to-peer market such as Localcryptos.
- If you want to be super secretive about buying bitcoin, here are some more advanced ways of doing so.
- You could alternatively buy from a bitcoin ATM, but will be charged a higher fee than the method listed above.
Where to Store Your Bitcoin
After buying bitcoin from one of the services listed above, your coins will automatically be stored in the wallet associated with that account. That’s fine, and in theory there’s nothing stopping you from leaving your coins there; it’s not as if they’ll expire or be deleted if you forget about them for a year.
That said, it’s not recommended that you leave your bitcoin with a third party platform. The beauty about bitcoin, after all, is that you don’t need to rely on others to store your wealth – you can keep it in a wallet to which only you hold the key. After buying your first coins, it’s better to send them to a personal (aka ‘non-custodial’) wallet for safekeeping. Recommended bitcoin wallets include Exodus, Trust, and BRD. These are multi-currency wallets, so can be used for storing other cryptos too, but for the purposes of this guide, the only coin you’re interested in storing there is BTC.
When Should You Sell Your Bitcoin?
If you’re buying bitcoin solely as an investment, you’ll want to sell some or all of it once you’re in profit. How much of a profit you’ll make depends on timing – i.e. when you bought your bitcoin – and patience – in other words, how long you’re willing to wait before offloading.
For example, if you’d bought bitcoin at the start of 2017, you could have made 20x your investment if you sold a year later. That was a freak year however. Broadly speaking, you can expect to double your investment with bitcoin in a good year – or to half it in a bad one.
And that’s the trouble: with bitcoin, as with any other asset, the only way to assess the merits of your investment is with hindsight. For what it’s worth, history has shown the following to be true for bitcoin:
- Over a one-year timespan, you have a greater than 50% chance of making a profit
- Over two years, you have a greater than 60% chance.
- Over three years, you have a greater than 75% chance.
Be patient, and the odds are you’ll do alright out of your bitcoin investment.
To summarize then:
- Buy bitcoin if you can afford to and believe it to be a sound investment
- Accept that you will not get rich quick, or possibly at all, and may in fact lose money
- It may take a year or more until your investment is in profit
- Store your coins in a non-custodial wallet that you control
Disclaimer: This article is for informational purposes only. Invest at your own risk. Neither Bidl nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to have been caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article. Tl;dr: if you get rekt, it’s on you.