With so much uncertainty in the world and talk of a recession increasing daily, it may be tempting to consider Bitcoin as an alternative way to invest your hard-earned cash.
Worried about volatility regarding the stock market? Well, Bitcoin and other cryptocurrencies have price volatility unlike anything you’ll ever witness in the British stock market. Bitcoin can sink, rally and sink again by lunchtime. In the last three months it has seen a high of £10,871, a low of £5,956 and is around £8,170 today. We’ve all read about crypto millionaires but is this even possible anymore? I imagine most of those reaching millionaire status struck it lucky by buying in the early years when it languished under £100 a coin.
Bitcoin never sleeps, so unlike stocks that are only traded during specific hours set by the London Stock Exchange, Bitcoin is bought and sold constantly.
Where should you store your Bitcoin? You have the choice of a desktop, app, online wallet, or even a physical drive. To access it, you need complex keys, containing 12 unique words, an authenticator app and passwords. Which leads us to the dilemma of where to store the passwords and keys? On top of this complexity, you don’t have to search far to find the internet is full of stories of people having lost their keys or had their cryptocurrency stolen. Exchanges have been hacked and even closed down for dodgy dealings.
So, although the public is understandably worried about a potential stock market crash in the wake of a recession, I don’t think investing in Bitcoin is a safer or simpler solution.
Thanks to the international trade war between the US and China escalating at a breakneck speed and nothing but doom and gloom on the Brexit front, it seems a recession may well be on the cards. However, as legendary investor Benjamin Graham said: “Investing isn’t about beating others at their game. It’s about controlling yourself at your own game.”
If you have a long-term investing plan in play, don’t divert from it in a downturn. Instead, I think it’s the perfect opportunity to pick up your favourite stocks at knock-down prices. It’s true that long-term investing can bore, but it’s a strategy that’s tried and tested.
Thoroughly research the companies you want to invest in. Read the annual report, check out the level of debt. Is there good news on the horizon? Does management seem reliable and proactive? Are dividends on offer or does it look like it has the potential for steady growth?
If you’ve done your homework (and all good investors do), then you should be able to rest easy knowing that even if a recession causes a temporary fall in prices, your carefully chosen companies will bounce back because they’ve got the strength to do so (with solid foundations built on an actual business, unlike Bitcoin). Try not to closely monitor daily market fluctuations but keep a clear head, knowing you’ve made strong choices.
If you’ve got spare cash to gamble with, then buy some Bitcoin and see how it fares, but that’s not an investing strategy.
I don’t think Bitcoin is safer than shares. It’s risky, difficult to trade in and complicated for ordinary folks to understand. I’ll be sticking to traditional equity investing.
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Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.