Can retirement investors see a future for Bitcoin?
After 2018, many Self-Directed IRA investors lost faith in the cryptocurrency market as Bitcoin went from near $20,000 to close to $3,000. Needless to say, the rise of Bitcoin in 2019 has been wholly unexpected. The sudden surge leaves many investors wondering, what is the future of Bitcoin in 2019 and beyond?
The Peak of Bitcoin
Bitcoin broke through into the mainstream in late 2017. At the time, its historic surge to nearly $20,000 was driven largely by retail investors, as well as self-directed IRA and solo 401(k) plan investors. After losing 73% of its value in 2018, 2019 has been much kinder to Bitcoin and the cryptocurrency market. Bitcoin’s value shot up 200% since the start of the year.
Bitcoin remains quite volatile and risky so it is almost impossible to determine where the price of Bitcoin or any cryptocurrency will go in the near future. The same can be said for every investable asset class, such as stocks and even real estate. No one can be sure where the price of an asset will go or we would all be filthy rich.
The future of Bitcoin is unknown, but why has the price of Bitcoin surged in 2019?
Facebook’s Cryptocurrency Project
One of the main reasons Bitcoin has surged over the last few months is the introduction of a cryptocurrency by Facebook. Facebook’s planned cryptocurrency has given legitimacy to Bitcoin and other decentralized cryptocurrencies. Libra – the Facebook cryptocurrency – when it launches in 2020 or later, will be a stablecoin–a digital currency that doesn’t fluctuate much because it’s supported by established government-backed currencies and securities.
Facebook’s announcement about the creation of Libra has caused many investors to refocus their attention on the potential disruption that cryptocurrencies, such as Bitcoin, and its underlying technology, blockchain, could have on the financial industry as well as global commerce.
How to Hold Bitcoin & Other Cryptocurrency
While there are many details that have not yet been reported about Libra, the one important detail that has yet to be described is how an individual, business, or investor will hold Libra.
In general, there are basically two ways to hold a cryptocurrency. One is you can hold the digital coins with an exchange, or in an exchange wallet. For example, if you buy your Bitcoin on a site like Gemini, you can leave it there, and they’ll hold it for safekeeping. The drawback is that you’re trusting Gemini with your cryptos.
The other way to hold Bitcoin is in your own private wallet. This entails keeping the cryptographic keys that unlock your coins in your own hands. This could be on your phone, your computer, a USB drive, or even on a piece of paper that you keep in a safe deposit box. The drawback in this case is, if you lose your keys, then your Bitcoin is gone forever. The advantage is that you have the freedom to do whatever you want with them.
The big question for Libra is whether a user will be able to hold the digital currency in a truly private wallet, such as a hard or cold wallet. This detail is important for investors, especially self-directed IRA investors who may wish to invest in Libra as an investment and not for personal use.
The enormous rise in the price of Bitcoin and other cryptocurrencies, such as Ethereum and Litecoin in 2019 has been somewhat unexpected for many of the mainstream investors. The price of Bitcoin has been rising quite steadily even before Facebook recently announced the launch of its cryptocurrency – Libra – so other than the normal fluctuations, it is hard to put a finger on exactly why Bitcoin has surged in value in 2019.
It would appear that Bitcoin is not so different from Apple or Google stock. Sometimes stocks go up or down for no apparent reason. It’s just an investment thing!