Rob Arnott once said that, “In investing, what is comfortable is rarely profitable.” This is such a true statement.
As we watch the price of Bitcoin rise, we hear the experts claim it will reach $10,000 a coin by the end of 2017. It’s so easy to say to ourselves, “Wow, I should have bought a few hundred Bitcoins back in 2011, when the rate was so low. I’d be a millionaire.”
It’s true. Investing in Bitcoin in 2011 would be paying out some pretty nice dividends in November 2017. However, what if Bitcoin rises to $30,000 a coin by November 2018? It could; but do you have the guts to invest?
It’s so easy to forget that moment of truth, that moment when you have to put your money where your mouth is. In the end, it’s always speculation and hope. However, just like Arnott so eloquently said, without the risk, there’s no reward.
If anything puts the risk/reward principle to the test, it’s Bitcoin. Let’s take a look at what would have happened if you had faced your moment of truth in 2011 and invested $100 in Bitcoin. (Remember, the $100 is gone. You left it alone. You didn’t touch it until 2017…Yeah right.)
2011: $100 Invested. Genius.
For the sake of this article, we couldn’t factor in the cost of transaction fees and additional transactions between wallets. We’re just using the basic recorded value for the various dates. If you bought $100 worth of Bitcoins on January 1, 2011, you would have received 333.33 Bitcoins. Bitcoins were only 30 cents per coin at that time. (Ouch. That had to hurt.)
Throughout 2010, Bitcoin was trading at around 6 cents per coin. You would have seen that the market was volatile. However, a $100 investment was still modest enough to take this into account.
One June 8th, 2011, Bitcoin reached $31.91 which would have earned you $10,636.56 in just six short months! However, Bitcoin prices had fallen to $4.72 per coin by December 31st, 2011. However, you still would have come out on top. Your $100 investment would have earned you a cool $1,573.32.
2012: Still Worth Your Time
On January 1st, 2012, Bitcoins were worth $5.72 a coin. Your $100 was worth $1,756.65 then. However, from January to March, the price fell below $5. In May, the price of the coins began to rise again. By December 31st, 2012, Bitcoins were worth $13.51 per coin. Your initial investment would have earned you $4,503.29.
However, in 2012, you couldn’t spend your Bitcoin in stores. Very few businesses accepted this form of currency. BitPay, a Bitcoin payment processor only had 1,000 businesses using its services.
Bees Brothers out of Utah was one business that did accept Bitcoin. So, one thing you could have bought with your Bitcoin was 450 half lb. bags of roasted honey almonds. Hey. It’s better than nothing. (You could always just sell coins for cash too.)
2013: A Rocky Year
January 2013 started with a dip. The cost of Bitcoins dropped to $13.30 per coin. Your investment dropped to $4,433.29. 2013 was not a good year for your investor peace of mind either. The Financial Crimes Enforcement Network, (FinCEN), issued a list of guidelines on March 18th, 2013 for people who used Bitcoin. These guidelines caused problems for a lot of Bitcoin users.
The Mt. Gox Bitcoin Exchange was hit hard by these regulations. There were hacking attacks on multiple Bitcoin exchanges; and the FBI seized over 170,000 bitcoins from Silk Road, (a criminal internet portal). All this bad press caused the price of Bitcoin to fluctuate throughout the year. Dips were huge; but so were the profits.
However, Baidu began to accept Bitcoin as payment for some of its services and the Chinese media started to tout the benefits of promoting Bitcoin as an alternative currency. These positive changes could be why Bitcoin hit its record-breaking high of $1,147.25. On December 4th, 2013, Bitcoin was passing $1,200 on many exchanges, making your $100 investment worth $382,412.84. However, throughout the rest of December, Bitcoin didn’t do so well, closing out the year at $757.50 and bringing your investment down to $252,497.48.
These numbers are impressive, yes, but realistically, would you have held your Bitcoin until 2013? Many people would have cashed out when their $100 started earning them 4X their initial investment. Then they would have been kicking themselves just one short year later when their returns would have gone from the $4,000s to the $300,000s.
2014: Bitcoin was Buzzing; but Bitcoin was Falling
By now big businesses were catching onto the promise of Bitcoin. You could now use your Bitcoins to buy products from Microsoft, Overstock.Com, Time and Dell. Paying with Bitcoins gave people many advantages over paying with traditional methods.
Mobile payment processing was more convenient, and
You could withdraw funds at convenient ATMs throughout the world
Unfortunately, all the good press didn’t do Bitcoin a bit of good. The value per coin dropped dramatically to $309.87 per coin by the end of 2014. However, your $100 investment would still be worth an impressive $106,565.60. You could’ve gone over to Overstock.Com and bought 240 Tribecca Home Uptown Modern sofas with that money.
2015: A New Year, Climbing the Charts Again
In 2015, Bitcoin continued its downward trend through October 2015. Then the cryptocurrency began edging up to $300 per coin again. By December of 2015, it had begun to trade at $413.51 per coin, making your $100 investment worth $137,835.29. That’s a return of 137,735.29%. That’s darn impressive.
However, that amount is less than half of the high so far since 2011, (November 2013’s record breaker of $382,412.84.) You could buy one or two nice homes in Burlington, NC for that money. According to Zillow.Com, the median home value there was $132,000.
2016: On Pins and Needles
On January 1st, 2016, Bitcoin was at $434.46 per coin. It was stable at this rate for about 3 or 4 months. The price started to rise in May. By June, it had risen to $773.94. Sudden demand by Chinese buyers started pushing the prices up. Then when that demand decreased, Bitcoin dropped down to $638.22 by the end of the summer. By December 2016, your $100 Bitcoin investment would have been worth $257,977.42.
2017: A Phenomenal Year
In February 2017, Bitcoin broke its November 2013 record and hit $1,169.04. In 2017, it also passed the price of a Troy ounce of gold. On May 1st, it rose again to $1,448. Since May of 2017, it continued to reach its highest highs. By November 8th, 2017 it had reached $7,458.79.
It could possibly reach $10,000 per coin by December 2017. During November, it once passed $9,000. At the November 12th price, your $100 investment would have been worth $1,952,420.48 at a rate of $5,857.32 per coin.
The Moral of the Story
Learn everything you can about investing in cryptocurrency before you buy.
Don’t invest all your money in the cryptocurrency market. It’s important to vary your investments.
Though buying and holding $100 worth of Bitcoin from 2011 to December 2017 would have been extremely profitable, the only way most people could have done this is if they literally forgot about the Bitcoin and remembered suddenly they had it in 2017. Could you have really resisted all those rates in between when selling would have put your investments in the six figures? Are you sure you wouldn’t have freaked out and sold when your investment was worth a few thousand? As much as you’d like to beat yourself up about not making the investment, you simply can’t beat yourself about being unable to predict the future.