Can you still make money with Bitcoin?

The Hill

5 days ago

Bitcoin is often hailed as digital gold, and on social media, it can feel like a modern-day gold rush.
On TikTok, crypto-influencers hype up lavish lifestyles, interviewing self-proclaimed Bitcoin billionaires surrounded by luxury cars.
Bitcoin, a form of digital currency that can be traded online without relying on traditional banks, has skyrocketed in value since its humble beginnings in 2009. One Bitcoin is currently worth around $110,000 — roughly quadruple its value just two years ago.
So, is it too late to get in on the action? Here's what to know.
When it comes to cryptocurrency, Bitcoin is the biggest name in town and it's not even close. With a market cap of over $2 trillion as of this writing, Bitcoin is more valuable than Costco, Walmart and Netflix combined.
Like stocks, the value of Bitcoin fluctuates from one day to the next.
Buying and selling the digital currency is fairly straightforward. You can purchase a Bitcoin (or fractions of one) with U.S. dollars through an online cryptocurrency exchange like Coinbase or a more traditional investment broker like Robinhood.
That transaction is recorded on the blockchain — a decentralized, secure digital ledger that isn't controlled by banks or governments.
'There is truly revolutionary technology underlying these cryptocurrencies, including Bitcoin, that allow money and value to flow outside of a government-sponsored fiat currency,' said Jennifer Schulp, director of financial regulation studies at the Libertarian-leaning Cato Institute.
That said, Schulp worries influencer buzz could do more harm than good for digital assets in the long run.
'Viewing it all as, 'how do you make a buck in the quickest way possible' is not beneficial to the long-term innovation that can be seen from this space,' she said.
The price of Bitcoin could go up or down. Nobody knows. That's true of other investments like stocks or gold, but Bitcoin has a few additional risks.
Historically, it's been more volatile than traditional asset classes. Bitcoin has gone up over the long run, but price swings have been the norm, not the exception.
If you bought Bitcoin at its November 2021 high, your investment would have been worth roughly half as much about three months later. On the other hand, buying in early Feb. 2024 would have resulted in a significant gain after only a month — about 60 percent.
At times, those fluctuations have been more a reflection of crypto-enthusiasm than so-called 'market fundamentals,' the tangible economic indicators investors use to gauge the stock market.
In that sense, Bitcoin requires investors to pay attention.
'I don't think it's just a set it and forget it investment because of its volatility, because of all the different macro factors influencing it,' said Bryan Armour, director of passive strategies research at Morningstar.
It's worth noting that Bitcoin has been less volatile than many individual stocks, even popular names like Meta, Nvidia and Tesla, according to a Fidelity Digital Assets analysis in 2024.
Bitcoin has only been around for 16 years, while the New York Stock Exchange dates back hundreds of years. With time comes information. Investors can look at previous economic cycles and know with some confidence where stocks are headed in the future.
Since its introduction in 1957, for example, the S&P 500 has delivered an annual average return of around 10 percent.
Bitcoin has done even better over the past decade, averaging an almost 50 percent annual return, but there's no guarantee that success will continue.
'Predicting where [Bitcoin] is going to go when there's an economic shock, I think we just don't know yet,' Schulp said.
And unlike stocks, which represent ownership in real companies, Bitcoin isn't backed by physical assets. Its value comes from scarcity, hence the comparison to 'digital gold.'
But even that analogy is imperfect. Gold is something you can hold and the world's most powerful governments keep it in strategic reserves. That could happen with Bitcoin, but it hasn't unfolded in the same way yet.
FILE – Then Former President Donald Trump speaks at the Bitcoin 2024 Conference, July 27, 2024, in Nashville, Tenn. (AP Photo/Mark Humphrey, File)
The U.S. doesn't have a clear regulatory framework for digital assets, though several cryptocurrency bills and regulations are in the works.
'Part of the risk of it is that it's unknown how these things are going to be regulated five years from now versus one year from now,' Armour said.
Bitcoin investors are optimistic that the Trump administration will be positive for the crypto industry, with Trump poised to be the most pro-crypto president ever. Even so, the ongoing uncertainty makes crypto a risky investment.
Ray Dalio, a prolific investor, called Bitcoin 'one hell of an invention' back in 2021, but cautioned: 'I suspect that Bitcoin's biggest risk is being successful, because if it's successful, the government will try to kill it and they have a lot of power to succeed.'
In 2023, Dalio said he has 'a little bit' of crypto in his portfolio but acknowledged the risks: 'I've seen people get very rich and I've seen people get very broke with it.'
Other big-name investors, like Warren Buffett and Jamie Dimon, have been vocal critics of crypto over the years.
Most Americans remain skeptical for now. Roughly six-in-ten (63 percent) say they have little to no confidence that current ways to invest in, trade, or use cryptocurrencies are reliable and safe, according to Pew Research.
Overall, just 17 percent of U.S. adults have ever invested in, traded or used a cryptocurrency, Pew found.