Bitcoin is an incredibly risky investment that may or may not pay off, so it's probably not the best fit for most people. But if you're eager to invest in the cryptocurrency, it's important to do so safely. First, make sure you have a well-diversified portfolio.
Tesla CEO Elon Musk recently made headlines after announcing that his company bought $1.5 billion worth of Bitcoin (CRYPTO:BTC).
The cryptocurrency has been around for years, but it has surged more than 370% over the past 12 months. Even before Tesla's investment in Bitcoin, Musk himself has been credited with increasing the price of cryptocurrencies by voicing his support online.
How to invest safely
Bitcoin is an incredibly risky investment that may or may not pay off, so it's probably not the best fit for most people. But if you're eager to invest in the cryptocurrency, it's important to do so safely.
First, make sure you have a well-diversified portfolio. The last thing you want to do is invest all your money in Bitcoin, because if it drops in value (and there is a good chance it will at some point), you could experience devastating losses.
Aim to invest in at least 10 to 15 different companies from multiple industries, or opt for index funds or mutual funds to further limit your risk. Because Bitcoin is so volatile, it's crucial to make sure the rest of your investments are as stable as possible.
Next, only invest money you can afford to lose. This is a good rule of thumb to remember with all investments, but especially the riskier ones. You may not lose money investing in Bitcoin, but it's a good idea to be prepared for the worst just in case.
Bitcoin may be gaining popularity right now, but that alone doesn't make it a smart investment. Before you invest any money, think about your tolerance for risk. If you have money to burn and are willing to risk it, it may be worth the gamble. But for most investors, it's best to steer clear of Bitcoin for right now.
This article represents the opinion of the writer(s), who may disagree with the "official" recommendation position of a Motley Fool premium advisory service. We're motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
About Bitcoin
Bitcoin was the first cryptocurrency to successfully record transactions on a secure, decentralized blockchain-based network. Launched in early 2009 by its pseudonymous creator Satoshi Nakamoto, Bitcoin is the largest cryptocurrency measured by market capitalization and amount of data stored on its blockchain. The Bitcoin software is free and available online to anyone who wants to run a Bitcoin node and store their own copy of the Bitcoin blockchain. As Bitcoin matures, engineers have designed additional protocols to improve the speed and privacy of Bitcoin transactions, including the Omni Layer, Lightning Network and Liquid Network. Only approximately 21 million bitcoins will ever be created. New coins are minted every 10 minutes by bitcoin miners who help to maintain the network by adding new transaction data to the blockchain.
The Bitcoin price page is part of The CoinDesk 20 that features price history, price ticker, market cap and live charts for the top cryptocurrencies.
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