With the introduction of Bitcoin in 2009, much of the world has become fascinated by cryptocurrency. Within its first decade, Bitcoin reached the mainstream, becoming a household name. And more recently, on Sept. 8, El Salvador launched Bitcoin as a national currency. Because of its popularity alone, many investors and financial advisors cannot escape the question: Should we invest in cryptocurrency?
To get to the bottom of this, let’s first start at the top.
What is cryptocurrency?
Cryptocurrency is a digital currency created as a medium for payments that bypasses the traditional banking structure. According to its creator (who has used the presumable pseudonym ‘Satoshi Nakamoto’), Bitcoin was created to be a “peer-to-peer version of electronic (payments) . . . without going through a financial institution.” (bitcoin.org.)
Bitcoin “mining” is the process of finding new bitcoins by using sophisticated hardware to solve difficult math problems. Miners are rewarded for their work with new bitcoins. Most holders of Bitcoin, however, simply buy Bitcoin as an investment, speculating the price will increase.
There are thousands of digital currencies, with Bitcoin being the most widely used, taking nearly half of the market share (coinmarketcap.com/charts.)
How much has it grown?
In 2011, one Bitcoin was worth roughly one U.S. dollar. By April 2021, Bitcoin