Short-term investors in Bitcoin and other cryptocurrencies are generating and losing profits based on the vast swings inherent in a speculative investment. Long-term investors are investing in the future of financial services more than a specific cryptocurrency. Cryptocurrency is your opportunity to invest on the ground floor of an emerging market that many believe will become the foundation of finance.

Expected Return on Investment

Similar to other long-term investments, the expected return on investment is a critical consideration in cryptocurrency investments. The expected return (sometimes called mean value) of an investment quantifies the relationship between risk and return. This calculation allows you to compare investments to decide which fit best in your portfolio.

Let’s say you are considering investing in Venture A. Project A is a speculative investment with a higher than average risk of losing everything, but if it succeeds you will receive a high rate of return. After research, you calculate the possibility of failure to be 90 percent and the possibility of success to be 10 percent. If Venture A fails, you will lose all your investment. If it succeeds, your investment will multiply by a hundred-fold.

Investment Possible Loss Possible Gain Expected Return
$20,000 -$20,000 +$2,000,000
Risk Distribution 90% 10%
(.90)*(-$20,000) =

-$18,000

(.10)*($2,000,000) = $200,000 $182,000

 

The expected return is the weighted average of the amount you risk and the amount you might make. In this simplified scenario, if you invested $20,000 in Venture A the expected return is $182,000, or a 9.1 multiple. By comparing this multiple to other investment opportunities, you can determine the best fit for your retirement portfolio.

Bitcoin as a Long-Term Investment

Only 21 million Bitcoins will be created. Once the last Bitcoin is mined, there will be no more. This fixed number means that as long as demand for Bitcoin exists, the price will increase. Even though Bitcoin has existed longer and has more publicity than other blockchain technologies, it is still in its infancy. Over time, the volatility is likely to stabilize as more blockchain solutions are successfully implemented around the globe. Institutional investors are beginning to consider cryptocurrencies for small portions of their diversified portfolios. This is a signal that confidence in the future value of cryptocurrencies is growing.

All markets are volatile by nature and need time to grow. Cryptocurrency markets have proliferated in the last decade, and the trend will continue. New opportunities based on blockchain technologies are appearing rapidly. Some institutional investors see Bitcoin and other cryptocurrencies as a safe haven asset that protects wealth during periods of political and economic uncertainty. Smart contracts built on blockchain technologies may transform the legal industry. Intelligent assets may digitalize bills of lading and letters of credit to revolutionize supply chain management. The blockchain is the perfect tracking system for keeping track of who is sending what and tracking tax payments. Not all of these ideas will be winners, but many blockchain ventures will be hugely profitable.

Find the Answers You Need

The right retirement investment for you depends on your situation, goals, and adversity to risk. If you are someone who loses sleep at night if the Dow drops a few points, then you may want to wait until the cryptocurrency markets mature a bit more. If you are comfortable investing a portion of your retirement portfolio in a higher risk venture that might have a huge return, then take time to research cryptocurrencies. We have specialists available to help you formulate the right questions and research answers. Call anytime; we won’t pressure you to invest – just help you find the accurate and reliable information you need to make the decision right for you.

Forbes: Bitcoin Price ‘Likely’ To Pass $10,000 Before Halving

Forbes: Bitcoin Price ‘Likely’ To Pass $10,000 Before Halving

Source: Billy Bambrough, Forbes Bitcoin investors are gearing up for the long-awaited 2020 halving—a supply squeeze that will see the number of new bitcoin created cut by half. The bitcoin price has this week soared by almost 20%, topping $9,000 per bitcoin for the...

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