Bitcoin has been making headlines again — hitting record highs and catching the attention of investors everywhere. However, with its widely fluctuating performance, it’s natural to wonder if bitcoin is a good investment or just too risky to consider. To help make sense of it all, here’s what’s behind the recent surge of bitcoin, along with cryptocurrency’s pros and cons.
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What’s Behind the Bitcoin Surge?
Russell Hackmann, CFA, president of Hackmann Wealth Partners, said that bitcoin has surged from a low of about $17,000 per bitcoin at the end of 2022 to $93,000 currently. “In early December 2024 it reached a high of about $105,000,” he added. “The previous high was about $68,000 in October 2021.”
Hackmann said that bitcoin tends to fluctuate significantly over four-year cycles that are triggered by what are known as “halving” events, which make the mining of bitcoin double in difficulty level.
“Bitcoin mining is the process by which new bitcoins are minted; the design of bitcoin causes minting to become more and more expensive over time, so the total amount of bitcoins in existence never exceeds 21 million,” he explained.
Hackmann pointed out that the most recent halving, on April 24, 2024, reduced the supply of new bitcoins being mined and started the most recent rally.
“In addition, in 2024, after a protracted regulatory battle, the SEC finally relented and permitted bitcoins to be owned by ETFs (exchange-traded funds),” he said. “Exchange-traded funds hold $13 trillion of assets. This allows bitcoins to be purchased and held by a much larger array of accounts including retirement accounts. Major ETF players, such as Blackrock and Fidelity, have aggressively marketed their ETFs, attracting new assets into bitcoin, and driving up the price of bitcoin.”
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Pros and Cons of Bitcoin investing
For those interested in potentially investing in bitcoin, here are some of its pros and cons, according to Hackmann.
Pro: It Can Be Very Profitable
“Even with all the ups and downs, bitcoin investors have made significant money over time,” said Hackmann.
Despite its volatility, those who have held bitcoin for extended periods often see impressive returns compared to traditional investments.
Pro: It Can Help With Diversification
Hackmann pointed out that bitcoin can serve as a diversifier when added to a portfolio in small percentages.
This is because its price often moves differently from traditional investments like stocks or bonds, which can help balance potential gains and losses in a portfolio.
Pro: It’s Viewed as Digital Gold
Hackmann said that bitcoin is often compared to “digital gold” because there’s a limited amount of it — only 21 million coins will ever exist. He explained that this sets it apart from currencies like the U.S. dollar, which can lose value when governments print more money.
Some believe this scarcity makes bitcoin a potential hedge against inflation and currency devaluation.
Con: It’s Extremely Volatile
Hackmann explained that bitcoin’s volatility makes it unsuitable for conservative investors. “At Hackmann Wealth Partners, we view bitcoin as entirely too volatile for our more conservative investors, most of whom are looking to preserve capital, earn consistent income and achieve consistent growth over time,” he said.
To highlight this volatility, Hackmann pointed out bitcoin’s price swings: “From $68,000 in October 2021 to $17,000 in October 2022 to $93,000 now, that is just entirely too volatile to be a serious investment asset. Bitcoin only belongs in the most speculative portfolios,” he added.
Con: It Encourages Risky Speculation
Hackmann also observed that many investors and ETF companies have recently joined the late 2024 and early 2025 bitcoin rally. “Many of these same investors avoided bitcoin when it became inexpensive in 2022, and fundamentally, it is the same asset as then,” he said.
While bitcoin may rise further, Hackmann warned that history suggests an inevitable large downturn in the future.
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This article originally appeared on GOBankingRates.com: Bitcoin Is Surging: 3 Pros and 2 Cons of Investing In the Cryptocurrency Now
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
