Opportunity doesn’t knock twice, it knocks once every four years – The Bitcoin “Halving”

THE BRIEF

The Bitcoin “halving” is officially upon us.

• The Bitcoin halving occurred on May 11, 2020 and is an event that occurs approx. every 4 years and has historically resulted with a major increase in the digital currency’s value (6,940% between 2012 and 2016 and 1,249% between 2016 and 2020).
• What is Bitcoin? Bitcoin is an encrypted (secured), digital currency designed to act like standard money currencies (i.e. USD, CAD, EUD, etc.).
• What is the hype with Bitcoin? The price of one Bitcoin rose from less than a penny to over $10,000 within a decade.

THE EXPLANATION

Bitcoin is created through a process called “mining” that rewards “miners” with Bitcoin for using their computing power to support the system. The halving reduces the reward given to miners by half, a process designed to prevent inflation in the coins’ value while preserving its purchasing power. These halvings occur until Bitcoin reaches its maximum supply of 21 million coins. This is predicted to occur around the year 2140.

The massive increase in value following the previous two halvings coincided with an increase in the mainstream media interest in Bitcoin. Google search volume for “Bitcoin” peaked in 2017 and with Bitcoin losing its shine, one can expect to see less demand driving up the price this time around.

THE ACTION

Investors must approach Bitcoin with caution as it is EXTREMELY VOLATILE and RISKY. A good rule of thumb for investing in risky assets is to put either:

1. A maximum of 5-10% of investments into this category OR
2. An amount you wouldn’t mind losing

Ways to Invest in Bitcoin:

1. [LOW RISK] Investors can gain indirect exposure to Bitcoin through the Ark Next Generation ETF (ARKW) which have an ~2% exposure to Bitcoin
2. [RISKY] Canadian investors can get exposure to Bitcoin through The Bitcoin Fund ETF (QBTC.U) launched in April 2020 as the first Bitcoin ETF in North America
3. [VERY RISKY] Digital currency exchanges like Coinbase and Coinsquare (Not for the faint of heart!)

Read more here to see if you, The Average Joe, should be investing in Bitcoin.