If you like see-saws, you might like investing in Bitcoin as well.Bitcoin investing does need the courage of your convictions but the rewards can be unparalleled.A glance at Bitcoin rates starting in 2010 will tell us that the currency has been through many ups and downs.While the peak was reached between 2013 and 2014, by 2015 Bitcoin had fallen again to US $200 levels and has been steadily inching its way towards $1000 levels again.However, even in the short term Bitcoin has been volatile, while on May 24, 2016 Bitcoin prices reached US $775, by June 23, 2016 they had again fallen to US$ 560.At the time of writing of this article one Bitcoin was worth US$ 673 and most of the recent rise in Bitcoin price was due to the uncertainties caused by ‘Brexit’ or Britain's withdrawal from the European Union.Compound Annual Growth Rate (CAGR) is a way of measuring return on investments over a given period of time.In order to calculate CAGR we need a beginning value, an ending value and a given time period.

In short the formula for CAGR = (Ending Value/Beginning Value) (1/No.Of Years) - 1 CAGR gives us an idea of how much an investment grew at an annual rate for the period of time we are looking at.If we compare CAGR of various investments in the last 3 years, we get a picture that Bitcoin has far outperformed traditional investment products.As is clear from this table, Bitcoin is leaps and bounds ahead of most major assets when it comes to returns, be they stocks, commodities or real estate.Well, it really depends on who you are and how much of a risk appetite you have but digital assets like Bitcoin are certainly something investors should consider for their portfolios.Way back in December 2015 Reuters carried a news story titled, “Record highs predicted for Bitcoin as new supply halves.” Not only did Reuters assert that as supply of the virtual currency diminishes, the prices should rise as in the case of traditional fiat currencies.It also carried an interesting comment from Daniel Masters, co-founder of Jersey-based Global Advisors Hedge Fund.

The prediction Masters made was Bitcoin hitting US$ 4,400 by 2017.The assertion by Masters is based on increasing acceptance by big companies, the technology behind Bitcoin and growing demand for Bitcoin in China as the Chinese economy slows down and the Yuan weakens.If you are attracted to Bitcoin you should think about a few things before investing.You should definitely consider the volatile nature of the investment and not put all your money into Bitcoin alone.However, on the other hand, Bitcoin’s very nature makes it especially useful as a hedging tool.Alexander Matanovic, CEO of ECD, says to CoinTelegraph: “Bitcoin is a great hedging tool because it is immune to events that often heavily influence regular financial markets.In fact, its price often rises when there is a crisis on the financial markets.One important advice: take special care how you store your Bitcoins!”Finally if you are investing in Bitcoin, think about Bitcoin just as any other investment.Bas Wisselink, Founding Member of Nxt Foundation, explains: “If you are just using it as an investment: treat it like a traditional investment.

I don't really see why it should be in a different category if you are going to just invest.”With Its $10 Billion U.S.Factory Plan, the World's No.1 Electronics Company Just Spotlighted a "Must-Own" Tech Stock We have a maxim here that I repeat over and over again – with good reason.uk tax treatment of bitcoinThis maxim is super simple… and very powerful.deep web bitcoin walletFull Story You may choose from these hot topics to start receiving our in real time.meu primeiro bitcoinBest Investments AlertsGold and Silver AlertsBreaking StoriesMarijuana Industry Updates Interested in other topics?ethereum price of gasYou can add more alerts below.ethereal blade market

Before the Bell PreviewAfter Market RoundupBreaking Stories Best Investments AlertsTrading Strategy AlertsRetirement TipsOptions TradingStock Market Crash Insurance Retail Ice AgeMarijuana Industry UpdatesCybersecurity UpdatesWall Street Scam WatchBitcoin/Cryptocurrency UpdatesPolitics AlertsFinancial Regulation AlertsTerrorism Watch Fed WatchEconomic Data Alerts China and All Asia AlertsEurope Alerts Biotech and Pharma AlertsPenny Stocks AlertsEnergy WatchTech WatchDividend Stocks AlertsSmall Cap Stocks AlertsApple UpdatesFacebook UpdatesAmazon UpdatesGoogle UpdatesExxon UpdatesIPO WatchStocks to Watch Gold and Silver AlertsOil and Gas AlertsAlternative Energy AlertsMetals Updates Keith Fitz-GeraldDr Kent MoorsMichael A RobinsonShah GilaniTom GentileWilliam Patalon IIID R Barton Jrethereum how many confirmationsLONDON (InsideBitcoins) — One common talking point surrounding bitcoin that is returned to again and again is the question of its volatility.

Whilst all currencies fluctuate relative to the value of the world’s principle reserve currency, the US dollar, the value of bitcoin remains unpredictable; speculation, loss and gain, has become an everyday cost of doing business with the cyrptocurrency.But how risky is it?In a recent article for Investopedia, Prableen Bajpai quotes bitcoin investor and venture capitalist Barry Silbert as saying bitcoin is “pretty much the highest-risk, highest-return investment that you can possibly make.” On what basis was this conclusion reached?Two important figures taken at face value do indeed seem to back up the claim; a one day drop of 61% in the value of bitcoin in 2013 and another of 80% in 2014 stand out as landmark moments.Certainly, investors with significant reserves of bitcoin choosing to panic-sell on what amounted to bitcoin’s very own version of ‘Black Tuesday’ would have felt the pinch.And yet, viewing two specific dates as examples of an overall trend has the tendency to mire the observer in a wealth of academic speculation or to put it less politely, ill-informed guesswork.

Inside Bitcoins asked Dr. Kevin Aretz, senior lecturer in finance at The University of Manchester’s business school to help clarify the issue.“Looking at the underlying data, the average annualized return of bitcoins over the last year is around 106%, their volatility, again annualized, is around 90%,” Dr. Aretz said.In other words, on the whole, people are making money on the currency, so long as they choose the right moment to buy and the right moment to sell.Such an evaluation is however, necessarily laden with caveats.“A problem with the expected return estimate is that it is based on only one year of data, far too little to make any definite conclusions about the real (unobserved, because it exists only in people’s heads) expected return.I would guess that bitcoins have a fairly high expected return — they are new, exciting and therefore highly volatile — but probably the return will never be greater than 50%.I would also guess that since bitcoins are fairly sensitive to the economic climate that they will probably go down in the next recession as much as they rose over the last year.

That certainly makes them a risky prospect.” That there is risk involved in bitcoin is of course, news to nobody.Bitcoin’s history has been dotted with incidents of successful and not so successful amateur speculation; indeed, it may well be speculation that is driving the entire industry.However, the question is not one of risk, but of the scale of the risk.Are bitcoins truly the most high-risk investment option out there?“A 90% annualized volatility is huge, but not unheard of.Derivative products easily have such a high risk.But there are also other primary assets; take, for instance, highly distressed equity,” Dr. Aretz explained.Compensation for the high risks taken “Investments into derivative products, such as call and put options or even more exotic options, are considered to be extremely risky, especially when you short these — that is to say, you sell these to someone else — as commercial banks do,” he continued.“It’s hard to estimate expected returns, but my hunch would be that such products can have an expected return as high as 30%-40% per annum.

The high expected returns [are] however nothing but compensation for the high risks taken.” In other words, bitcoin might be risky but those willing to take that risk stand a chance of being well remunerated for their gamble.And it seems that it’s this willingness to take risk that is underlining the principle reason why the currency refuses to stand still.“There aren’t that many new currencies and most of them are linked to some established fiat,” Dr. Aretz added.“Having said that, for a currency, this is an extremely high volatility and my guess is that the huge swings we are seeing are due to the fact that those speculating on the currency have limited experience with investment.” Ian Jackson is an Inside Bitcoins correspondent based in the U.K.Opinions expressed do not represent the opinion of MecklerMedia and are not recommendations of whether to buy, sell or hold shares of bitcoin or other investments.Investors are advised to do their own research before making a decision.