The Pros and Cons of Investing in Bitcoin
You have probably already heard of Bitcoin by now since cryptocurrency has been rapidly growing for the last decade. Bitcoin is a virtual currency that is often controlled by a decentralized network of users and is never impacted nor controlled by any banking authority or national government. There are several kinds of cryptocurrencies spreading worldwide these days, yet Bitcoin remains the most popular and widely used. It is also considered the closest cryptocurrency treated almost relative to traditional and state-minted currencies.
In this article, you will discover the good and bad aspects of investing in Bitcoin. If you have a significant amount of capital or extra cash and you’re looking for a cryptocurrency to invest in, you have probably wondered how to buy Bitcoin and how to get in on the cryptocurrency game. But, before you take that leap, you should consider both the pros and cons to determine if this is a good investment choice for you.
Here are some of the pros and cons:
- Massive Potential Return on Investment
Bitcoin has shown incredible return on investment (ROI) in the relatively short time it has been on the scene. For example, if you invested $1,000 in Bitcoin back in 2013, it has appreciated to a value of $400,000 today. Many other cryptocurrencies have also accumulated significant returns in a short period of time. Sure, there is always the potential for risk as there is in any investment, but you could see huge returns over time—due to their growing popularity, cryptocurrencies seem to have a bright future ahead.
- High Liquidity
Its high liquidity is one of the most appealing features of Bitcoin. It is considered one of the most liquid investment assets, and it can be bartered and traded both for short and long-term periods. Many trading platforms accept Bitcoin and are run globally.
Many online investors enjoy Bitcoin’s decentralized nature. There are no authorities or governments who can impose rules, high fees, or restrictions. It is very flexible according to its users and traders. It is operated globally, so there are no exchange rates to deal with. Since there are no exchange rates and high fees, many people prefer to invest and trade Bitcoin.
Because of its decentralized nature, Bitcoin owners can transact with their peers using their digital money. This means you can deal with a diverse community of people from all walks of life. Everyone can see their profile and account accessibly since the flow of their transactions is permanently recorded on the blockchain system.
- High Volatility
While it can give you high returns, Bitcoin is also very volatile. It is a scarce asset and is impacted tremendously by demand and supply. It is unpredictable, and no one can predict its market value and performance. Because of these factors, Bitcoin could be riskier than more traditional means of investment. In some cases, its value could drop significantly in just a matter of weeks. If you’re not up for that kind of risk, investing in Bitcoin might not be suitable for you.
- Limited Use
The number of merchants globally who are accepting Bitcoin is already increasing. However, Bitcoin still has limited use and is entirely dependent on the Internet. It would help if you also kept in mind that Bitcoin is only limited to use in financial transactions only. For some people, that indeed is a significant disadvantage.
- Not 100% Safe
Although blockchain technology has improved its security and protection against hackers, the truth is that Bitcoin is still not guaranteed to be 100% secure. Exchanging and trading Bitcoin on open platforms pertains to a threat of being possibly hacked. Unfortunately, some people have lost their Bitcoin money and never recovered it.
- Misjudged by Many
Despite the increasing optimism and popularity of Bitcoin among many people worldwide, Bitcoin is still misjudged. The fear of using Bitcoin for financial transactions remains for many people, especially those who are more comfortable using traditional payment systems.
The main takeaway of this article is that Bitcoin has both merits and demerits. It will all have to depend on your calculations regarding risk and rewards. It would be best if you weighed whether your potential rewards will be higher than the risks. It could still be unstable and evolving currently. Yet, it is getting more popular, and this valuable resource is already giving investors a chance to diversify their portfolio and garner vast returns of investments. At the end of it all, it will all depend on your investment goals and your effort to learn and study the Bitcoin system.