Is investing in Bitcoin a good idea?
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Blockchain-based cryptocurrencies have been around for over a decade, since the release of Bitcoin in early 2009.
It is a digital decentralized currency, independent of any financial institution or government.
There are many ways to get your hands on this digital asset, and one way is to purchase it using real money, accept it as a form of payment for the products or services you offer, or create it using your device.
Now as all businesses and investments have their advantages and disadvantages, buying or investing in Bitcoin carries its own risks. I hope that after reading the advantages and disadvantages of Bitcoin Maybe this article will assist some investors in the decision one way or the other.
ADVANTAGES OF BITCOIN INVESTMENT
Bitcoin ‘s overwhelming performance-as a currency and investment-has attracted both traditional and institutional investors. As an investment resource Bitcoin gives you the following advantages over conventional investments.
Negligible Inflation Impact: One of the key reasons why investing in bitcoin is a smart idea is that it has a marginal effect on inflation. This can be attributed to the fact that there is infinity in the blockchain system that power this digital asset, which allows cryptocurrencies like bitcoin to hold their value regardless of market changes. It is also not regulated by any government, unlike any of the world currencies.
Minimalistic trading: Stock trading requires that you possess a license or certificate. You will need to go through a broker to exchange shares in a stock. But bitcoin trading is minimalistic: just buy or sell bitcoin from exchanges and put it in your wallet. Bitcoin transactions are also instantaneous — unlike stock trading orders that could take days or weeks to settle.
Liquidity: Bitcoin is arguably one of the most liquid investment assets due to the establishment of trading sites, exchanges and online brokerages around the world. You can transact Bitcoin instantly with extremely low fees for cash or commodities like gold. Bitcoin ‘s high liquidity makes it a perfect vehicle for investment if you’re looking for short-term gains. Digital currencies may also be a long-term investment due to their high market demand.
New opportunities: Cryptocurrency trading is fairly recent, which also makes the price of these assets extremely unpredictable. This can be useful for short-term transactions, providing a perfect opportunity for a big gain as long as you are buying and selling at the right data point. Conversely, it’s newness can also bring forth benefits for a long-term investment because of the projections for the future value of bitcoin which is based on a constantly rising trend.
DISADVANTAGES OF BITCOIN INVESTMENT
Bitcoin may be the future of money exchange, but it is equally critical for you to be aware of the issues surrounding investing in cryptocurrencies. Here are some serious risks to investments in bitcoin.
Volatility: The price of bitcoin is always rippling back and forth. If you happened to buy bitcoin on December 17, 2017, the price was $20,000. Weeks later, you couldn’t sell more than $7,051 of your savings. The market for bitcoin is continually moving. With such an volatile market, the return on your investment can hardly be healthy. Keep a close eye on the economy to prevent major losses.
Online hacking: Hacking is a major challenge a bitcoin investor faces. Bitcoin exchanges let you use a smartphone app or web site to buy and sell your cryptos. This leaves them vulnerable to hacking and theft of your entire investment. Besides, the FDIC doesn’t guarantee bitcoin kept on exchanges.
Little or no regulation: The bitcoin market currently operates with no major regulations. It isn’t taxed and governments have no clear stance on it. As a result, you could stand exposed to fraud and malpractice.
Limited use: As companies are just coming to terms with cryptocurrency bitcoin is currently only accepted by few online merchants. Many companies don’t also recognize bitcoin as a legitimate exchange, making it an unfeasible investment vessel. Besides, there’s only a fixed supply of bitcoin — 21 million.
Price volatility isn’t all you need to worry about in this hyped-up market. Since bitcoin largely exists outside government regulation, it poses more risk than dealing with government currency and other asset classes. However, it isn’t hard to sell or buy and you can make a limited amount of purchases.
If you decide to dabble in bitcoin, classify it under your high-risk, high-reward portfolio. You can reap huge profits in the short-term and lose heavily if the value drops. Understand that bitcoin is a relatively new technology, and even futurists aren’t sure about its fate. Use the philosophy “buyer beware” when investing in bitcoin.
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