Bitcoin is a modern investment phenomenon. But Is Bitcoin a good investment? Find out more.
Cryptocurrency, more specifically Bitcoin has become the rage these days. While it’s tough to predict if Bitcoin is going to prove to be a great investment in the future, it’s hard to totally ignore its appeal. A lot of investors are willing to take the chance for profits from a bitcoin investment.
Is bitcoin a good investment? Start with our guide to learn more and make your own judgment. Like any kind of investment, buying Bitcoin comes with inherent risks. The price could nosedive because of market volatility and a single online hacking or crashed hard drive incident can completely erase your Bitcoins without any way of getting them back. Over the course of years,
Bitcoin has seen a dramatic peak in price followed by some painful crashes. However, it has managed to keep a significant portion of its previous gains every time it plummets. Since its launch. Bitcoin has grown a dedicated underground following of investors who see it as a future replacement of the standard physical currency system. Let’s find out more about the qualities of Bitcoin as a type of investment.
Is Bitcoin A Good Investment: Advantages and Disadvantages
Bitcoin’s consistent performance over the years has attracted a lot of investors towards itself. As an investment tool, Bitcoin gives you these advantages over traditional investments.
- Liquidity – Bitcoin is definitely one of the most liquid investment assets available for people. It’s caused by the global establishment of trading platforms, exchanges and online brokerages. It’s very easy to trade bitcoin for cash or assets with incredibly low fees. The high liquidity associated with bitcoin is also great for investors looking to make some short term profits.
- Lower inflation risk – Bitcoin isn’t like other currencies which are regulated by national governments. Hence, it is free from inflation. The blockchain system is infinite and it is most likely never going to lose value.
- New opportunities – Bitcoin and cryptocurrency is a very new and recent thing. So there are always new and exciting things coming up with it. This unpredictability allows for great ways to book some profits.
- Minimalistic trading – Trading in traditional stocks needs you to hold a certificate or license. You will also need a broker to trade a company’s shares. But bitcoin trading is minimalistic: all you need to do is buy or sell bitcoin from exchanges and store them in your e wallet. Bitcoin transactions are also settled instantaneously. Vastly different from stock trading orders, which could take days or weeks for settlement.
While Bitcoin seems to have a bright future and investing in it might seem very tempting, one must also be mindful of the possible pitfalls and disadvantages of Bitcoin. Some of them are:
- Volatility – Bitcoin’s prices always change wildly. In case you happened to buy bitcoin on December 17, 2017, the price was $20,000. Weeks later, you couldn’t sell your investment for more than $7,051. The bitcoin market is in a state of constant flux. With such an unpredictable market, you can hardly get a good return on your investment. To avoid huge loss, keep a close eye on the market.
- Threat of online hacking – Since Bitcoin is virtual currency, the threat of hacking always looms large. Bitcoin exchanges allow you to buy and sell your cryptos using a mobile app or website. This leaves Bitcoin susceptible to hacking and that can lead to the theft of all your investment. Bitcoin investments aren’t insured by the FDIC either.
- Lack of regulation – The bitcoin market as of today has very few regulations. Transactions aren’t taxed and governments don’t seem to have any clear stance on it. As a result of that, you might end up losing a lot of money to fraud and institutionalized malpractice.
- Limited usage – Bitcoin doesn’t have universal acceptance. Very few online retailers accept Bitcoin as a mode of payment. Many companies also refuse to recognize bitcoin as a legitimate exchange, making it an unfeasible investment vessel. Bitcoin is also limited in supply, there are only 21 million.
- E Wallets are susceptible – In case your wallet file is corrupted by a virus or you lose it because of a hard drive crash, all your Bitcoins will be gone instantaneously. You can go from super rich to bankrupt in seconds. What’s worse, unless your other files with cloud back ups, there is no way to recover Bitcoin.
So that was a brief look at some Bitcoin basics. Hopefully, you have a better idea of this novel form of investment now and if your friend asks you “Is Bitcoin a good investment”, you will be able to answer them with more ease.