Cryptocurrencies like Bitcoin are creating a lot of buzz at the moment, not because they have soared, but because they have fallen about 45 percent. You may be considering jumping in. Could now be the right time to buy?
Bitcoin’s pros are attracting several investors to invest in this digital asset, but the cons are preventing their steps from moving backward. There are many who still doubt the Bitcoin investments and how they will benefit them in the future.
Bitcoin has already gained attention. However, before proceeding to invest in Bitcoin, you need to consider both pros and cons, which will help you make the right decision.
We are going to try to answer the question of whether or not is Bitcoin still a good investment vehicle or is it something that no longer reaps the desirable profits against the inevitable risks. To answer that question, we’ve made a list of pros and cons for you in order to make a better and informed decision.
Pros of investing in Bitcoin
No physical barriers
One of Bitcoin’s best benefits is that there is no involvement of physical barriers such as government or central authority. This helps to take care of your asset, and no one has any right over your digital currencies.
Some have cited cryptocurrencies as an alternative hedging instrument to gold in a portfolio context. For example, the S&P 500 declined in 17 out of the 60 months to end December 2020, of which the price of bitcoin rallied in seven. In the five years to the end of 2020, a portfolio consisting of 10% invested in bitcoin and 90% in the S&P 500 would have generated compound annual returns of 26.8%.
Low transaction fee
Another best benefit of investing in Bitcoin is that it consists of a low transaction fee. It is because digital currencies eliminate the need for banks and ATMs, and there are no charges such as processing fees, bank charges, ATM withdrawals, unlike fiat currencies.
Bitcoin is decentralized
One of the main advantages of Bitcoin is its decentralized nature; there are no authorities or central banks that may impose high fees or restrictions. Bitcoin is also global, so there are no exchange rates to deal with. This feature is highly tempting, with more and more people turning to cryptocurrency investment.
You can make a cryptocurrency transaction whenever you want to. It doesn’t matter where you are, you will just need an internet connection. You can even perform transactions with your mobile phone. Bitcoin could become a global form of currency as it is the easiest and fastest means of exchange that can be used across the globe.
Fast and inexpensive
Bitcoin transfer cost is either negligible or non-existent. Bitcoins can be sent to any nation on the planet. Like the Internet and e-mail, Bitcoin has no geographical limitations. This, combined with the assurance of protecting its users’ rights, makes Bitcoin the first truly global currency.
The right to make payments is the most significant benefit that bitcoin investors gain from participating in the trading market. They can send and receive bitcoin payments at any time, from anywhere, and with no restrictions.
Cons of investing in Bitcoins
Bitcoin is highly volatile
Bitcoin is an asset of limited availability unlike fiat money. As a consequence of being decentralized and having no regulatory body governing its flow, its value is influenced purely by market forces i.e. demand and supply. Hence, Bitcoin is a highly unstable asset and is liable to rise or fall at a rapid pace, and is really difficult to predict the future price.
High risk of loss
There is no way to protect your bitcoin from technical errors or human errors. Your just one mistake can invite hackers to the table to snatch your digital currencies. This way, you can lose all your digital assets in one go.
Potential security risk
This is a high-security risk related to Bitcoin and other internet currencies. It uses Blockchain technology, but it does not make your transaction completely secure.
As revolutionary as Bitcoin and other cryptocurrencies are, we are still far from using it as an everyday medium of transaction. The world is undoubtedly becoming more crypto tolerant given the fact that you can now buy airplane tickets, cars, and even Rolex watches using Bitcoin, but you’d still have a hard time finding any grocery store near you that accepts Bitcoin in exchange for veggies and fruits.
If you see the other side of decentralized currency, you will find that this is truly one of Bitcoin’s cons. If your digital assets are once hacked, you cannot get any refund, unlike traditional currencies. This is the negative side of investing in Cryptos.
Unregulated and unbacked
Bitcoins are a construct of the private sector with no official oversight or regulation. This means that cryptocurrencies are wide open to being exploited by criminals as a means to scam unwary investors. A 2019 academic study found that 25% of bitcoin users are involved in illegal activity and that 46% of bitcoin transactions are associated with illegal activity.
Bitcoin is indeed a bit trickier to invest in it now since the potential returns aren’t as obvious as they were before.
Bitcoin investment consists of both pros and cons, but it is in your hand how you are going to deal with the same. Read the features of Cryptocurrencies carefully and gain experience in this field before proceeding to invest.