While it seems that Bitcoin has skyrocketed in recent weeks, the question of whether or not Bitcoin is a good investment is one that's not necessarily cut and dry. There are several pros and cons associated with Bitcoin investing, such that you want to be aware of before putting your money into the popular cryptocurrency. In this article we look closer at the question "is Bitcoin a good investment" examining both the pros and the cons of this type of investing.
What Is Bitcoin?
Before diving into the plusses and minuses of Bitcoin investing, let's first take a look at what exactly Bitcoin is. Bitcoin is what is known as a cryptocurrency. It was first created/launched in 2009. From that point on, it has become one of the most popular assets to trade on a global scale—Bitcoin is currently more often traded and consequently used in countries other than the US.
Bitcoin represents digital money. It is also the platform that performs the transactions associated with this digital currency. Bitcoin was created to help decentralize financial systems around the world and thereby make it more convenient for people to transact business internationally.
In using Bitcoin there is no need for costly third parties to become involved. In light of this, many have flocked to Bitcoin as they see it as the future of money and a global financial system in general. So, is Bitcoin a good investment for the average investor looking to make a decent return? Below are some of the pros and cons of Bitcoin and cryptocurrency investing.
The Pros…
Many investors will be quick to tell you that jumping on the Bitcoin bandwagon can make you a great deal of money if done strategically. They tout Bitcoin's benefits over many more traditional investment opportunities; among such benefits are:
Bitcoin is a decentralized platform and form of currency
Essentially, what this means is that there are no central banks involved and therefore the fees that would normally be charged are not relevant with Bitcoin. Because it is a global form of currency, the exchange rates are also nonexistent. This is one of the primary reasons people across the globe use Bitcoin.
It is accessible for many investors
Unlike some other types of investment, investing in Bitcoin does not require you to have a fortune at your disposal. Once you acquaint yourself with the platform, investing is easy and can be done with even a few hundred dollars—you would buy a percentage of a Bitcoin.
It's a more liquid investment
What makes Bitcoin attractive to so many is the fact that it is a liquid investment. You can hold it over a longer-term, or you can also buy it and then trade it for other forms of assets.
Bitcoin is transparent
It is known to be one of the more transparent forms of investing available today. Again, this goes back to the fact that it is decentralized. And because of how it is set up, users can easily see the transaction history.
It has important business related features
On a global scale, Bitcoin is increasingly becoming one of the more accepted forms of payment among retailers. There are also numerous Bitcoin ATMs now set up around the world. Tens of thousands of businesses will now take this cryptocurrency. This does help answer the question, is Bitcoin a good investment.
Good return on investment
Sure, there are some risks, as with any investment there are going to be risks, but with Bitcoin, the ROI tends to be somewhat higher than with more traditional investment strategies. One study found that in 2020, it even outperformed gold.
The Cons…
As noted, this is not a risk-free investment, that said, you should go into Bitcoin investing understanding what some of those risks are and what that could mean for the ultimate value of your Bitcoin investment.
It can be volatile
This is probably one of the bigger downsides to a Bitcoin investment. Given the supply and demand nature of how Bitcoin is traded, the volatility level on this cryptocurrency is pretty high. Meaning, within weeks it could lose its value by over ten thousand if not more.
Its use is still rather limited
Unlike cash, credit cards, or mobile payments, fewer retailers and vendors accept Bitcoin worldwide. So finding out where you might be able to use the cryptocurrency could be tricky—especially depending on what country you live in. And keep in mind, it is limited to just financial transactions.
Safety can be a question
While blockchain technology has come a very long way and is one of the safer technologies out there, Bitcoin hacking is a real threat. If you have your Bitcoins on an exchange, they especially become vulnerable. So you do have to be comfortable with the safety aspect of this kind of investment.
Bitcoin is unregulated
This is the reason some countries are more hesitant to allow Bitcoin because as far as regulatory oversight goes, there is little to none involved with the platform. Virtually anything associated with cryptocurrency regulations is vague at best at this time. This can of course means more scams and fraudulent activity.
Should You Invest…Is Bitcoin a Good Investment?
As with many investment types, there are the good and the bad that need to be weighed when you're dealing with Bitcoin, especially as it is a relatively new form of investing. You have to take into consideration your comfort level, the amount of money you wish to invest, the expectations you have as far as ROI, and then make an informed decision about Bitcoin investing.
One thing to note though regarding Bitcoin and Bitcoin investing is that even given the downturn that markets across the world have taken as a result of the pandemic, Bitcoin has managed to not only survive but perform quite well for many who invested in the cryptocurrency.
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