Does investing in Bitcoin have pros and cons? Here are the pros and cons of investing in this electronic money.
Bitcoin is an excellent store of value and, simultaneously, a medium of transacting digitally. This digital asset’s basis are cryptographic algorithms, which are encrypted, thus making the currency decentralized and giving ownership to the user.
On the other hand, this electronic money is not risk-free and can be riskier than traditional assets in many ways. Here are a few advantages and disadvantages of this digital money.
Decentralization
The decentralized nature of this digital money is one aspect that makes it stand out among other currencies. There are no centralized authorities or central banks that may impose high fees or restrictions.
What’s more, this digital money is global. Hence, users have to deal with no exchange rates when transacting. The decentralization nature of Bitcoin is tempting; with more and more people investing in cryptocurrency.
Transparency
Another reason that makes Bitcoin better compared to conventional cash is transparency. With fiat cash, central banks can establish debt, purchase debt, and, in the end, make money off consumers, creating a problem. Also, banks reveal their books to consumers and the public.
Bitcoin uses blockchain technology to create a distributed public ledger. With the Bitcoin ledger, every transaction its users have ever made is open to the public. Even though the people in the Bitcoin network can view these transactions, they can’t distort or simulate them after adding them to the blockchain. Ideally, this virtual money has a self-dependent transparency environment whereby the Bitcoin network awards miners or the computers that add and verify transactions with newly minted tokens. In the end, this transparency eradicates the chances of fraud.
Liquidity
Among the most tempting pros of Bitcoin investing is its liquidity. This virtual asset is among the most liquid investment assets; traders can either trade Bitcoin for other purchases in the short term or buy and hold Bitcoin for long periods.
The best thing is that many trading platforms accept Bitcoin, which facilitates Bitcoin investing globally, you can check it here
Hedge against Inflation
Because of Bitcoins limited supply cap of 22million coins and its decentralized nature, some believe this digital money is immune to economic turmoil, geopolitical problems, and inflation. Others also claim that this digital money will outperform gold in the future.
This inflation has been particularly the case during the coronavirus pandemic, with many central banks printing vast quantities of money to help stimulate the economy. The purchasing power of the US dollar decreases with excessive printing, therefore, devaluing assets valued in dollars. Bitcoin, however, does not have this problem because it is a better hedge against inflation.
Volatility
Bitcoin prices are highly volatile as the values rise and fall rapidly. Speculators profit from this, but genuine investors see it too. Therefore, investing in this digital asset is risky.
Investing is not regulated
The lack of regulatory oversight is among the most significant drawbacks of Bitcoin investing. Cryptocurrency laws and taxes differ from country to country and are often ambiguous or contentious. A lack of regulations, unfortunately, can lead to fraud and scams.
Risks of Loss
It is possible to lose all your Bitcoins if a hard drive crashes or a virus corrupts records. And this makes the wallet file corrupt. Consequently, there’s nothing you can do to retrieve your Bitcoin. These coins will remain orphaned in the scheme indefinitely, which has the potential to bankrupt a wealthy Bitcoin investor in a matter of seconds with no means of recovering.
The Bottom Line
Bitcoin has its pros and cons, as seen in this article. Therefore, weigh the advantages and drawbacks before investing in this digital money.
