No cryptocurrency enjoys the same recognition as Bitcoin. That’s because it was the first to make trading virtual coins a possibility today. Though Bitcoin is the most popular of its kind, cryptocurrency in general remains a mystery for many people, including investors. In this article, we’ll take a look at the different pros and cons of Bitcoin to help you decide whether it’s a good investment for you.
How Bitcoin Works
Bitcoin is a cryptocurrency supported by computer codes. It’s decentralised, which means a central bank or a government doesn’t own it. All transactions are stored in a public ledger that can be accessed by anyone. So if one computer crashes, the entire network of Bitcoin, or the blockchain, doesn’t necessarily follow.
As an asset, it’s also completely digital. Owning a lot of Bitcoin means you can only virtually swim in it because there aren’t any physical coins that correspond to Bitcoin. But that doesn’t mean Bitcoin has no real value. In fact, Bitcoin is slowly becoming acceptable as an alternative form of payment by merchants across the globe. You can buy Bitcoins using fiat currencies like the British pound, wait for its value to go up, and sell them for a profit later on.
Heads or Tails?
Every coin has two sides, and in the case of Bitcoin, each represents reasons to invest and reasons not to.
The Good Side
Contrary to popular belief, cryptocurrencies including Bitcoin are not actually anonymous. Instead, they’re pseudonymous. It uses public key cryptography that masks the user’s identity, making it difficult for hackers to steal a user’s personal information or their assets. Security is what makes Bitcoin an attractive investment, especially for those who have large assets they want to protect.
• No intermediaries
Because Bitcoin doesn’t operate under a single authority, the transaction fees are often lower. If you’re planning to trade Bitcoin, this is a huge deal given that you won’t lose a significant amount of money to buy and sell assets regularly. You can ensure profits remain high and your virtual wallet stays healthy.
• Varying investment options
There are many different ways you can buy into the Bitcoin game. The most common — and most beginner-friendly — is to purchase Bitcoins directly through coin exchange services, apps, stockbrokers, and other owners.
If you have more investment experience, you can also choose to buy crypto CFDs. Like regular CFDs, crypto CFDs can be traded 24/7 without the need for special wallets because you don’t actually own the asset. You’re just speculating on whether or not Bitcoin will result in a loss or a profit. That means you can sidestep the volatility of the market by making predictions on its performance instead of participating in it.
If you need to choose one cryptocurrency, Bitcoin is the most worthwhile to invest in. It is the most popular, which means it has the highest liquidity due to the number of transactions that occur. Compared to the rest, it is also the most widely accepted for payments and trades.
The Bad Side
If you thought the stock market was volatile, then you haven’t looked at cryptocurrencies well enough. The market is subject to wide price fluctuations given that digital coins are considered a speculative investment. Some countries have banned cryptocurrencies entirely, while a few are just starting to establish regulations to protect cryptocurrency owners. This may affect the value of Bitcoin and the ability to participate in the market.
Once a transaction is completed, there is no way to reverse it. In some cases, this is a benefit. For instance, merchants can prevent fraudulent purchases from happening. But that can also be a bad thing. If fraud does occur (say a merchant doesn’t deliver goods purchased), it’s virtually impossible to get a refund. Buyer protection is still quite low in Bitcoin transactions.
• Developing network
Given that Bitcoin is a developing system, transactions may not be as efficient or accessible as well-established financial services like banks. The number of people who own Bitcoin, though growing, is still a minority.
As you can see, Bitcoin has benefits and drawbacks depending on which side of the coin you’re looking at. Investing in Bitcoin now may be a huge risk, but it can very well be one that pays off in the future. As with any other type of investment, play it smart by diversifying — that means don’t put all your eggs into the Bitcoin basket!
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