The Pros & Cons Of Investing In Bitcoin
While you might have just heard of Bitcoin recently, it has been around since 2009. You might have heard stories of how its value has grown from almost nothing to thousands of dollars per Bitcoin today. If so, you may have also heard about the wild price fluctuations in the crypto market. If you are wondering whether to invest in Bitcoin (BTC) or not, here are some facts that could help you make up your mind.
Sound & Predictable Monetary Policy
Bitcoin’s monetary policy is hardcoded into the underlying blockchain. Unlike fiat currencies, the supply of Bitcoin is fixed at 21 million. If you are a long-term investor, this sound and predictable policy will be quite attractive.
While making short-term predictions on the price of BTC is almost impossible, a look at the historical data shows an upward trend. In the past ten years of its existence, the Bitcoin has grown in value from less than a dollar per Bitcoin to around $9,000 per Bitcoin today. If you had invested in BTC a decade ago, your investment would have ballooned hundreds of times.
Its monetary policy means that there is little risk of inflation. BTC, unlike fiat currencies, grows its value with time. On the other hand, if you own a hundred dollar bill and stash it in your safe, it will be worth significantly less in ten years.
The high Liquidity of BTC
In the investment world, BTC is one of the most liquid assets you will ever come across. If for some reason you quickly need access to cash, you can convert your BTC in cash at one of the thousands of crypto exchanges across the world. Even gold does not have the same liquidity as BTC. It is a great investment option for people looking for a short-term profit from their investment.
Bitcoin is Immune to Censoring
If you own shares or money stored in a bank account, a central authority can order the bank or investment firm to freeze your cash and shares. With Bitcoin, it is impossible to censor a person’s wealth. You can move your wealth to any part of the world within minutes without being worried about censorship by central authorities.
Upcoming Crypto Regulation is Mostly Positive
Some people fail to invest in BTC because they fear to be on the wrong side of the law. However, most upcoming crypto regulation is positive. Thus far, no country has criminalized the purchase and sale of Bitcoin. Most of the regulation being passed or being drafted supports the notion that BTC can be used as a store of value or for payment of goods and services.
The Cons of Using Bitcoin
While there are good reasons to invest in BTC, there are a few downsides to owning BTC. They include:
If you are investing in BTC, ensure you only invest a small part of your wealth. The price of BTC is highly volatile and in the space of a few days, the price could drop or rise by 10% or more.
Expect for trading purposes, the uses for BTC are limited. Only a few eCommerce stores and physical stores accept payment in BTC.
Permanent Loss of BTC
If you lose the private key, you lose access to your BTC forever. In contrast, losing the PIN to your ATM card could easily be remedied with a call to the bank.
Threat of Hacking
If you store your BTC online, there is always a good chance you could lose all of them to hackers. For people without a lot of experience with computers, there is a good chance they could become easy targets for hackers.
In general, investing a small part of your wealth in BTC is a good idea. If you are lucky, your investment could have grown by multiples in a few years. However, you need to conduct enough research before you commit any of your money to the crypto world.