Is Bitcoin a Good Investment?
A collective insanity has sprouted around bitcoin over the last decade. It’s hard to predict whether this cryptocurrency will eventually prove to be a great investment or just a passing storm. That thrill of riches or ruin leaves some investors wary, but others want to chase the chance for profits from a bitcoin investment.
Simply Put: Is Investing in Bitcoin Risky?
Similar to any speculative investment, buying bitcoin carries some well-known risks: The price could drop precipitously and a single online hacking or crashed hard drive incident can wipe out your stash of bitcoin with no recourse.
Bitcoin has seen dramatic run-ups in price followed by some painful crashes but has consistently retained a significant portion of its previous gains every time it plummets. Since its inception, Bitcoin was the 1st digital asset to beget the current ecosystem of cryptos. For quite a while, it grew an underground following of investors who saw its future as a possible replacement to the physical monetary system.
The decision to invest in bitcoin comes down to your appetite for risk.
Advantages of Bitcoin Investments
The overwhelming performance of bitcoin — as a currency and investment — has attracted traditional and institutional investors alike. Bitcoin as an investment tool provides you with the following advantages over traditional investments.
- Liquidity. Bitcoin is arguably 1 of the most liquid investment assets due to the worldwide establishment of trading platforms, exchanges and online brokerages. You can easily trade bitcoin for cash or assets like gold instantly with incredibly low fees. The high liquidity associated with bitcoin makes it a great investment vessel if you’re looking for short-term profit. Digital currencies may also be a long-term investment due to their high market demand.
- Lower inflation risk. Unlike world currencies — which are regulated by their governments — bitcoin is immune to inflation. The blockchain system is infinite and there’s no need to worry about your cryptos losing their value.
- New opportunities. Bitcoin and cryptocurrency trading is relatively young — new coins are becoming mainstream on a daily basis. This newness brings unpredictable swings in price and volatility, which may create opportunities for massive gains.
- Minimalistic trading. Stock trading requires you to hold a certificate or license. You must also go through a broker to trade a company’s shares. But bitcoin trading is minimalistic: simply buy or sell bitcoin from exchanges and place them in your wallet. Bitcoin transactions are also instant — unlike the settlement of stock trading orders, which could take days or weeks.
Disadvantages of Bitcoin Investments
Bitcoin may be the future of monetary exchange, but it is equally important that you are aware of the concerns surrounding cryptocurrency investing. Here are some serious risks associated with bitcoin investments.
- Volatility. The price of bitcoin is always rippling back and forth. If you happened to buy bitcoin on December 17, 2017, the price was $20,000. Weeks later, you couldn’t sell your investment for more than $7,051. The bitcoin market is constantly changing. With such an unpredictable market, you can hardly get a good return on your investment. To avoid huge loss, keep a close eye on the market.
- Threat of online hacking. Hacking is a big threat facing a bitcoin investor. Bitcoin exchanges let you buy and sell your cryptos using a mobile app or website. This leaves them susceptible to hacking and theft of all your investment. And bitcoin held on exchanges isn’t insured by the FDIC.
- Little or no regulation. The bitcoin market currently operates with no major regulations. It isn’t taxed and governments have no clear stance on it. As a result, you could stand exposed to fraud and malpractice.
- Limited use. Bitcoin is currently only accepted by few online merchants. Many companies don’t also recognize bitcoin as a legitimate exchange, making it an unfeasible investment vessel. Besides, there’s only a fixed supply of bitcoin — 21 million.
- Wallets can be lost. If your hard drive crashes or virus corrupts your wallet file, you lose your bitcoins. You can go from a wealthy to bankrupt investor within seconds with no way to recover.
Can Bitcoin be Exchanged for Real Money?
Bitcoin can be converted to cash in a couple of different ways. You can sell bitcoin on a cryptocurrency exchange like Coinbase or Kraken. The cash will be deposited directly into your bank account.
Bitcoin ATMs are rare, but if there is 1 near you, you can exchange your bitcoin for cash. And some websites allow you to sell bitcoin for a prepaid debit card.