No matter where you are on the financial spectrum (a traditionalist who prefers cash or an investment aficionado), by now you’ve probably heard of cryptocurrencies and maybe even some pros and cons of them. the cryptocurrencies. Cryptocurrency has become increasingly popular in recent years, with roughly 14 percent of the US. uu. population owning some form of cryptocurrency as of March 2021. Additionally, an estimated 46 million Americans own bitcoin.
Bitcoin is one of the oldest and most popular cryptocurrencies in existence. And for the cryptocurrency curious, this is where you might consider diving into cryptocurrency investing. So, if you’re wondering, “is bitcoin worth investing in?” or “is it smart to invest in bitcoin?” understanding the pros and cons of bitcoin can help.
Reading: Pros and cons of bitcoin
Advantages of Bitcoin
Although bitcoin was created in 2009, it is still considered a relatively new type of currency, which comes with a lot of misinformation. Knowing the benefits of bitcoin can help you decide if it’s a good investment opportunity for you.
1. accessibility and liquidity
One of the biggest advantages of cryptocurrencies is that they are often borderless, and bitcoin is no exception. one of the main advantages of bitcoin is that it is a very accessible and versatile currency. Since it only takes a few minutes to transfer bitcoins to another user, it can be used to purchase goods and services from the ever-growing list of places that accept it. this makes spending money in another country and exchanging for other currencies easier, with the advantage of little or no fees. bitcoins can also be easily sold at any time.
2. user anonymity and transparency
While not completely anonymous, bitcoin users are identified by numerical codes and may have multiple public keys. this ensures that there is no public tracking and transactions cannot be traced back to the user. Even though transactions can be viewed permanently, giving you transparency, they are still kept safe from fraud due to blockchain technology. In addition to that, only you, as the owner of the wallet, will be able to know how many bitcoins you have.
For added security and anonymity, even if your wallet address has been made public, you can generate a new wallet address to keep your information safe. Compared to a traditional currency system where personal information from a bank could be leaked, no other personal information is required to transact bitcoin, increasing user privacy.
3. independence from the central authority
Bitcoin is a decentralized currency, which means that it is not regulated by a single government or central bank. This means that the authorities are not likely to freeze or demand your coins. there is also no viable way for a tax to be implemented for bitcoin. In theory, this gives users autonomy and control over their money, because the price is not tied to government policies. And in general, cryptocurrency users see this as one of the main advantages of bitcoin.
4. high return potential
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Bitcoin prices can be very volatile, changing dramatically on a monthly and even daily basis. For example, in March 2017 bitcoin was priced at $975.70 and in just a few months it shot up to $20,089 in December. a couple of years later, the bitcoin price reached an all-time high of $64,000 in April 2021.
This shows that although there is a lot of volatility in prices, cryptocurrency users can see this as one of the benefits of bitcoin as it can result in a high return potential. And with a growing number of users believing bitcoin to be a promising global currency, many investors and businesses have decided to embrace it. this helps increase the potential for a higher return, especially for those who bought it at a lower price.
In addition, some investors believe that bitcoin will continue to gain value in the long term, with the possibility of reaching prices close to $500,000 by 2025. That’s because of its fixed supply limit of 21 million coins. and that supply cap will likely occur within a defined time frame, which many believe will enhance bitcoin’s value in the long run.
Disadvantages of Bitcoin
Despite its rapid growth and ever-increasing number of users, there are some downsides to bitcoin to consider, especially if you’re wondering, “is bitcoin worth investing in?” As with many financial decisions, the more you know, the more informed decision you can make about whether bitcoin is worth investing in.
5. volatility
when satoshi nakamoto created bitcoin, there was a limit of 21 million bitcoins that could exist, so some consider bitcoin to be absolutely scarce. this scarcity is what makes bitcoin so valuable, but also what makes its prices fluctuate because price is now the only variable that can change to guarantee demand.
There are also other factors that influence the volatility of bitcoin, such as news in the headlines that investors perceive as bad, uncertainty about its value and future uses, as well as security breaches.
6. no government regulations
Sure, a decentralized currency can be seen as one of the benefits of cryptocurrencies, but it can also be seen as a disadvantage of bitcoin, as it means investing in bitcoin is unregulated. Unlike a central bank-regulated currency, bitcoin transactions are not legally protected and are generally not reversible, making them susceptible to scams.
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Another problem with bitcoin decentralization is that there is no guarantee of a minimum valuation. Therefore, if a large group of investors decides to stop using bitcoins and sell them, the value of bitcoins could decrease considerably and affect users with a large amount of cryptocurrencies.
7. irreversible
Because bitcoin transactions are anonymous and unregulated, another downside is the lack of security. transactions made through bitcoin are irreversible and final, so nothing can be done if the wrong amount is sent or if it is sent to the wrong recipient.
In addition, there is a risk of loss. Many bitcoin users choose to keep their bitcoins in a cryptocurrency wallet, putting them at risk of losing their investments if they lose access to their private key. Should a hard drive fail or a virus corrupt your records or even your wallet, your funds could become inaccessible or disappear entirely in a matter of minutes.
8. limited use
Although there are a growing number of companies that accept bitcoin, such as microsoft and some subway franchises, it is still not widely accepted. this puts a limit on where you can spend your money, unlike using a credit or debit card.
the bottom line: is it worth investing in bitcoin?
so is it smart to invest in bitcoin? Although there are some great benefits of cryptocurrency and the advantages of bitcoin specifically, many people still see it as a risky investment. But like any investment, investing in bitcoin requires you to do your research ahead of time.
Going through a list of bitcoin pros and cons is just the first step. It is also a good idea to study how cryptocurrencies and crypto wallets work, how accessible the market is, as well as the expectations and risks associated with it. If you decide to invest, remember that there are many tools available, such as the mint app, that can help you keep track of your cryptocurrency investments.
Sources: Federal Trade Commission
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