Pros and Cons of Bitcoin Investment
Bitcoinhas been at the top of every economic news report from the beginning of its journey. It has almost become a trend to invest in bitcoin. However, bitcoin is not like any other investment as company stocks and bonds depend on the company’s performance. The bitcoin market is highly volatile. So, investing in bitcoin should depend onan individual’s risk tolerance. Don’t be determined to take a risk in investing in digital nature before you know the drawbacks and the advantages that you can get by investing in it. Before you take a step, one question might arise in your mind.Is the world really into bitcoin investment?
The main reason for the slow paced acceptance of Bitcoin was that they did not understand how the bitcoin system works, its role in the economy, and how it can be a fruitful investment in the future. Bitcoin is nothing like a currency.
The difference is that it is not in a physical form. It is completely virtual or digital. The currency is transferred online from one wallet to another wallet,just like you transfer your cash online from one account to another account. In the case of bitcoin, the transaction happens on a peer-to-peer network. The network works on blockchain technology, and the formation of bitcoin takes place by mining blocks that are encrypted with cryptography. In this way, bitcoin is much safer than any other currency.
However, the modern world is very clear about the bitcoin system, its role in the economy, and people are really into it. Not only small investors but big companies like Microsoft, Tesla, Nike, many economic institutions, and even many reliable banks are investing in bitcoin and working with bitcoin money. But, bitcoin investment is risky. So, if you are a new investor of bitcoin, you should be aware of the advantages and risks you might face.
Advantages of bitcoin investment:
- Decentralization:The bitcoin system is decentralized. It means no government, no authority, bank, or company can regulate it. Government can also not determine the value of bitcoin. The bitcoin earned by an individual completely lies with him. It cannot be stolen because it has no physical form. Government cannot seize it anyway.
- Secured currency: Bitcoin is completely digital. As we said before, it is encrypted by cryptography, making it hard to hack. To create a bitcoin, you must mine it by solving a cryptographic puzzle. One more thing is that the bitcoin network is a distributed ledger. Every ledger containsthe same data. So, if some fraudulent activity happens on one block, the other blocks get notified in no time, and the data remains secure. To create a bitcoin, you must add or verify a block by mining. When you own a bitcoin, it remains safe in your bitcoin wallet with two special keys- a public key and a private key. Moreover, bitcoin transaction does not need any identity disclosure.
- Fast and economical: Bitcoin transactions are much faster than any other currency transactions,whether intra-national or international transactions. Transaction cost is almost negligible, or no cost is required. There are no limitations. One can make payment from anywhere, anytime. This is the best benefit of bitcoin that makes it worldwide acceptable.
Risks associated with bitcoin:
- Volatility: This is the main risk associated with bitcoin investment. As we all know, the bitcoin market is extremely volatile. Continuous rise and fall happen. Many investors take a short-term investment positively. But, other investors consider it a dangerous game.
- Regulatory factor: Unlike any other currency, bitcoin is not regulated by the government. But, it is spread worldwide. Different countries have their own rules and regulations. So, many experts think that a lack of a centralized authority can lead to fraud and scams.
Now, we will talk about some essential factors that one must be concerned about before getting into a bitcoin investment.
- Always do market research before investing. You can go to an exchange where investors will help you or can check the market on investment platforms and applications. One such most used platform inthe Bitcoin era.
- Don’t invest all your life savingsin it as it is associated with high risk.
- Invest only that amount of money that you can afford to lose.
- You can consider it a bit like gambling. If you lose, you don’t lose much. But, if you gai,n you are on the winning side. So, invest a small amount.
This brief discussion on crypto investment, would have given you an insight into the world of trading and will help you frame your strategy in a better way.