Cryptocurrencies have stayed in the headlines for the past year. But the increasing valuation and popularity of crypto are seeking regulators and central banks.
Despite the risks, big tech companies like Amazon and personalities such as Elon Musk are getting associated with Bitcoin currency. It is difficult to predict the acceptance of the currency globally. Some investors choose to stand away, whereas the thrill of becoming rich or losing it all is enough to get involved for some.
What is bitcoin, and how does it work?
Bitcoin works like any regular currency but with some differences. It uses peer-to-peer payment methods where the banks or other bodies don’t get to interfere or take a commission on transactions.
This is a digital currency with no physical form. They are maintained as records in a public ledger (decentralized) and hence transparent.
Bitcoins are mined using an encrypted algorithm. The miners (also known as nodes) run and save the code in the blockchain. A blockchain is nothing but a collection of blocks joined one after the other. Each block holds the record of transactions.
History of Bitcoin
Bitcoin has seen a journey of lots of ups and downs from 2008 till now. Bitcoin was introduced in 2008 by a person under the pseudonym of Satoshi Nakamoto. It offers a parallel online payment system that comes with lesser transaction fees than traditional online payment mechanisms.
Bitcoin is an asset that is not controlled by any central authority. Bitcoin is highly secure, liquid, and has a limited supply for trading. The limited supply has made the demand surge and made Bitcoin attractive.
Advantages of Bitcoin Investments
Liquidity: Because of the global establishment of trading platforms and exchanges, Bitcoin has become one of the most liquid assets. Bitcoin can be traded for cash or other assets, that too, with a very low fee.
Hence it acts as a superb short-term investment tool. A long-term horizon is also possible as the demand for such currencies increases.
Lower inflation risk: Since any government does not regulate Bitcoin, it is immune to inflation.
New opportunities: Bitcoin trading is relatively new, and even more currencies are becoming mainstream. This newness brings unpredictability and volatility, which creates massive gains for investors.
Minimalistic trading: While trading with stocks or funds requires you to have a license, Bitcoin trading is quite simple in nature. It can be bought or sold from the exchange and can be stored in your wallet.
Disadvantages of Bitcoin Investments
Volatility: The rippling nature of Bitcoin prices is something that worries investors. Your valuations can do both ways in just a few days. You may purchase coins while the prices are increasing but find the price dropping drastically within weeks.
For example, the price of bitcoin in December 2017 was around $20,000. And weeks later, it dropped to the range of $7,000.
The threat of online hacking: There are renowned exchanges that are trustworthy. They may do wonders for you by lowering the risk of getting hacked. But still, the risk exists.
The best is to transfer your coins to your web or hardware wallet. Do not lose your private key. The crypto wallets are the key to having more security for your crypto coins.
Is Bitcoin a good investment?
Even though Bitcoin is extremely volatile, it is a good investment option. Just check your risk appetite, Bitcoin price prediction today, and make a crypto investment strategy.
Do not just invest because of fear of missing out. Understand how it works, the dynamics of the market, and then invest within your risk limits.
Is Investing In Bitcoin Risky?
Like any speculative investment, Bitcoin brings its own risks. But with growing popularity and adoption, its risks are reducing.
But recently, in 2021, Bitcoin has become the legal tender in the first country, El Salvador. There are other countries which are likely to follow the same. Even the other risks, such as price volatility, are also expected to be controlled, with more and more countries adopting Bitcoin and adopting it as currency for the purchase of goods and services.
With all such advancements, investing in Bitcoins remains a personal risk. But the advantage of Bitcoin investing is outtrading the risks involved with it.
With organizations starting to accept Bitcoin as the legal currency and countries making it a legal tender, Bitcoin holds a strong future of currency.
Also, Bitcoin being free from any central entity’s control, it has sound monetary policies. Investors are looking for alternate options to hedge against inflation.
However, because of the volatility, Bitcoin investment is still a reluctant option for risk-averse investors because of the volatility.
Bitcoin can be a good investment if you do your research correctly and invest wisely.