Bitcoin is a form of digital currency that has been making headlines for the last few years. It has experienced its ups and downs. However, despite the volatility, many people are becoming more interested in it.
If you plan to invest in Bitcoin, knowing what you are getting into is essential. First, you should know that investing in Bitcoin isn’t for the faint of heart, and just like any other investment, it has pros and cons. Here, we will take a closer look at why Bitcoin has created such a division in today’s society.
Bitcoin: A Love and Hate Relationship?
But first, what is Bitcoin? Bitcoin is a currency that you can use to pay for goods and services, just like USD or Euro. However, that’s the only similarity between Bitcoin and traditional currencies. What makes Bitcoin different?
- Decentralized: There is no government or bank that controls the supply of Bitcoins.
- Digital: There is no physical Bitcoin. The currency exists entirely online and uses blockchain technology to support peer-to-peer transactions.
- Pseudo-Anonymous: Transactions go on a public ledger called the blockchain, and the identity of the people behind those transactions is not revealed. Instead, transactions tie to unique addresses, essentially random strings of letters and numbers.
Bitcoin: A Long List of Advantages
Even though Bitcoin started trading in 2009, people still consider it a relatively new form of currency. As a result, there is a lot of misinformation out there about it. Knowing the advantages of Bitcoin can help you determine whether it’s an investment that suits you. Consider the following:
Accessibility and Liquidity
One of the advantages of Bitcoin is that it’s easily accessible and versatile. Transferring this currency from one user to another takes only a few minutes, so you can use it to buy goods and services from online businesses that accept Bitcoin.
Transactions do not contain any personal information like a name and credit card number. Even though it’s still possible to link a person to a specific wallet, Bitcoin transactions are usually more private than credit card transactions.
Many investors buy and hold BTC, believing that more people will trust and use it once the currency matures. If and when that happens, the currency value will increase.
Bitcoin trading does not close over the weekend or in the afternoon the way traditional financial markets do. You can buy or sell Bitcoin 24/7. That’s the beauty of a decentralized system.
Disadvantages and Limitations of the Cryptocurrency
Despite Bitcoin becoming popular and widely used, there are some drawbacks you should know about. Here’s why a significant portion of the world population is still unsure about the cryptocurrency.
When Bitcoin came into existence, it had a set limit of 21 million Bitcoins. That’s why many people regard Bitcoin as being scarce. But this scarcity is what makes Bitcoin so valuable. Aside from that, it makes the prices extremely volatile. Furthermore, the Bitcoin market is relatively small and reacts strongly to news and events, causing sudden and dramatic price fluctuations.
Although backers claim that the blockchain technology behind Bitcoin is very secure compared to traditional electronic money transfers, there have been some cases of hacks. For example, in May 2019, over $40 million worth of Bitcoin was stolen from Binance, one of the leading cryptocurrency exchanges.
So, is a Bitcoin investment worth it? Even though the cryptocurrency has birthed a few millionaires (and even billionaires), many still view it as a risky trade. Either way, it’s essential to do your own research before committing or disregarding it completely. Knowledge is power, especially when it comes to Bitcoin.