- 24/07/2024
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Created in 2009, Bitcoin has taken the investment world by storm. Introducing the concept of cryptocurrencies, Bitcoin has become the standard-bearer for the investment. Thousands have gotten rich while thousands more have regretted getting out at the wrong time.
We have heard all about the incredible highs and devastating lows. But before you get involved in Bitcoin, it helps to know the good and the bad. Here are the pros and cons of investing in Bitcoin, and cryptocurrencies, in general.
Pro: Return Potential
Let’s be honest about why people really invest in Bitcoin. The simple fact of the matter is that it is possible to enjoy serious return on investment. Though the potential is not as great as it was for those who got in on the ground floor, investing in Bitcoin does has potential.
Take, for example, the period from December 2022 to March 2023. Bitcoin went from roughly $16,000 per coin to just over $22,000 per coin in just under four months. Given that the price is at more than $64,000 per coin right now, there is a ton of room to grow your investment and make some real money in the process.
Con: Volatility
The single biggest downside to investing in Bitcoin is its volatility. While the meteoric rises have been well-documented, so too have been the drastic losses. Bitcoin is no stranger to massive dips in the market, especially over short periods of time. It is enough to make the average investor cringe and want to sell at the wrong possible time.
Because there is a limit of 21 million Bitcoins, the currency is scarce. The biggest impact of its volatility is the acceptance of major financial entities. As banks, retail chains, and other industries begin to accept Bitcoin as a form of payment, the stronger it becomes a reliable investment strategy. But until the day comes when it has universal acceptance, there is always a risk of a major drop.
Pro: Decentralisation
The entire selling point, the biggest pro of investing in Bitcoin, is its potential to become a consistently decentralised currency. The majority of currencies now are regulated by some kind of bank or government agency. That means everything runs through a central entity.
With cryptocurrency, led by Bitcoin, the goal is to put the authority in the hands of the individual. Each transaction would go through the blockchain and would require no third party to execute. It presents the opportunity for true independence from the banking system that has largely controlled financial markets since the dawn of time.
Con: Lack of Regulation
Another scary thing about cryptocurrencies – not just Bitcoin – is the overall lack of regulation. Despite the fact that banks and other financial institutions control the flow of money in the world, they are heavily regulated. That just is not true of cryptocurrency right now. Though it will be important to decentralise those institutions, the lack of regulations makes adhering to cryptocurrency a scary thing for many.
Regulations have been coming off and on in different parts of the world over the last few years. Bitcoin is also taxed, so it is important to report capital gains and losses as you would any other form of investing. The bright side to that is you may be able to write off some of your crypto losses if you move them at a loss.
That’s just scratching the surface of what it’s like to invest in Bitcoin. The further in you get, the more you unlock. In the end, you can learn more about the hottest commodity in the world and may even make some money.