While cryptocurrencies like the Bitcoin may have much headway in recent years, critics still feel that it is a double-edged sword. You may feel that you are missing out on the opportunity to turn rich overnight by investing in Bitcoins, but, you should first understand how the Bitcoin works and assess the pros and cons of investing in it before you dive into crypto investments. So, here are a brief listing of the biggest advantages and disadvantages of Bitcoin investments:
Pros of investing in Bitcoins:
- Institutionalization: Bitcoin prices appear to be spiking up due to mainstream adoption of crypto coins across the world by industries and businesses. When businesses started to realize the potential that Bitcoin or blockchain technology has, they began to embrace it. So, institutional use makes Bitcoin prices soar higher than ever.
- Liquidity: Bitcoin is undeniably one of the best liquid investments because of the easy availability of trading platforms, trading exchanges and brokerage online that makes trading a breeze. Bitcoins can be traded for assets like gold or cash at low fees.
- Low inflation risks: Unlike traditional fiat currencies that are controlled by governments Bitcoin is not affected by inflation. There is a finite supply of Bitcoins and you never have to worry about Bitcoins losing their value.
- Newer opportunities: Since the Bitcoins are still in a nascent stage there is enough scope for growth and the unpredictable price fluctuations can give traders the chance to earn unprecedented profits.
- Minimalistic trading: When you trade in stock exchanges you have to own a license for it. But, in Bitcoin trading, you simply have to purchase and sell your Bitcoins through exchanges and store these in wallets. Transactions are almost instantaneous unlike stock trading orders that could take weeks.
Cons of investing in Bitcoins:
- Resources limits: To start with, there can be a shortage of resources because the Bitcoin will not last always; the final Bitcoin will be mined by 2140.
- Volatility: While Bitcoin price volatility may provide you with massive returns on your investment it can also make you incur huge losses. You must research well before jumping into trades to understand the right time to enter or exit trades.
- Hacking: This continues to remain the biggest security threat to Bitcoins and other crypto assets. Exchanges are places where you may trade Bitcoins using their apps or websites, but they are prone to hacking and you may lose all your coins in the process. There is no insurance against such losses.
- Lack of regulations: Bitcoins are not regulated by any centralized authority or institution like banks. Governments do not have a uniform stance towards it and this makes you susceptible to malpractice and frauds.
- Limited usage: Bitcoin is still not an accepted form of payment by retailers worldwide; only a handful of merchants have started accepting Bitcoin payments. Many businesses do not yet recognize Bitcoins as a legal payment system and this makes it an unfeasible investment.
- Lost wallets: When virus corrupts your system or your computer hard drives crashes for some reason and the private keys are not backed up in another location, you may lose everything you have earned. There is no recovery for losses of this kind.