The Pros and Cons of Investing in Bitcoin

Posted in Investment By Poshita Bhatt - Jan 28,2022
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To buy or not to buy. That is the question. While buying cryptocurrency like Bitcoin is becoming increasingly popular in today’s time, a large majority of people still have their doubts and hesitations about it. And not without reason. Cryptocurrency has added a completely new dimension to the idea of investing money, and it only makes sense to look before you leap. 

Bitcoin is the most popular and one of the oldest cryptocurrencies. It has been around since 2009 and seems to be going strong in today’s time. If you are concerned about its drawbacks but also eager to become educated about its benefits, we present to you both sides of Bitcoin! 

The Pros 

1. Potential of relatively high returns:  

This is the advantage that has allowed Bitcoin to gain huge popularity in the world. Being highly volatile, its value can increase drastically on a monthly or even a daily basis. This is because there is a limit (21 million) to how many Bitcoins can ever exist. This means that they are scarce and the value of each may change exponentially in small periods of time. 

2. Universality, accessibility and liquidity:

Bitcoin transactions are immediate and can happen internationally with zero hassle. No paperwork and commission costs are involved. This allows it to be easily accessible. Bitcoins are now being used to buy goods and services with the acceptance that it has gained. This makes making purchases in another country possible while bypassing the government authorised currency. 

3. Transparency and protection against fraud: 

Bitcoin investment eliminates the chances of fraud. The payments can never be declined. All you need to do in order to make a payment is have the receiver’s private key. All transactions done are permanently viewable adding the element of complete transparency to them. This is because all cryptocurrency is developed using blockchain technology which is like a digital ledger that cannot be erased or tampered with.  

4. Privacy and user anonymity: 

Only the owner of an account has the knowledge of how much currency he owns. Users of Bitcoin are identified only by a numerical code and can have multiple public keys. This allows anonymity as there can be no public tracking. In case the address of a user’s wallet becomes public, another address can be generated to keep the privacy safe.  

  

The Cons 

1. High volatility:  

While being the greatest asset of cryptocurrency, this is also its biggest disadvantage. Prediction of how the crypto market would change even in a matter of hours is extremely difficult. In such a scenario the money that you make in a few hours can be reduced to dust in the next few. 

2. Risk of loss: 

Bitcoins are effectively lost forever in case of a cyber hack or a hard drive crash or if the wallet file gets corrupted. The coins that you lose in such an event are said to be ‘orphaned.’ This implies that Bitcoin investments have the potential of bankrupting an individual in a matter of seconds.  

3. Unregulated by any centralised authority: 

Because cryptocurrency is not recognised by the central authorities of any state, complaints of illegal payments and other activities cannot be entertained or redressed in any court of law. This means no consumer protection is available in Bitcoin dealings. The sources of transactions are impossible to trace. Bitcoins have been used in the past to carry out several illicit activities like the purchase of drugs and narcotics. 

4. Irreversibility and limited use: 

A transaction done can never be reversed by any method. This means there is no scope for a mistake when it comes to Bitcoin. Acceptance of Bitcoins in exchange for a product or service is also not universal, although it is becoming increasingly popular.   

Final words… 

Cryptocurrencies like Bitcoin are here to stay. Governments cannot ban them, though they may be able to regulate and restrict them better in future. Investing in Bitcoin is something that must be done with extreme discretion and careful planning.  

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