Today we are going to talk about tree advantages and disadvantages of Bitcoin, is it a good investment and should you invest in Bitcoin today?.
Bitcoin is one of thousands of cryptocurrencies, it was launched in 2009 by an unknown group known only as Satoshi Nakamoto, today, Bitcoin has a market cap of $647.2 Billion, it is the most successful cryptocurrency by far. Bitcoin has a supply limit of 21 million Bitcoin in circulation, and so far around 18.5 million have already been mined.
Back in 2010 you could of bought Bitcoin for only $0.8 Cents, but today a single Bitcoin will set you back $33,625 Dollars, that means that if you had invested $100 dollars 11 years ago, it would now be worth almost $42 Million Dollars, now you can see why people get so exited about investing in cryptocurrencies, but is it worth investing in Bitcoin today or is it too late?.
I am going to start by talking about three disadvantages of investing in Bitcoin and then move on to talk about three advantages.
First disadvantage of investing in Bitcoin.
The first disadvantage of investing in bitcoin is that it produces no income, nothing. Most companies pay a dividend to their shareholders and if you have bonds you get a regular coupon payment, in this respect bitcoin is similar to gold it’s more of a speculation than an investment. You’re buying it hoping that someone else in the future will pay more for it than you did.
Second disadvantage.
The second disadvantage of investing in bitcoin is that it is extremely volatile and unpredictable, the price of a bitcoin can vary hugely even in a single day, the comparison over the last 50 years the US stock market has had an annual standard deviation of monthly returns of around 15.66% and gold’s was 20% over the same time period. But bitcoin is on another level the price of bitcoin could change by more than 10% in just a few hours. In 2018 when the crypto bubble popped the price of a bitcoin fell from around $17,000 in January to around $3,700 in December.
Third disadvantage.
The third disadvantage is that there is virtually no regulation or protection. Though bitcoins are not regulated by the FCA or protected by the FSCS. This means if you lose your hot wallet or keys or your hot wallet is hacked then your bitcoins are gone forever and you won’t be able to get them back. Hackers are constantly trying to steal bitcoins from online crypto exchanges such as coin base. This is a real problem.
Let’s move on to talk about the advantages of investing in bitcoin.
First advantage of investing in Bitcoin.
First advantage is that you have the potential to make huge profits. Let’s be honest this is the main reason why most people buy bitcoins, I’ve already mentioned how $100 of bitcoin in 2010 would now be worth $42 million. There’s an element of hoping this will happen again. But will it happen? No one really knows. One thing I would say is that its definitely a dangerous idea to go all in on bitcoin as an investment. Just look at 2018 as an example of what can happen.
Second advantage.
The second advantage of investing in bitcoin is it has a low correlation with the stock market. If you’re looking to diversify your portfolio across different asset classes then it makes sense to include at least some crypto currencies in your portfolio. The idea being if there was a stock market crash then the bitcoin price might rally. Though it could quite as easily crash with the stock market. We don’t really have enough historical data to fully understand the relationship between bitcoin and other asset classes.
Third advantage.
The third advantage is that theoretically it can be used as a hedge against inflation or hyperinflation. Again this is where bitcoin shares some similarities with gold and this is one of the reasons people call bitcoin digital gold. The supply of fear?? currencies like the dollar or the euro can be increased by printing money.
When governments print money it causes inflation and devalues your cash. But like gold the supply of bitcoin can’t be artificially increased, it has to be mined. When I say mined its digital mining using computers as opposed to physical mining using diggers and trucks. This means that unlike fair?? currencies there is a limited supply of bitcoin and theoretically its not affected by inflation.
If you are going to invest in bitcoin I also think it is important to buy real bitcoin and not indirectly through a CFD or tracker fund. And I also think its important to store it safely on your own hot wallet or your own keys. If Bitcoin is not for you, another alternative is Affiliate links, you can make $1k or more per month with Affiliate links.
