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Benefits and Risks of Investing in Bitcoin

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What are the benefits and risks of investing in Bitcoin? Find out why you should consider investing in this cryptocurrency and the possible risks.

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The media has undoubtedly given Bitcoin a lot of coverage recently. And this has captured the attention of many people, especially those seeking alternative investments. Bitcoin is a decentralized, global payment system. It’s also a digital currency that operates without the regulation of any government or central bank.

This virtual currency uses blockchain technology that allows users to complete transactions without involving intermediaries. Bitcoin is the most prevalent and the first cryptocurrency globally. Other cryptocurrencies include Ripple, Litecoin, and Ethereum. However, these are not as popular as Bitcoin. They also don’t have the same transaction volume as Bitcoin.

Initially, the only way to acquire this cryptocurrency was through Bitcoin mining. And this is a process of solving complex math problems using high computer-processing power. Bitcoin miners earn Bitcoins by improving or validating computer code blocks. Their rewards generate new coins that enter the Bitcoin network.

However, Bitcoin mining requires a significant investment in infrastructure and utility bills. Consequently, many people can’t afford to mine Bitcoin. Nevertheless, platforms like https://bit-iq.io/ allow people to purchase and sell Bitcoin online. With such a platform, you exchange fiat money for Bitcoin. Thus, you don’t have to struggle to find a buyer for your Bitcoin when you decide to do away with the cryptocurrency.

Today, many people use Bitcoin as a currency when buying and selling commodities or paying for services. That’s because this cryptocurrency fulfills these criteria for money:

  • It’s a value unit
  • It serves as an exchange medium
  • It’s a value storage
  • It’s a deferred payment standard

 

Recently, Bitcoin has experienced increased speculation due to its purpose as value storage instead of increased usage. Consequently, some people now compare this cryptocurrency to the Tulips boom of the 1600s.

 

Benefits of Bitcoin Investments

Bitcoin has high volatility that creates an investment opportunity. Ideally, you can buy and hold onto this cryptocurrency, hoping its value will increase. Thus, you can buy low and then sell high to make a profit.

Additionally, the lack of Bitcoin regulation and limited supply of this digital currency means its price will most likely continue to rise. Unlike fiat money, no government or agency can regulate the value of Bitcoin to occasion investment risks like inflation.

Bitcoin depends on an innovative infrastructure that holds a lot of potential for different sectors. Blockchain technology is an innovation that several fintech developers want to adapt and leverage for varied purposes. As such, Bitcoin will most likely keep growing and expanding its usage as more people adopt this technology.

 

Risks of Bitcoin Investments

Recent Bitcoin’s popularity as value storage has caused enormous gains for Bitcoin/USD exchange. And this explains the tremendous volatility of the price of this cryptocurrency. At the beginning of 2017, Bitcoin price was slightly more than $1000. And by November the same year, Bitcoin’s price had risen to about $6,400. By mid-December, this cryptocurrency price was $19,200 before falling to $13,400 by the end of the year.

Most speculators want to benefit from the short-term momentum of Bitcoin price instead of focusing on the long-term, daily usage of Bitcoin. And these are fueling the increase in the price of this cryptocurrency. Consequently, some merchants that had started to accept Bitcoin payments have suspended it due to this volatility.

Another drawback of Bitcoin investment is the lack of a regulatory authority. Without regulatory oversight, getting Bitcoin on a secondary market becomes an opaque experience. That’s because there is no transaction period for purchasing and selling this cryptocurrency.

Additionally, Bitcoin has limited transaction capacity. The restricted maximum transaction volume means it will be hard for this cryptocurrency to dominate the other payment methods.

 

Final Thoughts

Some of the things that make Bitcoin investments worthwhile are the increasing popularity and adoption. This cryptocurrency uses an innovative technology that gives it a competitive edge over fiat currency. Nevertheless, this investment has some drawbacks, such as low transaction volume. Take your time to investigate this digital currency before deciding to invest in it.

 

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