With authorities in some countries placing a ban on the buying and selling of Bitcoin, a majority of people have to wonder, “Is Bitcoin a good investment?”
There are thousands of cryptocurrencies available for investors to trade on; however, we will be focusing primarily on the one that seems to be the most talked-about crypto, and that is Bitcoin.
Bitcoin is often described as the king of cryptocurrencies. To some people, when they hear about crypto, all that comes to their mind is Bitcoin. With all these raves about Bitcoin, the million-dollar question still stands, “Is bitcoin a good investment?”
To some people who strongly believe that the emergence of digital currencies and cashless payment methods will eliminate centralized financial institutions, Bitcoin is a good investment. But to other renowned investors and business tycoons like Warren Buffet, who still have a high measure of trust in the traditional financial institution and do not see them being left behind in the pages of history, Bitcoin will seem like a wrong investment choice.
The response that you will get to the question, “Is Bitcoin a good investment,” is very likely to differ depending on the viewpoint of the person you asked.
If you’re an investor contemplating whether you should venture into this asset class, you would likely want to have all the facts before you invest in order to make smart investment decisions.
This article will provide you with some of the major things that you need to know about Bitcoin so that you will be in an excellent position to answer the question of whether Bitcoin is a good investment or not.
Things you Must Know to Answer the Question: “Is Bitcoin a Good Investment?”
Before deciding if an asset is a good investment, it is wise to find out every important detail about that particular asset to avoid making terrible mistakes that can result in huge losses.
So what are those essential things to know about Bitcoin that can help you decide if the cryptocurrency is a worthy investment in 2020?
Bitcoin is scarce
This is perhaps one of the essential facts about Bitcoin. Unlike fiat currencies that can be printed whenever the government deems fit and in whatever quantity they want, Bitcoin has a limited supply.
Based on the Bitcoin protocol, there can only ever be approximately 21 million units of the cryptocurrency that can ever exist. This means that it may stay consistently valuable or even increase its value over time as scarcity kicks in. According to the protocol, the last block of Bitcoin can only be mined in the year 2140.
Therefore, the mining of Bitcoin will tend to become harder and harder as time goes on, increasing the demand for it. With this knowledge, many people are clamoring to get a hold of this asset class and benefit from it.
Bitcoin is extremely volatile
Every investor who wants to venture into the worth of cryptocurrency should be aware of this fact. Bitcoin is known for its extreme volatility. Over the years, this digital currency has seen a lot of fluctuations in its price.
Bitcoin’s price can sometimes rise to high peaks, making investors bask in the thrill of accumulating huge amounts of money. It can also plummet to deep valleys that will leave investors scratching their heads in losses.
It is because of this volatility that some find it very difficult to have a measure of confidence in the asset as being a good investment. However, it is necessary to understand that Bitcoin has its risk just like any speculative investment.
How, then, is Bitcoin a good investment, you may wonder?
Well, if you are not a huge fan of sporadic changes in price, it will be best to steer clear the digital asset. But if you wish to experience the thrills of investing in the Bitcoin roller coaster, it will not be wise to invest your entire life savings into this digital asset. It is often advisable to never invest more than you are willing to lose, although Bitcoin always records an increase in the long-term.
Bitcoin has high liquidity
Bitcoin is currently one of the most liquid investment assets in the world. It can be very easy for you to sell your coins or exchange them for some other assets such as gold at a time that is very convenient for you.
The establishment of many crypto exchanges, trading platforms, and online brokers has made the task of trading Bitcoin very easy. These exchanges and trading platforms help to facilitate your buying and selling at incredibly low charges.
So, if you are looking for an investment asset with high liquidity, Bitcoin sure is a good investment choice. There is no minimum or maximum amount that you can invest in Bitcoin.
Bitcoin is not controlled by any central government
The fact that no government or individual can control Bitcoin is one of the driving forces behind the fast-increasing popularity of the digital currency.
The cryptocurrency provides investors with the freedom they need from the central government, which is often imposing fees on investors, monitoring their transactions, and being in total control of their money.
Bitcoin allows investors to decide what to do with it and how to spend their digital currency. However, this is also why some individuals use this asset class to perpetrate evil by utilizing it to fund certain illegal operations without having to answer to any government.
Bitcoin is transparent
Every single transaction that is carried out and every information, including the smallest bit, is stored in the underlying technology upon which bitcoin is built — the blockchain technology. All this information can be viewed by anyone and at any time using a block explorer.
Once your Bitcoin wallet is used publicly, anyone can determine what is going on in it by a careful examination of the blockchain ledger. However, personal information like name, address, date of birth, and other contact details are not stored or required when transacting with Bitcoin.
Bitcoin’s price history
To derive the answer to the question, “Is bitcoin a good investment,” it will be wise to take a closer look at the price of this digital currency over the past eleven years it has been in existence.
Often, one of the easiest ways to determine the worth of Bitcoin as a good investment is to take into consideration its rise against the U.S. dollar. Back in 2009, when bitcoin was first introduced, it was worth absolutely nothing against the dollar.
In one instance, one of the earliest bitcoin investors known as SmokeTooMuch was said to have auctioned a total 10,000 Bitcoin for just $50, yet there was no buyer.
On July 17, 2010, the first Bitcoin trade took place on the now-defunct Bitcoin exchange, Mt Gox. The transacting parties exchanged 20 BTC for $0.04951 per coin. The total size of the transaction was just under $1.
Today, the value of one unit of Bitcoin is currently sitting near the price of $12,000. It had traded near $20,000 in late 2017.
If you consider the validity of Bitcoin as an investment class from this angle, you will most probably have your answer to the question, “Is bitcoin a good investment?”
- Bitcoin’s growing popularity
A decade ago, investing in a digital currency like Bitcoin may seem like something implausible. As the years go by, there have become more transparent regulations on Bitcoin use, more discoveries on the real-life use cases of this digital asset, and the lifting of some previously imposed bans on the currency.
Some of the world’s most popular public figures and financial institutions are also encouraging individuals to invest in Bitcoin. JP Morgan, for instance, sees it as an asset every investor should have in their portfolio.
Rounding Up: Is Bitcoin a Good Investment?
Its proponents often view Bitcoin as a store of value and a hedge against inflation. Some investors come onboard this investment vehicle due to the thrills of making huge profits while others shy away from it because of its volatility.
But is Bitcoin still a good investment? No one can predict the future, so the answer to this question may be a matter of guessing. You are entitled to your opinion.
The points provided in this article are merely things that you need to bear in mind when deciding on whether to invest in Bitcoin. It is not a piece of investment advice, so be sure to do your due research and always remember never to invest more than you will be willing to lose.