Bitcoin has recently become a household name, and many who have never heard of cryptocurrencies before are now curious about this digital asset. However, investors should be wary of making any investments too hastily. Cryptocurrencies are more complicated than just making a traditional stock market investment.
While there is certainly money to be made in the world of cryptocurrency, it’s still important to weigh all of the pros and cons before making any sizeable Bitcoin investment. We’ll go over these, and then a short summary over the state of cryptocurrency, and some potential problems you may face if you choose to make an investment.
Bitcoin investment Pros and Cons
Pros
- Investors have actual ownership of their investments
- Volatility can lead to big profits for smart investors
- Low supply helps to avoid inflation, offering a store of value
- It can never be confiscated from you if it’s privately stored
- The most popular base currency which nearly all alt coins trade against
Cons
- Prices can go down just as quickly as they went up
- Cryptocurrencies don’t come with insurance policies
- Small mistakes can lead to lost funds
- Future regulations may impact the price
Bitcoin is still extremely volatile
This is both a selling point and also a harsh reality of trading cryptocurrencies. Without the violent price swings, nobody would be able to make any money, and when that swing is in an upward direction, everyone celebrates. However, that same volatility is also responsible for the downward spirals that will knock the wind right out of you. The loss is painful, and it’s a lot harder than it looks to keep holding when your portfolio is slowly melting.
New investors who are looking to become cryptocurrency investors should know that you’ll need a very strong stomach for it. If you’re the type of person who will obsess over every little dip and constantly check your portfolio every five minutes, then crypto markets will likely drive you insane. There are many ups and downs, and for many people, it can be sickening to watch.
A Bitcoin investment requires your protection
Investing in cryptocurrency is not like putting your money into the stock market or a bank. These are free market assets, and that means that you are responsible for securing them. There is no insurance policy to return your funds to you if you make a mistake.
If you’re new to cryptocurrency, then you may not be aware that something as simple as sending your coins to an incorrect wallet address can result in a total loss of your funds. For this reason, when you’re sending your funds to your wallet, it’s important to be extra careful when doing so.
What’s worse is that there are many other dangers here to look out for. Scammers are out to steal your investment at every turn, and investors must be diligent to avoid phishing sites or malware which could result in their wallets being compromised.
You must also make sure to store your assets in a reputable wallet, and you’ll need to create a backup of said wallet in a safe place. If you do not and your host machine stops working then you’ll have no way to regain access to your investment, and your funds will be lost.
Regulations surrounding these assets are not set in stone
Another looming issue with digital currencies is that regulations have not been completely established for them. That means that world governments could change their stance on them, making it harder on investors to participate in the market. Since cryptocurrency trading moves heavily on various news items, this could potentially be disastrous for the price of any cryptocurrency asset.
The exchanges may end up being shut down or heavily restricted, or some short-sighted lawmakers may try to impose legislation against these alternative currencies that is very damaging.
When investing in new technology, you are taking a definite risk. In the case of Bitcoin and other digital currencies, we still don’t know what the future has in store, and how desperate that governments will become in an effort to control them. On the flip side of this coin, some see these regulations as the only way for Bitcoin to truly gain a mainstream audience and gain worldwide usage.
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