Almost every investor has heard about Bitcoin regardless of their expertise, qualification, or experience. Over the last several years, cryptocurrencies have grown in acceptance, and as of March 2021, over 14% of Americans were said to be cryptocurrency owners. To give you a better perspective, more than 46 million Americans are thought to be Bitcoin owners. You might have heard many pros and cons about Bitcoin, regardless of where you stand on your investment journey. It is to note that due to the hype that cryptocurrencies often get, there is a lot of misinformation about Bitcoin, just like every other cryptocurrency. But in this article, we will go over in-depth the pros and cons of Bitcoin.Â
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About Bitcoin
is the first ever decentralized digital P2P cryptocurrency ever made. The unknown programmer known as Satoshi Nakomoto invented Bitcoin back in 2009. It is still unknown whether Satoshi Nakomoto is an individual or a group, as their identity remains hidden. This currency was built on a blockchain, a tamper-proof distributed ledger.Â
Today, a sizable majority of the populace is aware of this technology, albeit many may not understand how it works. The cryptocurrency market is growing in popularity among consumers, companies, and governments. Bitcoin stands out among the multitude of cryptocurrencies available today. Despite being just thirteen years old, it is the fourteenth biggest currency in the world. This shows how quickly the cryptocurrency industry is expanding. If you are interested in investing in cryptocurrency, Bitcoin is the first place you should start. However, before investing money into this new asset, you need to know Bitcoin’s pros and cons.Â
Bitcoin’s Pros and Cons
| Pros of Bitcoin | Cons of Bitcoin |
| Bitcoin is a very liquid asset and can be transferred to fiat any time | Highly risky â Prices are very volatile |
| Ensures privacy as well as transparency | It Is not regulated by the government or any other authorized body |
| Decentralized | Irreversible â an exchange made on the blockchain cannot be reversed |
| High return potential | Not adopted widely (yet) |
| Faster Transactions | Involved in Blackmarket activity |
Bitcoin’s Pros
Now you know what advantages Bitcoin has, but letâs talk about each of these advantages in much more detail:
Liquidity and Accessibility
A major feature of every cryptocurrency is that it doesnât have any geographical boundary. It is accessible to everyone around the world. And this is the same for Bitcoin too. The ever-expanding list of sites that accept Bitcoin may be utilized to make purchases as it just takes a few minutes to send money to another user. Having low fees makes spending money abroad and converting to other currencies relatively simple. In addition, it is worth mentioning that the price for sending Bitcoins from one part of the world to another is low compared to other forms of currency transfer. Along with accessibility, its liquidity is another excellent advantage. You can sell your Bitcoins any time and will be able to turn your cryptocurrency into fiat whenever you are in need. A lot of investment assets do not have that much liquidity.
Privacy And Transparency
Our financial system is largely based on third-party intermediaries that process transactions. This implies that you put your confidence in one or more of these intermediaries whenever you do business. Bitcoin offers you a solution to this.
You may participate in the financial markets and conduct transactions without any middlemen since they are accessible to anybody, anywhere. Bitcoin users could have numerous public keys and are recognized by numerical codes. This prevents public monitoring and makes it almost impossible to link individual transactions to specific users. Although the transactions are always visible, giving you transparency, blockchain technology nonetheless protects them against fraud. Furthermore, the number of Bitcoin you hold would only be known to you as you are the walletâs owner.
Decentralized
Since Bitcoin is a decentralized currency, neither a single government nor a central bank controls it. This indicates that the government is unlikely to demand and freeze your coins. Bitcoin removes the influence that FIAT money has over the populace by depoliticizing the currency since the people developed it. Because the pricing is independent of governmental regulations, nobody has the right to charge, demand, or freeze your currency. They cannot be taken, and under no circumstances may the government seize them. Contrarily, Bitcoin transactions don’t demand the revealing of any private data. Instead, they use two keysâa public key and a private key.
High Return Potential
There is no doubt that Bitcoin is a very risky asset to hold. However, the risk matches the reward. Bitcoinâs price fluctuates significantly on a monthly, perhaps even daily basis. For instance, the price of Bitcoin was $975.70 in March 2017 and shot up to $20,089 in December in a few months. A few years later, in April 2021, the price of Bitcoin rose to an all-time high of $64,000. This proves that despite the significant price volatility, cryptocurrency users may consider this one of the advantages of Bitcoin since it may provide a high return potential. And as more people begin to see Bitcoin as a potential global currency, many investors and companies have decided to utilize it. This increases the possibility for a bigger return, particularly for individuals who jumped into the crypto wagon early on. Other investors think Bitcoin will continue to appreciate over the long run, with values perhaps reaching $500,000 by 2025. This is a result of the 21 million coins fixed supply limit. And that supply limit will probably take place within a certain time period, which many people think would raise Bitcoin’s value in the long run.
Bitcoin’s Cons
Now that you know about the Bitcoin pros, it is time for you to know about the downsides it may have. Remember that every good thing has its fair share of ugly sides. Suppose you plan to invest in this asset. In that case, you need to be completely aware of these cons.
Extremely Volatile Asset
Satoshi Nakamoto established a cap of 21 Million on the number of Bitcoins, which is one of the reasons why it is thought to be such a valuable and rare asset. Because there are so few Bitcoins available, it makes it precious and causes its values to fluctuate because the price is now the only factor that can alter to assure demand.
A cryptocurrency’s price may suddenly spike to dizzying highs (with related rewards for investors!) and then plummet to terrifying lows. Therefore, this may not be the greatest option if you’re hoping to generate consistent profits. Because of its relatively small size and reliance on speculation, the Bitcoin market is particularly susceptible to price changes. This has a negative impact on coin value, which is one of the main drawbacks of cryptocurrencies.
No Regulation
Yes, surely a decentralized currency is a great idea. But this very concept has all the potential to backfire as well. Bitcoin is unregulated. Contrary to a currency controlled by a central bank, Bitcoin transactions lack legal protection and are irreversible, which means that these transactions are more vulnerable to fraud. Because Bitcoin is decentralized, there is no assurance of a minimum valuation, which is another problem. Therefore, if a sizable number of investors stop using Bitcoins and sell them, the value of the cryptocurrency might significantly decline, which would impact users who own a sizable quantity of it.
Security Issues
Bitcoin may not have the hazards associated with relying on centralized intermediaries, but it does not imply that they are fully secure. If you possess Bitcoin, you run the risk of losing the private key that gives you access to all of your assets. Then there are all the various malevolent techniques of gaining control, including hacking, phishing, and so on. Experienced investors are aware of this, while novice investors are more prone to fall prey to these sorts of traps. Furthermore, there is a possibility of loss. Many Bitcoin users decide to keep their assets in cryptocurrency wallets, such as Metamask, Exodus, etc. This may increase the likelihood of losing money in the unprecedented case where they misplace their private key. In addition, you may lose all your Bitcoins in a matter of minutes if your hard disk fails or a virus corrupts the data or even your wallet.
Steep Learning Curve
âNever invest in something you do not understand” – This is a famous quote by Warren Buffet. While a lot of people may tell you that they understand cryptocurrency, in reality, few people do. Understanding cryptocurrencies might be difficult at first. The idea of cryptocurrencies (much like the blockchain) may not seem natural to someone who is not tech-savvy. Also risky is attempting to invest in something you don’t completely understand. Although many internet resources may be used to your advantage, you still need to devote some time to comprehend the benefits and drawbacks of investing in cryptocurrencies fully.
The Bottom Line
Bitcoin definitely has its fair share of pros and cons. As more investors jump in on Bitcoin, price swings are becoming more in line with the stock market. However, owning crypto will undoubtedly help diversify your portfolio. Including some Bitcoin in a diversified portfolio is a smart idea if you believe that the usage of Bitcoin will increase in popularity over time. Make sure every cryptocurrency you purchase has a solid investment justification by reading whitepapers and doing proper research. The research will make it clearer to you why the currency will endure (or not).