The cryptocurrency known as Bitcoin has been in existence for about a decade now, and in that time, its value has fluctuated wildly. For example, at the beginning of 2017, one Bitcoin was worth around $1,000, but by December of that year, its value had surged to nearly $20,000. Since then, the value of Bitcoin has fallen sharply and is currently hovering around $8,000. Given the volatility of the currency, you might be wondering if investing in Bitcoin is a good idea. Let’s take a look at some of the pros and cons so you can make an informed decision.
Pros of Investing in Bitcoin
The first thing to consider is that although the value of Bitcoin has fallen sharply from its all-time high, it is still up considerably from where it was just a few years ago. This means that if you’re patient and invest wisely, there’s still potential for your investment to grow. Another positive is that there are more places than ever before where you can spend your Bitcoin. In fact, Coinbase – one of the most popular cryptocurrency exchanges – announced last year that there are now over 30,000 businesses that accept Bitcoin. This is up from just a handful a few years ago, which shows how rapidly adoption is increasing.
Furthermore, as more people become aware of cryptocurrencies and as more businesses start accepting them as payment, it’s likely that their value will continue to rise. This could mean big profits for early investors.
In 2009, an anonymous cryptography lover going by the name Satoshi Nakamoto created Bitcoin, the world’s first digital cryptocurrency. Since then, it has been shrouded in controversy, with some people hailing it as the future of money and others calling it a speculative bubble. So, is Bitcoin a good investment today? Let’s take a closer look.
Cons of Investing in Bitcoin
Of course, no investment is without risk, and there are a few potential downsides to investing in Bitcoin that you should consider before putting any money into it. For example, as we mentioned above, the value of Bitcoin is incredibly volatile. While this could present an opportunity for profit-taking, it also means there’s a greater chance you could lose money on your investment. Additionally, bitcoins aren’t regulated by governments like fiat currencies are (i.e., dollars), so they’re not backed by anything tangible. This lack of regulation also makes them more susceptible to fraud and theft than other investments.
Lastly – and this is a big one – investing in cryptocurrencies is still a relatively new phenomenon with very few established players. This lack of maturity combined with the other factors we’ve mentioned above makes investing in Bitcoin a risky proposition.
Bitcoin is famous for its volatility; over the past year, its price has swing from $3,000 to $20,000 and back again. This makes it hard to use as a currency, as merchants never know how much their goods or services are going to be worth in Bitcoin. However, this volatility also presents an opportunity for investors; when prices are low, you can buy in, and when prices are high, you can sell and cash out. Of course, timing the market is notoriously difficult, so there’s no guarantee that you’ll make money by investing in Bitcoin.
Another issue facing Bitcoin is limited adoption. While there are around 10 million active Bitcoin users worldwide, that’s still only a tiny fraction of the global population. For Bitcoin to become more widely used, businesses need to start accepting it as payment, and consumers need to feel confident using it to make everyday purchases. So far, this hasn’t happened on a large scale; although some businesses do accept Bitcoin, it’s mostly used for speculative investing rather than day-to-day transactions.
Extreme energy consumption
Mining new Bitcoins is a process requires an enormous amount of energy; in fact, each Bitcoin transaction consumes enough electricity to power 1.57 American households for a day. As more and more people invest in Bitcoin and other cryptocurrencies, this energy consumption is only going to increase. Some experts have even warned that Bitcoin could eventually lead to an environmental catastrophe if its popularity isn’t carefully regulated.
Now that we’ve looked at some of the pros and cons of investing in Bitcoin, it’s up to you to decide whether or not it’s right for you. If you’re comfortable with taking on some risk and you’re confident in your ability to pick winners in the cryptocurrency space, then investing in Bitcoin could be a smart move. However, if you’re risk-averse or you don’t have the stomach for wild swings in value, then it might be better to steer clear altogether. Whichever route you decide to take, be sure to do your homework first so you know what you’re getting yourself into!