Is Bitcoin a good investment? Pros & cons in 2021
Bitcoin seems to have become an increasingly controversial topic over the last decade, even more so in the recent few years, given the fact that the incredible value that it brought to people (along with the catchiest of headlines) in the late 2017 is not the same as the value and profits it brings to people today.
As a matter of fact, a lot of the investors who became millionaires in the late 2017 because of the immense rise in prices, also lost a lot of that same income when they reinvested their earnings back into Bitcoin and suffered the market crash in 2018. So is that it? Is Bitcoin dead? If it is, then what is all the hype and new headlines about?
Well, firstly, no, Bitcoin is not dead. But it is indeed a bit trickier to invest in it now since the potential returns aren’t as obvious as they were before.
In this article, we are going to try to answer the question of whether or not is Bitcoin still a good investment vehicle or is it something that no longer reaps the desirable profits against the inevitable risks. To answer that question, we’ve made a list of pros and cons for you in order to take a better and informed decision.
Pros of investing in Bitcoin
1. Bitcoin is here to stay
Bitcoin is the first cryptocurrency ever introduced to the world. When it first launched back in 2009, it so rapidly disrupted the global financial systems that it made all the headlines – so much so that people started referring it as the “future of money.”
This was at a time when there was a major distrust in the hearts of people for traditional banks and other financial bodies as they didn’t feel comfortable having no control over their own hard-earned money. Bitcoin changed that. It offered people something that they really wanted: control over their own money.
In a matter of a few years, Bitcoin went from being an early-adopter’s experiment to being a global hit and the prices skyrocketed – making some people insanely rich. Now, even though that price rise is not as poignant these days, but what has stayed is people’s sentimentality towards it – which means that there will always be demand for Bitcoin – making it a good investment tool.
2. Bitcoin is decentralized, transparent, and immutable
Perhaps the most noticeable and applaudable quality of Bitcoin is its decentralized nature i.e. it is not controlled or regulated by any central government body or financial institution. Instead, the control is distributed to the actual owners and is therefore more decentralized.
Being an application built on top of the blockchain technology, Bitcoin also has the perk of transparency. Any transactions made in Bitcoin are recorded on the blockchain and are fully transparent and trackable – which basically means that you can, quite literally, track down every Bitcoin transaction in the world – allowing for high degrees of accountability.
Not only that, but the transactions are also immutable i.e. they cannot be altered by an external party because the transactions are stored in blocks and locked in mathematical code. Alteration in one block would require altering all the linked subsequent blocks.
3. Bitcoin is pseudonymous
While traditional forms of banking transactions require you to have your identity verified, Bitcoin on the other hand offers the benefit of privacy. While transacting via Bitcoin, you don’t need to get your identity verified or registered anywhere. All you need is a public and a private key.
A public key is like your bank account number and your private key is your password. In order to transact, you send your public key to whoever you wish to make transactions with. The private key stays with you and only you – kept safe and out of reach of anyone else.
Cons of investing in Bitcoin
1. Bitcoin has high volatility
Unlike fiat money, Bitcoin is an asset of limited availability. As a consequence of being decentralized and having no regulatory body governing its flow, its value is influenced purely by market forces i.e. demand and supply.
Due to that, Bitcoin is a highly unstable asset and is liable to rise or fall at rapid pace and is really difficult to predict future price of. An investment made towards Bitcoin needs to be incredibly well-researched so as to not suffer huge losses.
2. Bitcoin is not fully safe
Even though blockchain transactions are pretty much unhackable, the fact of the matter is that Bitcoin isn’t 100% safe. For instance, if you ever lose your private keys, your account cannot be recovered. Period. This is because, like we discussed, there is no regulatory body.
This means that one of Bitcoin’s biggest strengths is also one of its greatest weaknesses. This lack of regulation along with the quality of pseudonymity can allow for crimes like money laundering and purchase of illegal substances to occur – something that an MLRO (Money Laundering Reporting Officer) is responsible for reporting.
3. Bitcoin has limited use
As revolutionary as Bitcoin and other cryptocurrencies are, we are still far from using it as an everyday medium of transaction. The world is undoubtedly becoming more crypto tolerant given the fact that you can now buy airplane tickets, cars, and even Rolex watches using Bitcoin, but you’d still have a hard time finding any grocery store near you that accepts Bitcoin in exchange for veggies and fruits.
The point here is not that Bitcoin is unusable, but that Bitcoin is not to be relied on for normal everyday transactions. Don’t invest so much in Bitcoin (even if you are 100% sure that the prices are about to shoot up) that you have no actual disposable income left.
For instance, in a case of emergency, say, an accident, you’d require immediate financial assistance. In that case, waiting to find a hospital that accepts cryptocurrency is like signing your own death warrant.
Conclusion
So, is Bitcoin a good investment in 2021? If you ask us, given all the points mentioned above, our answer would be a calculated optimistic ‘yes’. This is mostly because, like we mentioned, Bitcoin is a scarce asset. Its supply is not unlimited – making it a valuable commodity.
As time passes and all the 21 million Bitcoins are mined, the prices are bound to become more stable, making it a much safer investment option. However, despite all of this, you should decide for yourself if Bitcoin is a good investment for you or not. Consider all the factors that you possibly can and make sure to never invest more than what you can afford to lose.
This way, you’ll be going in safer and more prepared and more likely to profit from your Bitcoin investments. Thank you for reading this article. We hope we were able to help you gain some valuable insight in your investment journey so as to make better and smarter investment decisions.
