Investing in Bitcoin can be a lucrative undertaking, yet it is crucial to keep expectations in check. Some may claim Bitcoin will make everyone a millionaire, but the reality is very different. Weighing the pros and cons is crucial before making any investment big or small.
Table of contents
- Understanding Why Bitcoin Matters
- Why You Should Invest In Bitcoin
- Why Bitcoin May Not Be The Investment For You
Understanding Why Bitcoin Matters
To the majority of people, the concept of Bitcoin and other cryptocurrencies makes little to no sense. A digital token created by anonymous developer Satoshi Nakamoto went from having no value to trading at over $37,000. All of this has been achieved within 12 years, forcing many investors to rethink their stance on BTC.
Judging by Bitcoin’s performance to date, investing in it may seem like a no-brainer. Even if you do not understand Bitcoin or what gives it value, it can still help investors make money.
Whether cryptocurrencies will disrupt the financial landscape remains challenging to determine. However, it is evident that, unlike fiat currencies or stocks, Bitcoin can be a better store of value than traditional investment options.
Why You Should Invest In Bitcoin
Many different reasons exist as to why Bitcoin can make for a viable investment, regardless of how much money you want to commit to it.
The Undisputed Top Cryptocurrency
If cryptocurrencies have caught your attention over the years, Bitcoin is the safest asset to invest in. It notes the best yearly performance, has remained the top crypto-asset for years and is only now finding its groove among institutional investors. Even though thousands of alternative assets exist, they often only exist to increase one’s Bitcoin holdings in the end.
No Centralization Or Top-Down Control
One key reason why people are drawn to bitcoin – from a monetary perspective- is how it provides a necessary alternative. Banks and governments have no say in Bitcoin matters, as they do not issue the crypto-asset nor control it in any way. It is also the only viable modern form of global money.
Ease Of Access
Despite the growing number of investment vehicles, most of them remain off-limits to everyday consumers as they “don’t meet the investment criteria”. Bitcoin is a unique creature, as anyone in the world can buy, trade, and sell BTC at their leisure. More importantly, this market operates on a 24/7/365 schedule; something traditional finance will never be able to provide.
Plenty Of Bitcoin Liquidity
When investing, it is pertinent to gauge whether the market has sufficient liquidity to enter and exit positions whenever you want. That is not always the case for stocks, bonds, or foreign currencies. Bitcoin, on the other hand, has more than sufficient liquidity anywhere in the world. You can trade it against most fiat currencies and other assets through hundreds of trading platforms.
Hard Supply Cap Prevents Inflation
Most people may not realize it, but there is no limit on how much fiat currency banks can bring into circulation. The same applies to stocks, as companies can execute a stock split whenever they need it.
Bitcoin is very different, as it has a hard supply cap of 21 million BTC. This prevents inflation and also makes it immune to inflation affecting fiat currencies. It is one of the many factors contributing to the ongoing success of the world’s leading cryptocurrency.
Diversifying A Portfolio
During times of financial and geopolitical uncertainty – which occur on a 24/7 basis – it is always advised to diversify one’s investment portfolio. Adding [a small portion of] Bitcoin to that portfolio will often yield benefits. The value of that BTC investment may not make one a millionaire, but it can often prevent the overarching portfolio from going into the red.
Why Bitcoin May Not Be The Investment For You
Every form of investment has certain potential benefits, yet one should never overlook the potential drawbacks either. As versatile as Bitcoin may be to one’s portfolio, there are always different aspects to consider.
Volatility Remains Present
One often-heard criticism about Bitcoin – and other cryptocurrencies – is how the market is incredibly volatile. Bitcoin’s price swings can be steep, resulting in a value change of 10% or more in a single day. This degree of volatility is not appealing to everyone who looks at BTC as an investment. If you are risk-averse and dislike volatility, putting your money elsewhere is advised.
Lacking Speed To Serve As Money
Although many people want Bitcoin to replace traditional money, it remains unclear if that will ever be possible. The Bitcoin network cannot process enough transactions to make it a viable global payment solution. Transactions take up to 10 minutes, yet receiving six network confirmations – the advised threshold – takes an hour or more.
Due to the slow network, Bitcoin remains a bit of a niche payment method. Numerous merchants accept BTC payments, but their market share remains relatively small. Layer-two solutions, such as the Lightning Network, may change that narrative in the future. For now, everyone has to deal with the network constraints.
Don’t Shun Responsibility
When investing in Bitcoin, users must move their funds to a private wallet, of which they know the private key. Keeping money on an exchange is not advisable. Funds in your wallet mean having full control over your Bitcoin investment.
As a result, the user also has a lot of responsibility. They must protect their wallet and create a safe backup of the private key. Losing access to this information results in being unable to access funds ever again.
Using all the information above, Bitcoin can be a good investment or something to pass up on completely. Not everyone feels comfortable actively controlling their wealth, especially a volatile one such as Bitcoin.
However, there are reasons to allocate [a part of] one’s portfolio to BTC. It is the strongest-performing asset on the market, and you can invest as little or as much as you want. One’s chances of achieving a decent return on investment are tangible, although it is often best to look at this as a long-term investment.
Becoming a millionaire in Bitcoin is a real possibility for everyone. The hard-capped supply ensures not everyone can own one full Bitcoin. Only 0.003% of the world’s population may own one full BTC when all 21 million coins are circulating. As such, it is plausible to see Bitcoin hit a value of $1 million per BTC or more. If and when that will happen is a matter of debate.