Is investing in Bitcoin in 2020 a wise decision?

In its decade-long history, collective insanity has sprouted around this new digital asset, causing an irrational gold rush across the globe. Whether this cryptocurrency will eventually prove to be a great investment or just a passing storm remains a mystery. That thrill — the promise of instant riches or ruin — has a lot of investors gun shy, as others wonder how to reap big off a bitcoin investment.

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Simply Put: Is Investing In Bitcoin Risky?

Similar to any speculative investment, buying bitcoin is a risky business. It is still very much a gamble. This cryptocurrency carries some well-known risks: The price could drop precipitously and one online hacking or crashed hard drive incident can wipe out an investor’s stash of bitcoin, leaving you with no recourse.

Bitcoin has seen dramatic run-ups in price followed by some painful crashes but has consistently retained a significant portion of its previous gains every time it plummets. Since its inception, Bitcoin was the first digital asset to beget the current ecosystem of cryptos. For quite a while, it grew an underground following of investors who saw its future as a possible replacement to the physical monetary system.

Advantages of Bitcoin Investments

The overwhelming performance of bitcoin — as a currency and investment — has attracted traditional and institutional investors alike. Bitcoin as an investment tool provides you with the following advantages over traditional investments.

• Liquidity: Bitcoin is arguably one of the most liquid investment assets due to the worldwide establishment of trading platforms, exchanges, and online brokerages. You can easily trade bitcoin for cash or assets like gold instantly with incredibly low fees. The high liquidity associated with bitcoin makes it a great investment vessel if you’re looking for short-term profit. Digital currencies may also be a long-term investment due to their high market demand.
• Lower inflation risk: Unlike world currencies — which are regulated by their governments — bitcoin is immune to inflation. The blockchain system is infinite and there’s no need to worry about your cryptos losing their value.
• New opportunities: Bitcoin and cryptocurrency trading is relatively young — new coins are becoming mainstream on a daily basis. This newness brings unpredictable swings in price and volatility, which may create opportunities for massive gains.
• Minimalistic trading: Stock trading requires you to hold a certificate or license. You must also go through a broker to trade a company’s shares. Bitcoin trading, however, is minimalistic: simply buy or sell bitcoin from exchanges and place them in your wallet. Bitcoin transactions are also instant — unlike the settlement of stock trading orders, which could take days or weeks.

Disadvantages of Bitcoin Investments

Bitcoin may be the future of monetary exchange, but it is equally important that you are aware of the concerns surrounding cryptocurrency investing. Here are some serious risks associated with bitcoin investments.

• Volatility: The price of bitcoin is always rippling back and forth. If you happened to buy bitcoin on December 17, 2017, the price was $20,000. Weeks later, you couldn’t sell your investment for more than $7,051. The bitcoin market is constantly changing. With such an unpredictable market, you can hardly get a good return on your investment. To avoid huge losses, keep a close eye on the market.
• The threat of online hacking: Hacking is a big threat facing a bitcoin investor. Bitcoin exchanges let you buy and sell your cryptos using a mobile app or website. This leaves them susceptible to hacking and theft of all your investment. Besides, bitcoin held on exchanges isn’t insured by the FDIC.
• Little or no regulation: The bitcoin market currently operates with no major regulations. It isn’t taxed and governments have no clear stance on it. As a result, you could stand exposed to fraud and malpractice.
• Limited use: Bitcoin is currently only accepted by a few online merchants. Many companies don’t also recognize bitcoin as a legitimate exchange, making it an unfeasible investment vessel. Besides, there’s only a fixed supply of bitcoin — 21 million.
• Wallets can be lost: If your hard drive crashes or virus corrupts your wallet file, you lose your bitcoins. You can go from a wealthy to the bankrupt investor within seconds, with no way to recover.

Is Bitcoin the Future, Really?

Price volatility isn’t all you need to worry about in this hyped-up market. Since bitcoin largely exists outside government regulation, it poses more risk than dealing with government currency and other asset classes. However, it isn’t hard to sell or buy and you can make a limited amount of purchases.