By Contributing Author
What is bitcoin?
It is a type of cryptocurrency initially started by an unknown group of people under Satoshi Nakamoto. Cryptocurrency is a type of digital currency. It’s verified, and the records are maintained using a decentralized system.
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The supporting technique for bitcoins is cryptography. It is one of the first usable types of cryptocurrency, which adds to its popularity. There has been an insane craze for it from the past decade, though its legality is still ambiguous.
Cryptocurrency, especially bitcoin in specific, has become a buzzword for the past few years. However, the prediction is not possible if investing in cryptocurrency is worth it. But there are many success stories of crypto investors who traversed from rags to riches. It does not mean that cryptocurrency is a quick get rich scheme.
Most investors find it challenging to invest in Bitcoins for the very reason that stakes are high. The outcomes of investing in bitcoins are not predictable and sometimes biased.
Well, what is life without risk, isn’t it? Unlike traditional currencies, there is a limit to the supply of the cryptocurrency. Moreover, it does not have any particular central authorities. They have not also regulated the users, and not any authority decides their value.
What do you mean by the volatility of bitcoin?
Well, the volatile property of bitcoin is a boon as well as a bane. It is effortless for the users to drive the prices up and downward as bitcoins are not regulated. The price could drop unprecedentedly or even shoot up to the sky.
Over the years, cryptocurrency has seen dramatic downfalls and run-ups. Yet, it has restored most of it to normalcy. Asset classes such as gold have also been volatile and have taken some time for stabilizing. Likewise, even the bitcoin asset is again finding its way towards stabilizing.
How good is it to invest in bitcoins?
Well, it is very ambiguous to decide on whether investing in cryptocurrency is good. It’s a known fact that no investment comes without risk.
The risk associated with bitcoins is much higher than any other assets. Despite which it has also shown substantial growth of more than 1000% in the past decade.
According to stats, the value of bitcoins in the current year 2020 is $24,386.00. Besides such high returns, bitcoins also provide freedom to its investors. It is relatively easy to enter and start investing in the crypto market. Therefore today, its popularity is growing by leaps and bounds.
Unlike other assets, the crypto market does not demand a specific amount from the users. It does not have any entry threshold. In addition to this, there is no need to go to banks and to fill out umpteen number of papers.
With its growing popularity, cryptocurrency has pulled a lot of eyes towards it. In India, since the supreme court has lifted the ban on bitcoins’ trading, cryptocurrency is finding its way through Indian markets.
The economic repercussions of cryptocurrency:
There is no centralized regulating authority in the crypto market. Due to which it’s effortless to manipulate its value. Governments can print several fiat currencies to boost their economy. It may lead to severe inflation, resulting in a low value of the currency in your pocket.
Cryptocurrency has a limited supply, which checks economic inflation from time to time. Studies show that countries that have high inflation rates have benefited from the crypto market. Countries such as Argentina have immensely profited from bitcoins.
The stakes involved are very high:
Many instances show up where people have made billions while investing in the crypto. It is also seen that people have also seen a severe crash. Experts advise investing as much money that you can afford to lose.
Where to invest?
You could probably use an online broker to invest in cryptocurrency. Well, incesting on the crypto market is very much similar to the stock markets. But be careful enough because the crypto market is far more volatile, and they’re swayed daily.
Here are the steps required to invest in bitcoins
- Open a brokerage account in companies that provide crypto investment.
- Deposit funds into this brokerage account of yours.
- Buy bitcoins.
- Later you can sell the currency for gain or loss.
Pros and cons of crypto investment
- Bitcoins have worldwide trading platforms. It is one of the main reasons for its liquidity. Therefore they are one of the most liquid investment assets. Bitcoins are easily tradable for cash, gold, or any other form of assets.
- Due to its high liquidity property, it is best if you are aiming for short term profit.
- Besides limited supply, the crypto market is not regulated by organizations that make it immune to inflations.
- Unlike traditional investments, bitcoins are relatively new and young. Due to this newness, they are often subjected to high swings. This volatility in bitcoins is what makes way for new opportunities.
- It is mandatory to have a trading license. Besides the trading license, it is necessary to go through brokers to trade company shares. It makes way for minimal trading.
- Bitcoin transfer is quick, i.e., it does not require a day or week as in share markets.
- Well, as stated earlier, the volatility of cryptocurrency is a boon as well as a bane. Bane because the value of bitcoins is always swaying to and fro. This vulnerability is one of the leading causes of its risk.
- To avoid losses in the crypto market, make sure you keep a tab on the market.
- The threat of online hacking. Though you’ve tight security, it is true that in the 21st century, everything is hackable. As most of your transactions happen on a website or apps, your cryptos are susceptible to hacking.
- Any government body does not regulate the crypto markets. It makes investors exposed to malpractices.
- Due to its high irregularity, only a few companies are willing to accept bitcoins. As it is a parallel currency, it is entirely illegal in many countries, limiting both economically and geologically.
- If any virus infects your hardware or if it crashes, then all of your investments are just put to waste.
Here are a handful of reasons that make 2020-21 a better year for investing in the crypto market!
- The adoption of bitcoin is a growing necessity. The covid19 pandemic has accelerated the investor number in November month of 2020. It’s a fact that the number of wallets has seen a drastic increase from 43 million to 62 million in the past year.
- Bitcoin is the most suited for macroclimate. Bitcoin was one of the by-products of the global economic crisis of 2009. In this backdrop of severe financial failure, bitcoins were making their wildcard entry. Bitcoins grew through a small but growing group of idealists. Nearly a decade, the same trend is set to repeat.
- Bitcoins’s optimistic fact is that it has always surpassed its previous all-time high after a price crash and recovery.
Do your homework!
Run a thorough search while allocating a portion of your portfolio to the crypto market. Have a correct approach while doing so. Following the right strategies helps you balance your crypto portfolio.
Make sure to use a legal crypto platform that ensures your money is safe and is convertible to the required form whenever in need.
Due to the decentralized nature of cryptocurrencies, they are seldom affected by social, economic, or even geological issues. It is the very reason for their exceptional performances in times of crisis.
How does the cryptocurrency factor affect the near future?
As most of the crypto market exists outside the government clutches, it poses more risk than government currency. However, you can be on the safer side by making a limited purchase.
Finally, if you are very interested and have made a firm mind investing in bitcoins, you invest in a risky one. Nevertheless, you can reap huge returns in the short term. You may also lose heavily.
As investing in cryptocurrency is a relatively new technology, even economists aren’t sure about its fate. Make sure that you think twice before investing in the crypto market.
As Tudor Jones correctly puts it, “COVID-19 is a one-of-a-kind virus that has triggered a one-of-a-kind policy response globally”. Due to the Covid19, investing in the crypto market is seeing a boom.
Therefore, the decision to invest in the crypto market is solely based on the investor’s risk.Proper legitimacy in the crypto field often leads to success, so it is important to plan and execute the right approach.