Is Bitcoin a Good Investment?
Bitcoin is taking center stage as it redefines financial payments and global transactions. Retail outlets like Shopify are now accepting Bitcoin payments, and countries like El Salvador have legalized this digital currency and made it their legal tender.
But that's not all. Since its launch over a decade ago, it has grown to become one of the most trusted technologies and foundations for modern innovation. It is best known for pioneering decentralized networks, organizations, and cryptocurrencies like Ethereum.
The impact of adoption is widespread, making you question, if Bitcoin is a good investment?
After all, there are now Bitcoin ETFs and Bitcoin-backed bonds. What could be the harm in investing?
In this article, we will walk you through all you need to know about Bitcoin and if it's safe to invest.
What is Bitcoin?
Bitcoin is a decentralized digital currency that can be sent from user to user using its peer-to-peer network, without any need for intermediaries. This means it's a form of virtual currency with no transfer or receiving limits, and no central bank or governing authority monitoring transactions.
Bitcoin is built on open-source software. As a financial system, it was created to be self-sufficient. Transactions are verified by network computers through cryptography and are recorded in a public ledger called a blockchain. So Bitcoin transactions are transparent, however, they cannot be flagged, controlled, or frozen. International transactions using bitcoins are also faster and cheaper than regular banking.
What is a Blockchain?
A blockchain is a public ledger that functions in a decentralized fashion. Transactions recorded are spread across thousands of computer nodes worldwide to verify and store in blocks. These blocks contain a timestamp, data of each transaction, and a cryptographic hash of the previous block.
The blockchain's primary role is to secure and maintain records of transactions. When transactions happen it is recorded in a block, and then each block is chained together. That is where the name "Blockchain" is coined. With this ledger system, it's virtually impossible for records to be altered, deleted, or tampered with.
4 Reasons to Invest In Bitcoin
There are several reasons why Bitcoin is growing quickly and garnering the favor of the masses. Apart from being an effective means of payment, it has also created room for cryptocurrencies, which are helping with the redistribution of wealth. Millions of people have profited from owning and trading cryptocurrencies including Bitcoin.
A few other reasons to put your money in Bitcoin include;
- Store of Value: Bitcoin has been regarded as a store of value because of its potential to increase in price and its hedge against inflation. Since its inception Bitcoin has been compared to gold in value and characteristics. Where Gold is stable and sometimes reluctant in growth, Bitcoin provides stability and room for growth despite its price fluctuations.
- Positive Historical Performance and Yields: Early Bitcoin holders are certainly millionaires, perhaps even billionaires by now. This is because, Bitcoin has had massive returns yearly, since 2010. A look at Bitcoin's yearly price movements will show you that is indeed a high-performing asset you should include in your portfolio.
For context, take a look at Bitcoin's price performance every 5 years since 2010.
In 2010, Bitcoin was valued at $0.01
In 2015, Bitcoin was valued at $262
In 2020, Bitcoin was valued at $7,622
In 2022, Bitcoin is valued at $41,336.
In 2025, what will be Bitcoins' Value?
Compared to Gold, which was valued at $1,420.25 in 2010 and is currently worth $1,997 in 2022. Bitcoin has yielded better returns in 10 years.
- Limited Supply: Only 21 million Bitcoins exist and will ever exist in the world. Right now 18 million of those coins are circulating in the market. And the rest are yet to be mined or bought. The fact that Bitcoin has a limited supply, tells you it's a good investment to make for your future. For instance, the government prints money whenever they think the economy is low, which can sometimes cause inflation or the devaluation of the currency. Bitcoin prevents that.
- Blockchain is the Future: Bitcoin acts as a means of payment, but blockchain technology promises much more. It helps with the tracking and tracing of almost anything of value on a digital platform. Already, many decentralized applications (Dapps) have come into existence. And even Non-Fungible Tokens (NFTs) exist because of blockchain technology.
Risks Associated with Investing in Bitcoin
Bitcoin may hold promises of wealth, but it also has its dangers. Let's explore the risks of investing in Bitcoin;
- Volatility: Each year, bitcoin experiences incredible highs and dramatic lows. So, it can either make you very wealthy, or it can ruin you. These price fluctuations can be due to buyers' demand and sellers' supply not meeting up. And sometimes, it's due to the emotions in the market. Still, the fact remains, Bitcoin is five times more volatile than the average U.S. stock. If you ever decide to invest in Bitcoin make sure you invest with money you do not have immediate need of.
- Hack Or Theft From Exchanges: Bitcoin is digital and as such, it's vulnerable to cyberattacks if not properly secured. Exchanges Like Kucoin and Bithumb have lost over $350 million worth of assets to hackers.
Keeping your bitcoins offline in a hardware wallet is really the best way to beat these odds.
Is Bitcoin Safe?
Bitcoin is safe and secure. It is very transparent and facilitates faster and easy payments. However, you do need to keep your bitcoins safe. Hackers are on the prowl seeking to steal users' data that lead them to their Bitcoins.
Where to Buy Bitcoin
Bitcoin is the most popular digital currency and it's available on most Crypto exchanges and brokers.
To buy bitcoin, all you need to do is register with an exchange like Coinbase, and exchange your fiat money for the value in BTC.
Is Bitcoin a good investment? Well, that really depends on you as an investor. Are you willing to take the risk? Bitcoin has numerous advantages, and in terms of growth, it's high yielding than most assets, but that too comes with a cost of volatility. Still, investing in the stock market too can be risky. The key is to analyze the best-performing asset and consider your risk appetite before investing. But is Bitcoin a good buy? It most certainly is!
This content should not be treated as investment advice. Cryptocurrency is a highly risky and speculative market.