What Are Pros and Cons of Investing in Bitcoin and Altcoins1 (1)
Bitcoin is a digital currency that is similar to the traditional FIAT currency such as US Dollar or British Pound but the main difference is that Bitcoin is NOT centralized but rather DEcentralized, which is a significant difference. It runs on the technology called the Blockchain, all the time without a break, and its code is spread in an encrypted way across tens of thousands of computer networks all around the world and its users can transfer their coins anytime to anyone. The most important feature of bitcoin is that its operations are completely irreversible – once you send it to an address, you can’t get it back. Unlike credit cards and conventional online payment systems, you can’t go back and cancel the transaction because it’s data are stored on centralized locations and controlled by a privileged few. Instead, bitcoins are stored across the blockchain using public and private keys and can only be reversible by the sender.
While it may be tempting to buy bitcoin with all money you have in a bank, experts suggest keeping your exposure to speculative investments to less than 5% of your overall portfolio, but I would say if you feel, you can invest up to 20%. This means that you should only invest in Bitcoin if you’re confident that it will continue to outperform other investments in the near future more than 100%. If you bought Bitcoin 2 years ago when it traded on an average of $12,000, it’s 400% return right now in the crypto bear market, which is incredible. In other words, don’t buy the currency because it’s hot now. But Buy and Hold on good coins like Ethereum, Solana, Polygon, BNB, or Cardano, just to name a few coins, and don’t let daily price swings influence your investment decision.
Considering the potential upside and downside risks, a few pros and cons of bitcoin investment can help you make an informed decision about whether to hold on to your other altcoins. We know that Bitcoin has limited supply of 21 million units, as well as its increasing user base for the last 5 years, and the market cap of over $900 Billion make it a safe investment. However, bitcoin is expected to outperform many other assets over the next decade, there is a massive opportunity in other cryptocurrencies as well. You can choose your favourite token to invest in based on the projects that you’d like to support since most of the biggest cryptocurrencies are supporting the certain technology behind it.
So, what are the disadvantages of holding onto your coins?
The downside risk is small compared to the rewards, and the upside is significant.
If you’re thinking of buying bitcoins, be aware of the potential risks and rewards. There are several pros and cons to a cryptocurrency. On the other hand, if you’re looking for a safer investment, it’s not worth taking the risk. However, the risks involved with cryptocurrencies are not the only ones that can go up.
Another disadvantage is that it is not YET fully part of the traditional financial system as the financial regulators will try to discourage the public but secretly buying into the bitcoin and other crypto behind the scenes to gain the position in the fast emerging market such as crypto. When a transaction involves Bitcoin, it doesn’t have to go through governments and banks, and its anonymity is maintained, and of course, authorities and banks don’t like it because without centralized access power it is really hard to control!
This can be beneficial for general public, but it also carries negative aspects with it. It’s important to know that you should not be taking on too much risk when it comes to crypto investments, the portfolio must be accordingly balanced, meaning that you cannot lose a lot of money if the things go wrong.
It’s always your own responsibility to accordingly assess the investment take the risks involved with it.