Bitcoin is not risk-free and in many ways can be riskier than traditional assets. Today, we will look at the pros and cons of investing in Bitcoin.
- Investing in Bitcoin has numerous pros and cons.
- Bitcoin is the oldest and most traded crypto that is highly liquid, transparent, and relatively safe.
- At the same time, investing in Bitcoin is volatile, energy inefficient, and lacks proper regulatory oversight.
- Many Bitcoin investors believe in its bright future and potential growth.
- Bitcoin is a high-risk investment with lots of potential rewards.
Bitcoin investors need to be able to measure the strength of each of these pros and cons; to know when an issue is serious or not. To figure out if it’s time to buy or sell.
In this guide, we will cover:
- Pros Of Investing In Bitcoin
- Cons Of Investing In Bitcoin
- Is Bitcoin A Good Investment?
- How Much To Invest In Bitcoin?
- Will Bitcoin Be A Millionaire Maker?
Pros of Investing in Bitcoin
What are the benefits of investing in Bitcoin? Investing in the leady crypto asset is a popular venture across the globe. Why? Simply because Bitcoin has numerous advantages over other investment options.
1. Bitcoin is poignant
It is the first-ever cryptocurrency, and as such, it has led to the creation of thousands of alternative coins, called ‘altcoins’. This fact makes Bitcoin a prestigious and desired asset; an asset that has revolutionised the way we see money.
It is the most well-known cryptocurrency - even your grandma has probably heard of it.
And because of this, most crypto traders start with Bitcoin when they get into crypto. As they get comfortable with it, later they may dip their feet in other cryptos. (Bitcoin is like the ‘gateway’ drug to crypto.)
2. Bitcoin is decentralised
One of the main advantages of Bitcoin is its decentralised nature; there are no centralised authorities or central banks that may impose high fees or restrictions (e.g., ‘middlemen’).
Bitcoin is also global, so there are no exchange rates to deal with. This feature is highly tempting, with more and more people investing in cryptocurrency for this reason.
3. It is accessible
To invest in Bitcoin, you don’t need a fortune or credit history. This gives an alternative to people who distrust their government or live in restrictive places with limited access to financial services.
Meanwhile, investing in stocks or other investments can require a certain amount of money under your belt. You may also have to prove your earnings and financial history.
And guess what! Bitcoin investing is open 24/7 (the stocks and forex markets are only open five days a week during working hours).
4. It is highly liquid
One of the most tempting pros of investing in Bitcoin is its liquidity. Bitcoin is among the most liquid investment assets (especially in the crypto market), so traders can either trade Bitcoin for other assets in the short term or buy and hold Bitcoin for long periods.
The great news is that many trading platforms like eToro accept Bitcoin, which facilitates Bitcoin investing across the globe.
5. Bitcoin is transparent
As stated above, Bitcoin is a decentralised platform; it’s the first implementation of peer-to-peer digital money that attracts people from all walks of life.
On top of that, Bitcoin is a public ledger that allows everyone to see transactions as they are stored permanently on the blockchain.
What does this all mean? It means that laundering money or financing crime with Bitcoin would be pretty stupid, because it would be all over the internet and directly traceable back to you!
And so, this makes Bitcoin more efficient at fighting financing criminals than our current system.
6. Portfolio diversification
Bitcoin is also an excellent way to diversify your portfolio. As we know, portfolio diversification can help investors spread investments and reduce exposure to risks.
If you’re already invested in stocks, currencies and other financial instruments, investing a portion in BTC could be a great idea.
7. Hedge against inflation
Because of its supply cap of 21 million coins and decentralised nature, some believe that Bitcoin is immune to economic turmoil, geopolitical problems, and inflation. Some claim that Bitcoin may outperform gold in the future.
This has been particularly the case during the coronavirus pandemic, with many central banks printing huge quantities of money to help stimulate the economy.
As of May 2021, approximately 40% of US dollars were printed in the last 12 months, according to Nickie Louise of TechStartups.
The purchasing power of the US dollar decreases with excessive printing, devaluing assets valued in dollars. Bitcoin doesn’t have this problem.
8. Bitcoin has valuable business features
Bitcoin has various features, such as multi-signature authorisation, that can improve transparency and security in business settings.
On top of that, according to data, Bitcoin is the most accepted coin among retailers - with more than 15,174 businesses that accept Bitcoin and 5,041 Bitcoin ATMs in existence, according to Fundera in 2019.
Isn’t that one of the most tempting pros of investing in Bitcoin?
9. Return on Investment
Though Bitcoin investing is not risk-free, figures show that Bitcoin has a significant ROI compared to other assets. In 2021, in particular, Bitcoin outperformed assets, such as gold, oil and the Dow.
10. It is the safest crypto asset to invest in
Despite the horror stories of Bitcoin scams, hacks, volitatility, and dark web murder-for-hire services, Bitcoin is the safest cryptocurrency to invest in.
Why? Because the high number of users across the globe help decentralise the network. You would need an extremely powerful computer, such as a quantum computer to take down the Bitcoin network.
Yes, volatility will likely remain an issue, but Bitcoin is not completely unpredictable. Volatility is useful if you want to make money trading.
And in regards to hacks and scams, always keep your Bitcoin safe (never left in an exchange), and exercise caution when trading.
11. Bacjed by major investors
Huge names have become major investors in Bitcoin over the last decade and have been very vocal in their support.
Some of Bitcoin’s most well-known investors include Michael Saylor, CEO of MicroStrategy, founders of the Gemini exchange the Winklevoss brothers, and Mark Cuban, who claims that 60% of his crypto holdings are BTC.
12. It can handle more than just transactions
When we usually talk about smart contracts and DeFi, we usually talk about Ethereum, but did you know that Bitcoin also has these capabilities?
Yup, smart contracts can be built on Bitcoin, but they are a lot simpler than other platforms that are designed specifically for that purpose.
And in regards to DeFi, Bitcoin is the third-largest DeFi platform after Ethereum and the Binance Smart Chain, and ahead of EOS, according to DeFiprime.
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Cons of Investing in Bitcoin
Like any investment, putting your money into Bitcoin isn’t risk-free. So, here’s what you should know about the risks of investing in BTC.
1. Bitcoin is highly volatile:
One of the biggest cons of investing in Bitcoin is its volatility (subjectively, though, there are plenty who would disagree).
As Bitcoin is a scarce asset, its value is influenced tremendously by demand and supply principles and market sentiment.
This makes Bitcoin highly unpredictable and volatile, hence risky. For instance, in November 2021 BTC reached its all-time high of $68,789.63 and by December it had slumped to nearly $39k, almost half its value.
2. Bitcoin transactions are quite slow:
While Bitcoin facilitates payments across the globe, many users are frustrated with its slow processing times.
It’s not a secret that any Bitcoin transaction can take up to 10 minutes. And on busy days it can take even longer.
On top of that, slow transaction fees can also mean higher transaction costs, which can also vary depending on mining decisions and transaction size in bytes.
3. Bitcoin has limited use:
Though the number of merchants accepting Bitcoin is increasing, and more and more people are turning to the lightning network to make micropayments, Bitcoin has still limited use and depends on Internet availability.
Compared to other coins like Ethereum, Bitcoin is mostly limited to financial transactions.
4. Bitcoin is not 100% safe:
While Bitcoin’s blockchain is almost unhackable, the truth is that Bitcoin is not 100% safe and Bitcoin can still be stolen if you hold your Bitcoins on an exchange.
Have you heard of the notorious Mt. Gox hack? Long story short, in the early 2010s more than 850,000 Bitcoins were stolen over a couple of years (200 were recovered, though).
Today, that amount would roughly equate to $26.5 billion, making it the biggest crypto theft in the history.
Furthermore, many people find it difficult to manage private keys and may lose their wallets beyond recovery because no such reputable service yet exists to help them.
5. Bitcoin investing is not regulated:
One of the biggest disadvantages of investing in Bitcoin is the fact that there is little regulatory oversight. Crypto regulations and taxation vary across the globe and are often unclear, controversial, or simply non-existent.
And a lack of regulations can lead to fraud and scams, and if you become a victim, there aren’t many people you can ask for help.
6. Bitcoin is misunderstood:
Despite its innovative technology, investing in Bitcoin is still veiled in misconception.
Many associate Bitcoin with Silk Road (a former online marketplace for drugs), illegal services, and crypto scams, which makes cryptocurrency adoption difficult.
This perception is particularly prevalent among older generations and those with little insight into the technology and is often perpetuated through TV.
And sadly, many politicians fall into this criterion, which has led to some hardline positions on Bitcoin.
Besides, going against traditional payment systems is still unorthodox for many people.
7. Bitcoin is not energy-efficient:
One of the worst aspects of Bitcoin is its power consumption. According to Digiconomist, at the time of writing, Bitcoin uses as much power as Sweden or 135.12 TWh (terawatt-hour).
This is because Bitcoin uses a proof-of-work mechanism to validate transactions. Many cryptocurrencies since have opted for a proof-of-stake mechanism, which is more efficient and less harmful to the environment.
The issue is so big it led Tesla to drop Bitcoin as a payment method because it won’t look good for an electric vehicles company to use something that was clearly bad for the environment.
8. It Will Not Make Our Financial System fairer:
Bitcoin is now dominated by excessively big investors; serious players who’ll do whatever it takes to squeeze as much money from Bitcoin as possible.
Otherwise known as ‘whales’, these big investors, whether they be individuals, companies, or hedge funds, have a lot invested in Bitcoin and could easily influence the price by selling off.
Their ability to buy up huge amounts of Bitcoin can also be problematic, artificially pumping up the price and making it harder for small-time traders to buy at the right price. And the lack of regulation doesn’t help here either.
Further to that, imagine a world where Bitcoin replaces fiat money. Do you really think that everyone’s going to have a fairer slice of the pie?
What’s more likely is that BTC pie is going to be eaten up by the richest people in the world in seconds. Financial freedom via Bitcoin is not very likely.
9. Community Disagreements Have Split Bitcoin Before:
You’ve probably heard of Bitcoin Cash and Bitcoin SV (and several others with a similar name).
Bitcoin Cash was created after a split in the Bitcoin community over how to further develop after Satoshi Nakamoto disappeared.
If such splits happen again, it could be very discouraging for investors.
(Would you invest in a company where the owners kept fighting over petty things and then tried to split it into two?)
10. Quantum Computers Are Coming:
Google, IBM, and several other major tech companies are already racing to make the first quantum computer, computers that are immensely more powerful than the ones you have at home or work.
According to PREDICT, Google’s quantum computer is supposedly 158 million times faster than the current fastest supercomputer.
Theoretically, a quantum computer could overpower the Bitcoin network by performing a 51% attack and render it useless. It could create a crisis where a lot of value is destroyed. (It almost sounds like the plot of a James Bond film.)
11. Bitcoin Doesn’t Work As Intended:
Bitcoin was designed to be a digital way to transfer value, not a replacement for gold. And today not many people use Bitcoin for its original purpose - many just hold it because they believe it will increase in value.
Plus, Bitcoin was likely never finished. Its creation is like that of Frankenstein and Frankenstein’s monster - an experiment became bigger than its creator.
The fact that the Bitcoin whitepaper is only eight pages long (9 if you include references) also doesn’t help this theory either.
12. Satoshi Nakamoto’s Identity And Disappearance Raises Many Questions:
The elusive Nakamoto disappeared with 1 million BTC, that’s 1 out of 21 of all Bitcoin that will ever exist.
This is incredibly concerning because we have no idea what his possible intentions are if he ever returned.
His identity also causes other issues because it allows others such as Craig Wright to claim that he is Nakamoto and use that notoriety to gain a following.
So far, though, Nakamoto’s BTC seems not to have moved.
Is Bitcoin a Good Investment?
Investing in Bitcoin comes with a wide range of different pros and cons - it’s not completely clear cut. You should decide for yourself whether Bitcoin is a good investment or not, though it’s noteworthy that many investors believe in the bright future of Bitcoin and claim that it might continue to outperform gold.
Put simply, Bitcoin can be an extremely rewarding asset to invest in. However, it’s something you should definitely do some research on before you consider adding to your portfolio.
If you’re willing to invest the time and energy, you could make BTC an excellent investment.
Would you consider investing in BTC?
Should You Invest in Bitcoin?
To decide if investing in Bitcoin is a good option for you, first, you should calculate your risk-reward ratio and decide if potential rewards outweigh possible risks.
True, Bitcoin is a risky investment and the technology behind it is still evolving, but Bitcoin is also one of the most popular and valued coins right now and it gives investors the chance to diversify their portfolio and potentially make a profit.
In the end, it’s all up to your investment goals and willingness to learn and stay up-to-date with the crypto market.
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How Much to Invest in Bitcoin?
While it’s up to you, your funds, and your comfort zone, you should never invest more than you can afford to lose.
Never risk more than 1% of your account on a single trade and invest in an efficient risk management strategy.
If you want to invest in Bitcoin, you can do that with small BTC increments till you acquire more experience and confidence. The good news is that you can start trading Bitcoin and other cryptos with as little as $100.
Will Bitcoin Be a Millionaire Maker?
In a sense, Bitcoin already is a millionaire maker. As we have discussed, the price might continue to rise due to the reasons explained above.
Bitcoin is influenced by supply and demand principles, which makes it highly volatile. Experts believe that once BTC reaches its max supply of 21 million coins, it could become more stable.
The value of Bitcoin BTC is likely to increase further, as scarcity tends to promote growth in its price.
Please remember, Bitcoin or any investment includes some risk. So, only invest what you can afford and do as much research as possible before you decide to invest in BTC.
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Virtual currencies are highly volatile. Your capital is at risk.
How Does Bitcoin Investing Work?
To invest in Bitcoin, you need to exchange fiat money or other cryptocurrencies for Bitcoin at an exchange or broker.
To do this, you need to create an account and deposit money in an exchange and then trade it for Bitcoin.
At this point, you should then move your Bitcoin from the exchange to your wallet to keep it safe.
Later, when the price of Bitcoin has appreciated, you can return to the exchange and sell your Bitcoin for fiat or another asset, hopefully making a profit.
There are several other ways to invest in Bitcoin that don’t involve you having to own the asset, such as trading Bitcoin as a CFD.
How To Start Investing In Bitcoin?
Investing in Bitcoin can be done in four simple steps with reputable brokers and exchanges like eToro.
Step 1. Go to eToro’s website and click ‘Join Now’, then fill out the registration form.
Step 2. You’ll now need to verify your information by uploading proof of address and identity. (This is to comply with anti-money laundering laws and prevent fraud.)
Step 3. Deposit funds into your account. The minimum deposit is $200 in most countries, $50 in the USA. But do note that in some countries, the minimum deposit is far higher - so check first!
Step 4. Go to ‘Trade Markets’ → ‘Crypto’ → ‘Bitcoin’ and choose how you would like to purchase Bitcoin.
And that’s it, it’s that easy!
What Is A Good Bitcoin Investing Strategy?
Now you know the pros and cons of investing in Bitcoin, so you can decide for yourself if Bitcoin is a good investment that can be a millionaire maker.
If you want to invest in Bitcoin, simply sign up with eToro. This top exchange allows you to buy and sell cryptos and trade CFDs of over 90 crypto pairs.
Is It Worth Investing In Bitcoin?
Yes, it is worth investing in Bitcoin. Given the fact that Bitcoin is a hedge against inflation and may outperform gold, there’s no doubt that Bitcoin investing is worth considering.
When Investing In Bitcoin Do You Have To Buy Full Coins?
No, Bitcoin is broken down into ‘satoshis’, eight decimal places. One satoshi = 0.00000001, so you don’t need to buy a full coin.
However, in most exchanges and brokers, you will not be able to buy just one satoshi, e.g., at Binance $15 worth is approximately the smallest amount you can buy..
How Safe Is Investing In Bitcoin?
The biggest risks to investing in Bitcoin are price volatility, hackers who target exchanges, and potentially harsh regulation.
However, Bitcoin has matured in the last few years and is less vulnerable to attack. Crypto traders are also more grown-up and have been joined by more professional traders.
Regulators and banks have also warmed to BTC’s profitability, and we are seeing more crypto-friendly laws - so long as profits are taxed properly.
How Is Bitcoin Investing Taxed?
The laws on Bitcoin taxation are different across the globe. You can be taxed by ownership, which can change over a period and taxed from the earnings you make from trading Bitcoin.
In some countries, there are no laws on how Bitcoin is taxed. But bear in mind, that this doesn’t necessarily mean your profits will be safe.
Make sure you understand Bitcoin tax laws in your country before you start trading it! Be compliant and don’t go to jail!
Is Bitcoin A High-risk Investment?
Yes, investing in Bitcoin is risky due to its high volatility. At the same time, this high-risk investment is associated with potentially high returns.
Thus, always do your research, fully understand risk management, and self-control to reduce risks and stay ahead of the crypto game.
Who Is Investing In Bitcoin?
Some of the biggest investors in Bitcoin, according to Decrypt, include:
- MicroStrategy. 105,085 BTC.
- Tesla. Equivalent to $1.5 billion (note that they will probably sell off their supply).
- Galaxy Digital Holdings. 16,400 BTC.
- Voyager Digital LTD. 12,260 BTC.
- Square Inc. 8,207 BTC.
- Marathon Digital Holdings Inc. 5,784 BTC.
- Coinbase Global, Inc. 4,482 BTC.
- Bitcoin Group SE. 3,947 BTC.
- Hut 8 Mining Corp. 3,522 BTC.
- Riot Blockchain, Inc. 2,243 BTC.
All numbers are, of course, approximate and will change over time.
Can You Get Scammed Through Bitcoin?
Though Bitcoin has many advantages over other cryptos, Bitcoin is often referred to as the Pandora’s Box of crypto investing.
Many scams have involved fake Bitcoin exchanges and Initial Coin Offering (ICO) scams.
Moreover, people still associate Bitcoin with the Silk Road and illicit actions. Thus, always be aware of possible risks and fraudulent activities.
How Many Bitcoin Millionaires Are There?
There are more than 100,000 Bitcoin millionaires or addresses with more than $1 million in Bitcoin, according to Portfolio Insider, as of May 2021.
From day trading to ‘hodling’ and mining, traders can explore different Bitcoin investment options that can help them increase their wealth over time.