Over the years, we’ve all grown accustomed to the concept of digital currencies. They’re no longer a novelty or an unfathomable idea out of a Sci-Fi movie. Cryptocurrencies have become a reality that’s not so difficult to understand after all, as evidenced by the sheer number of people who have already dipped their toes into crypto trading.
So, the question today is no longer whether investing in cryptocurrencies is a good idea or not. Cryptos have already proven their benefits and utility many times over, so it’s become pretty obvious they’re not going anywhere anytime soon. The current dilemma is finding the right crypto to invest in. There are more than 10, 000 digital currencies on the market, with new coins emerging constantly. And while most of them have no value, the increasing number of tokens does make it difficult for investors to decide which crypto they should focus on.
For a very long time, Bitcoin (BTC) was the only notable asset ruling the crypto land, so the choice was a lot easier. But as the market evolved, the coin started sharing the playground with other digital currencies that chipped away at its popularity. That got many people wondering whether Bitcoin has lost its shine over the course of time and if they should turn their attention towards newer and brighter crypto horizons.
The only thing we know for sure is that Bitcoin is still the leader of the crypto pack with the largest market cap and user base. Investing in Bitcoin has made many people rich just like it has caused severe losses for others. So, is the crypto still a viable investment option in 2022? While no one can guarantee the success of a trading venture, there are definitely both pros and cons to investing in Bitcoin. And while you can easily learn how to buy BTC, it’s a lot more difficult to predict the outcome of your investments. So, before you make a decision, you should look at both sides of the coin and analyze things carefully.
The pros
There are several advantages to trading Bitcoin. Even experts recommend sticking with the big names in crypto, especially if you’re new to digital assets, as they tend to be more reliable and less prone to risks, although that’s not always the case.
High return potential
One of the biggest benefits of investing in Bitcoin is represented by its high return potential. Since its inception in 2009, Bitcoin experienced several price surges. The coin went through various cycles of growth and decline, but every time the prices spiked, those who were smart enough to invest at the right moment earned high returns. So, while Bitcoin’s volatility poses a serious risk, it also offers the possibility to bring back high profits.
What’s more, Bitcoin’s history teaches us that all periods of decline are followed by periods of growth, so even if the price drops suddenly, if you hold on to your investment for a longer period of time, chances are prices will go up again and you’ll be able to avoid losses.
Long track record of success
Bitcoin is the first-ever cryptocurrency created or at least the first one to provide real benefits and utility. Therefore, it has a longer history than any other digital currency on the market and a longer track record of success. Although it’s difficult to keep up with price moves, the fact that Bitcoin is still here today proves that it can hold on to its value over time, and serve as a powerful financial asset.
Scarcity
Bitcoin’s supply is limited to 21 million. We’re nowhere near reaching the limit – it was estimated that might happen around 2140. However, the fact that there’s not an infinite number of coins creates scarcity. As the supply diminishes, the demand is bound to increase, leading the coin to gain even more value over time.
The cons
As with any other form of investment, trading Bitcoin also comes with risks and disadvantages that should also be taken into consideration.
Volatility
Bitcoin’s value is influenced by a variety of political, economic, and social factors, so it’s next to impossible to predict when the prices will go up or down. Bitcoin’s volatility can be exploited to increase earnings, but it can also lead to negative outcomes if you don’t know how to deal with it.
Lack of regulations
Bitcoin’s decentralized nature is usually regarded as a major strength because it allows for independent control and decision-making. However, some people see it as a drawback since it means Bitcoin lacks regulations, making transactions vulnerable to scams and other security risks.
Limitations
Bitcoin’s utility comes from being used as a payment system. Apart from that, it has no other functions. Other networks, such as Ethereum have various use cases, giving participants the possibility to run smart contracts and develop decentralized applications, and that attracts a larger number of users. This makes many people wonder if Bitcoin’s technology might be obsolete compared to other networks. Also, while the number of companies accepting Bitcoin as a form of payment continues to grow, the coin still has a long way to go until entering the mainstream.
There’s no denying that investing in Bitcoin can be a risky endeavor, but that’s the case with all digital coins. The cryptocurrency market is known for its high volatility and unpredictable price swings that can lead to massive gains or wipe out all your assets in the blink of an eye. It’s up to you to decide how much risk you’re willing to take and if you’re ready to join the crypto hype.
Whether you chose to invest in Bitcoin or any other cryptocurrency, a good rule of thumb is to include other asset classes in your portfolio as well and keep crypto investments below 5% of the total, as a way to protect yourself against market volatility and the heavy losses you could suffer as a consequence.
