What Are The Pros and Cons of Bitcoin as an investment strategy?

So you have heard about this whole Bitcoin craze and also hear the stories about practically overnight “Bitcoin millionaires” who have struck it big with this new currency craze and you can’t help but think to yourself: “Surely there can’t be THAT much to this Bitcoin thing”, right? You decide you want to invest just a bit of money into this whole crypto thing and see if it can get you as good of returns as your hear everybody else is getting.

If you have any kind of maturity at all, you will realize that of something sounds too good to be true, it most likely is. Now this does not mean there is anything wrong with bitcoin. But your expectations should be based in reality here on earth and not some pie in the sky promise of overnight wealth and riches.

What do I mean by this? Simply, as most things, there is more than meets the eye. Both good and bad. Basically, it just pays to be educated in anything before you decide to get involved. There are more than a few Pros and Cons when using cryptocurrencies like Bitcoin as an investment strategy.

In laymen’s terms, it’s simply a digital currency and a payment system method. A peer-to-peer online currency solution that is gaining popularity at an astonishing rate all round the planet. Everybody from governments to Fortune 500 companies are getting involved in blockchain technology in some way shape or form. In this article, I will try to present some of the both pros and cons of Bitcoin.

When it boils down to it, at the end of the day, nobody can decide for you if Bitcoin is a good idea for you to invest in. It doesn’t matter what your decision may end up being, Bitcoin is here to stay and like I mentioned earlier, it is gaining popularity at a very surprising rate with more and more people accepting it all around the planet

Let’s look at the pros first.

Pro #1: Possible Growth Potential

It is possible that one of the most positive and alluring things about Bitcoin, is the very blockchain technology behind it is so new that the growth capabilities look extremely compelling. Cryptocurrency like Bitcoin offers a new way for individuals all around the planet to exchange funds and value instantly and also without the requirement to use any third party  intermediary (such as a bank or other similar institution).

Like all cryptocurrencies, Bitcoin also functions on a process know as blockchain technology. This algorithm can allow anybody to both send and receive funds. Now only that, but do it all for only a fraction of the money and time it would take to make the exact same transfers using traditional financial institutions and banks. It is for this very reason, many people have pointed to cryptocurrencies very own blockchain as one of the most valuable technological breakthroughs of the past decade or two. Blockchain is useful for not only cryptocurrency transfers like we just discussed, but also as a ledger-like record keeping technology. Blockchain it is also applicable to countless other industries and uses as well. Let’s put it like this: Everything from the way stocks are currently being traded to how many online contracts are negotiated and agreed upon can be (and in many cases already is) changed via blockchain technology.

 

The cryptocurrency of Bitcoin itself, also has another large growth probability once people get more and more comfortable using it. The more people are familiar with it and used to using it, the more often it will be used in the future. Recently, we have already seen everything from Bitcoin ATMs to several retailers (big-name companies you would recognize) accepting the cryptocurrency as a valid method of payment. This is really great news for bitcoin investors. As stated earlier, the coins will only become more and more valuable as the currency catches on and grows in popularity. This will cause the price of them to go up overall over the next few years.

 

Pro #2: Low transaction fees

Let’s be completely honest here for a second, shall we? The current fee structures charged by both online payment processors and banks can be extremely intimidating and downright unreasonable regardless of the volume. A lot of merchants and online retailers may balk at the exchange fees and related costs over time. Because cryptocurrency like Bitcoin is not yet controlled or regulated, it has very low fees by comparison and it’s still extremely secure because it doesn’t rely on a single point of failure like most normal payment gateways.

The transaction time itself is also much faster as well. This is because there is no manual approval process or manual verification required. All this is done automatically on the blockchain so it does not require human intervention.

Pro #3: Bitcoin is deflationary

Another very unique feature of Bitcoin lies in the fact that only 21 million bitcoins will ever be created. That is the limit. No more. No less. As you may have guessed, this means that nobody can just create more Bitcoin like people and governments do with fiat currency all the time. We know this leads to inflation which makes your dollar (or Yen or Euro, ect) worth less and less over time. Because the overall quantity of Bitcoin is set in stone and cannot be changed,this means the value of the coins will grow over time. This is especially true after the very last Bitcoin is mined.

 

 

Pro #4: Safety

Yet another thing that Bitcoin does (and blockhain technology in general with any cryptocurrency) is due to the way the blockchain code was written. It actually prevents things like identity theft and payment fraud much more reliably than anything you are currently using, such as a credit card for example. As cryptocurrencies like Bitcoin are digital, they cannot be faked, copied or counterfeited in any way. You could theoretically set up a fake wallet and fill it with fake bitcoin if you were a good programmer but the problem would arise when you actually went to send the fake Bitcoin out of your wallet into another persons wallet for a purchase or transfer. The blockchain will see the transaction trying to happen but will not allow it because it will not recognize the fake bitcoin in the fake wallet. The blockchain has every little piece of every bitcoin (21 million of them) in existence so if it cant match it up with its ledger technology, then it will simply not allow the transaction to take place. This is how the blockchain prevents counterfeit coins and gets rid of the risk that traditional transactions carry with banks and such.

As stated earlier, transactions made with Bitcoin are more secure for both buyers and sellers than traditional credit card charges. Paying for a good or service via Bitcoin lets the buyer send exactly the amount required from the seller — giving the seller no further access to the remainder of the buyers’ funds.

Traditional payments, such as with credit cards, actually give the seller access to a complete line of credit for just about any amount *within the credit limit of that particular card). That does nothing but leave an open invitation for both hackers and dishonest merchants to charge as much as they please from a buyer’s account.  Yikes!

 

Pro #5: It’s Hot!

Bitcoin and other altcoins on cryptocurrency exchanges are making some extreme profit right now for serious day traders. Over the course of a few months, speculations have driven the price of all coins up and down like crazy. But even though it is wildly unstable, Bitcoin has still gone in an overall upward direction since it’s introduction about a decade ago. If for example, you would have purchased only $100 worth of Bitcoin in May 2010, (when the first transaction bought two pizzas for 10,000 bitcoins), you would be a multi millionaire today and never have to work again a day in your life!

It not ALWAYS be good news, but you still hear about Bitcoin on the news a lot. It refuses to go away! All these news stories covering the every move of the crypto giant have kept the price in extreme fluctuation which lets anybody make a lot of profit on this trend if they know what they are doing.

 

Pro #6: High degree of privacy

Just about every cryptocurrency transaction that takes place is very secure and extremely private. Users of crypto actually incorporate pseudonyms for their purchases and transactions. This next level of privacy makes the utilization of cryptocurrency and blockchain technology largely intriguing to a lot of the population..

 

Pro #7: Simplicity Of Use

Bitcoin was created for the digital age with the internet being an intregal part of the blockchain and although this may sound complicated on the surface, it’s actually brain dead simple to use. To make a transaction and send Bitcoin to anybody, all you need to do is fill in the receivers wallet address,  the amount you want to give them, and send. That’s it! It’s quicker than sending an email. No hassle. No long waiting times. VERY low fees. It is a very flexible and practical form of payment.

 

Pro #8: Not Currently Completely Regulated

What this means is that there is no third party or middleman manipulating crypto to benefit their own agenda. The blockchain technology behind all crypto eliminates the need or requirement for any third party interference in the transactions.

 

Pro #9: It’s Liquid 

Bitcoin is definitely one of the most liquid when it comes to cryptocurrencies in general. Japan’s made the decision decision to recognize it as legal tender in April 2017 and this seems to be one of the events that kick started the huge bull run later that year. Also when it comes to liquidity, if you have Bitcoin, Litecoin, Ethereum or Bitcoin Cash, and you also have a Coinbase account, you can easily trade any of these in for USD at any point in time and then simply have it sent to your bank account. I have done this many many times.

 

Pro #10:

The World Is Going To Hell In A Handbasket!

One of the best reasons to buy crypto is the same reason people love to collect gold. That is because it acts extremely well as a hedgefund against market uncertainty. Advocates of both crypto and precious metals love to tell you stories about an upcoming coming market crash that will be globally devastating. Maybe it has to do with the unavoidable corruption of the Federal Reserve. Some will rightfully point out just how flat out dangerous the ability of banks and governments around the world is to simply print new “fiat money,” anytime they feel like it with no gold or anything else backing it.

 

There are actually a lot of geographical locations where this paranoia is very well founded and deserved. These are countries where cryptocurrencies — that have a fixed quantity derived by math — can be an extremely efficient hedge. In case you are wondering, I am talking about countries like Zimbabwe. This is a country where their government has destroyed the local currency but now they have very active bitcoin markets.

 

Another factor that not a lot of people consider is traditional money relies heavily on trust. The general public nees to trust the banks where they store their fiat currency. Recently, we have seen the collapse of several financial institutions,  a lot of dodgy practices, and runs on the bank, etc. It’s no surprise that many have simply lost their faith in banks and a lot of people view these financial institutions as detrimental to our society in general because of this.

 

 

Now, I know this part is not as fun but we need to also look at the disadvantages as well. There are a few that would serve us well to keep in mind.

 

Con #1: Misunderstood

Without a doubt, one of the biggest unfortunate cons for Bitcoin is the lack of understanding how cryptocurrencies work when it comes to the general public. Lots of studies have shown that most people — including a lot of bitcoin users — don’t fully comprehend exactly how the cryptocurrency works and if it is secure or not..

That’s is indeed, a problem. In order for there to be a more mass adoption with cryptocurrency, there needs to be more comfort and confidence in using it. This will come when the general public has a much better understanding of it.

 

Con #2: Requires Some Learning

Much like many other things in life, there is somewhat of a learning curve when it comes to bitcoin.  Most of us are accustomed to using traditional fiat currency or cash from a very early age. Cryptocurrency in general is still relatively new. The concept is a bit different than many people are used to and it DOES take just a little bit to get used to the small differences here and there..

There are tons of comprehensive guides on this subject if you simply take the time to look. I provide lots of free training and education on this very website because I believe in this concept so much. One should understand the different terminology involved such as “block chain”, “cryptography”, “mining”, “proof of stake” etc. If you honestly have a strong desire to learn more about cryptocurrency, there is more than enough info on this website to make you well-versed on the subject!

Con #3: Not accepted Many Places……YET!

I;m sure that we are all familiar with the online payment processor named PayPal. Their success has been nothing short of amazing. It has been widely adopted, and just about every online retailer or website offering a product or service will accept Paypal as a transaction option. However, the large majority of merchants both online and offline have not yet started accepting cryptocurrency like Bitcoin as a means of payment. This is changing very rapidly, however. More and more places are adopting crypto payments and blockchain technology on what feels like a daily basis. This progress will only speed up as time goes on. I personally believe that crypto payments will start to catch up with Paypal options as soon as the year 2022.

 

Con #4: Can Be Difficult To Obtain

One way of obtaining Bitcoin is by mining it. In the very beginning of cryptocurrency, mining for Bitcoin was a lot easier than it is now. With the current difficulty ranking that Bitcoin has, this is making mining harder and less profitable. These days however, it is extremely easy to get ahold of just about whatever amount of cryptocurrency you want by using a dependable and reliable american company called Coinbase. While obtaining Bitcoin and cryptocurrency in the past was a lot more difficult, that is not nearly as big of a problem this day in age.

Con #5: Transactions Can Be Slow At Times

Most transactions made with Bitcoin are very quick indeed. But because it is a peer to peer payment system, there are time limits built into the confirmations of the transactions. The larger the transaction is, the longer the wait for confirmations can be.

 

Con #6: Safety

When we are discussing both the pros and cons of cryptocurrency such as Bitcoin, safety can and does fall into both categories.

All transactions with cryptocurrency just need the buyer’s crypto wallet ID — as opposed to information like a name and full contact details. This offers a certain degree of anonymity that most fiat transactions do not. While a lot of people view this trait as a pro for Bitcoin, it also happens to be one reason why some investors view cryptocurrency in a negative light. Some people do not like the fact that it is so hard to follow a “paper trail” when it comes to transactions made with cryptocurrency. This is especially true of other coins such as Monero that specializes on total and complete anonymity (even more so than Bitcoin).

Even though cryptocurrencies are completely digital as opposed to tangible, it can still be stolen. Many people who buy and hold Bitcoin and other alt coins will store their crypto coins in physical drives and then secure THOSE drives in an actual safe to ensure they are not stolen (because nobody will have access to them).

 

Con #7: It’s Not Real

Cryptocurrencies such as Bitcoin are in fact nothing more than a mathematical algorithm. It’s not exactly the kind of thing that you can physically hold in your hand. The value of any digital coin is based entirely on your faith in math, the exchange rate and the willingness of the current market to accept it. That’s it!

 

 

Con #8: It’s Unstable

This should be no secret at all. What goes up quickly can also come back down even quicker. Many current news stories can have an astronomical effect on the price of cryptos. It can be at one price when you wake up and then certain headlines may come out at some point during the day and the price my drop or climb several hundred dollars or more within minutes!

What this does is make bitcoin unlike real currencies, which usually move in very small ranges. Cryptocurrency is great as a form of exchange in countries like Venezuela, where their native currency is currently worthless. But the value of Bitcoin as a medium of daily transactions are more questionable in countries like the U.S.A., where it acts as both an investment and a hedge.

 

Con #9: Other Coins May Better

While the overall price of Bitcoin has been rising over the past few years, its share of the total cryptocurrency market has been falling. While it represented over 80% of cryptocurrency trading on the exchanges a year or two ago, its share is now far less than half of all coins traded as the value of different coins like Ethereum, Litecoin, Ripple and others continue to rise over time as well.

 

Bottom Line on Bitcoin

I personally think it is a smart idea to give Bitcoin a chance and hold a little bit for the next few years and see what happens. Never invest more than you can afford to lose. But most importantly, do your homework and have fun doing it and learning more about this exciting new technology!

 

If you would like a step by step guide of how to create a Plug-N-Play Cryptocurrency portfolio built from Bitcoin, Ethereum, Litecoin and many other quality coins (some of which that pay you just to own them!), click the banner below:

 

 

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