The successes of Bitcoin investors have been touted across the internet for many years. However, recently confidence in the coin has dropped, with even its most seasoned advocates unsure of what the future holds. Nowadays, those looking to invest are met with a complex landscape of information and opinions about Bitcoin, making it difficult to determine whether it's a good or a bad investment.
Despite the uncertainty over its position, Bitcoin still attracts a great deal of attention from those seeking to expand their portfolio. Let’s take a look at the ins and outs of Bitcoin, to determine whether it’s the right investment for you. In this article, we’ll find out what Bitcoin is, its ups and downs over the last decade, the advantages and risks of investing in Bitcoin in 2023, how to invest, and other coins that may be worth your attention.
What Is Bitcoin (BTC)?
At its simplest, Bitcoin is a digital currency used for online transactions. As well as being used to purchase goods and services, Bitcoin can be traded on an exchange. It is not controlled by any governments or banks, and so requires no middleman to oversee sales and purchases. Instead, these transactions are recorded on the blockchain, a public ledger accessible to all, which makes it near impossible to counterfeit coins or sales.
The Turbulent History of Bitcoin
Created in 2009 by an individual or group known by the pseudonym Satoshi Nakamoto, many commentators would not shy away from branding Bitcoin’s history as particularly turbulent. However, in the first few years after its foundation, Bitcoin’s price remained relatively stable and its value relatively low.
In 2013, Bitcoin enthusiasts saw the value of their investments rise greatly for the first time. The coin was valued at $1000 per Bitcoin, before returning to around $200 and rising steadily until 2017. As both individuals and businesses began to recognize Bitcoin as a legitimate investment and form of payment, demand began to grow.
In 2017, Bitcoin saw its second price surge, with the value of an individual coin rising to $20,000. Once again, the high valuation began to fall, and by December 2019 Bitcoin was trading at around $6,500 per coin. This volatility in price continued throughout the Covid-19 pandemic when Bitcoin reached new highs of $40,000 and $60,000 in April 2021.
These peaks were to be short-lived, and by summer 2021 the price of one Bitcoin had once again fallen to around $30,000. Since then, Bitcoin has continued to experience sharp rises and falls in its value in the space of a matter of months, and is currently trading at around $28,000 per coin.
Marked by significant and volatile price fluctuations, many individuals have made huge profits on their Bitcoin investments, but many have also seen substantial losses. As with any stock, Bitcoin’s value is determined by a multitude of market factors and subsequent demand.
The Pros and Cons of Investing in Bitcoin in 2023
Let’s take a look at some of the advantages and risks of investing in Bitcoin, so you can determine whether those risks are worth the potential reward.
Pro - High Potential:
With a limited supply of 21 million Bitcoin, if demand for Bitcoin grows, the potential for profits is high. Similarly, if businesses and organizations continue to adopt Bitcoin as an official payment method, confidence in the coin will be bolstered and prices will rise or, at least, remain stable, providing the potential for a long-term investment. Additionally, confidence in traditional currencies is particularly low in 2023, meaning individuals are seeking alternatives such as Bitcoin.
Con - High Volatility:
Like any investment asset, if demand for Bitcoin falls, losses are highly likely. With the volatility associated with Bitcoin’s price, simply holding onto your coins and waiting for the price to stabilize may not be an option. On top of this, in 2023 most anyone interested in investing in Bitcoin has already made their purchase, leaving little room for demand to grow as drastically as it has done before.
Pro - Decentralized:
That Bitcoin is not controlled by any one bank or country is a pro for many investors, as market manipulation by established forces is unlikely. To add to this, since Bitcoin transactions are recorded on the blockchain, falsified transactions are extremely rare, creating confidence. The blockchain does not use your name or address such as a traditional bank card, instead using a Bitcoin wallet address. This offers those who want to invest in Bitcoin, as well as use it to make purchases online, a deal of privacy such as with no other currency.
Con - Regulatory Uncertainty:
For many enthusiasts, that Bitcoin is unregulated is an advantage that encourages them to invest in and use Bitcoin. However, as the popularity of online coins continues to grow, regulatory bodies and governments are looking to place regulations on Bitcoin and other coins like it. This uncertainty has caused many of Bitcoin’s investors to lose confidence in the supposed benefits of an online currency, contributing to its volatility in price.
Pro - Diversification Opportunity:
If you’re considering cryptocurrency investments as a way to diversify your portfolio, Bitcoin is a well-established choice, especially if you already invest in traditional currencies. When confidence in traditional currencies decreases, it tends to increase for cryptocurrencies, mitigating risk and even inviting returns. Diversification with Bitcoin will also allow you to make more informed decisions when investing in other markets or cryptocurrencies.
Con - Security Risks:
Bitcoin wallets are common targets for hackers and fraudsters. By gaining access to an individual’s wallet through hacking, thieves can steal Bitcoin holdings and move them through a series of wallets, making your stolen Bitcoin essentially untraceable. Similarly, false investment opportunities using Bitcoin as a payment are commonly touted by scammers to steal an individual’s Bitcoin. Unlike traditional currencies, Bitcoin investments are uninsured against such theft.
Pro - Potential for Widespread Adoption:
The more businesses and organizations that recognize Bitcoin as a legitimate form of payment, the more confidence there is in the coin as a whole. Recognition such as this has helped Bitcoin reach its current high price and has prevented it from falling to such drastic lows as when it was first launched. The potential for Bitcoin to become a widespread legitimate currency only increases with time.
Con - Low Intrinsic Value:
Unlike other investment opportunities such as stocks, Bitcoin is not backed by a physical asset. Its value is determined almost completely by market demand, which can be influenced by a wide range of, sometimes unexpected, factors, and contributes greatly to its volatility. Bitcoin is not a stable investment that you can expect to increase steadily in price over time. Instead, it requires an ever-watchful eye on market trends and sentiment to determine the optimum times to buy and sell.
How to Invest in Bitcoin
If you’ve chosen to invest in Bitcoin, purchasing a portion of a coin is surprisingly simple. Here’s how it’s done:
- Choose an Exchange
It’s important to choose a trusted and reliable cryptocurrency exchange to ensure your Bitcoin investment is genuine and secure. Do your research to find an exchange with terms and an interface that suits you.
- Create Your Account
Once you’ve chosen an exchange that works for you, the next step is to create an account. This will require you to provide your basic information, as well as verify your account using a phone number and/or a form of identification.
- Add Funds
To purchase a cryptocurrency such as Bitcoin, funds will need to be added to your account. Usually, this will be done through bank transfer using your card details, but some exchanges do provide alternate methods of adding funds.
- Purchase Bitcoin
Now you’ve got your account on the exchange and have added funds, you’ll be able to purchase your Bitcoin. You can either specify the number of dollars you’d like to pay, and the exchange will inform you how much Bitcoin this is. Or, you can specify how much Bitcoin you’d like to buy, and the exchange will provide you with the final price in dollars.
- Store Your Bitcoin
The vast majority of exchanges will provide you with a wallet to store your Bitcoin. However, you can also download a personal wallet to keep track of your Bitcoin investments. This can provide slightly more security.
Should You Consider Investing in Other Cryptocurrencies?
Although Bitcoin is undoubtedly the most established and well-known cryptocurrency, there are a multitude of other coins to consider investing in. These offer more affordable points of entry for new cryptocurrency investors, as well as the potential for higher returns as these coins begin to make a name for themselves.
However, with the potential for higher returns comes a greater deal of volatility and subsequent risk. Considering the cheaper buy-in points, significant losses are unlikely, but confidence in these alternative coins may take much longer to grow. This means if you choose to invest in another cryptocurrency, you’ll likely have to stay the course through price surges and falls to make significant gains.
With decent liquidity and a well-established reputation, Bitcoin is a great choice for those looking to invest in cryptocurrency for the first time. However, if you want to bypass Bitcoin, getting in on the ground floor of a new coin could bring increased returns. Consider the coins’ liquidity, trading volumes, transaction times and fees, general market interest, and legitimacy before choosing to invest. Most investors choose to buy Bitcoin to keep in their wallet, as well as one or two new cryptocurrencies to back.
Conclusion
Like any investment, Bitcoin carries its fair share of risks, as well as the potential for high returns. The lack of interference from governments and other organizations makes it an attractive investment prospect for many modern investors.
As well as this, if you’re looking to diversify your investment portfolio by backing cryptocurrencies, Bitcoin is a good place to start. Despite its volatility, it is well-renowned enough to maintain a relatively high value despite frequent price surges and drops.
However, its price’s dependence on market sentiment, the uncertainty surrounding the future possibility of regulation, as well as the security risks of owning and storing Bitcoin does sway some conscientious investors away from it.
Ultimately, whether Bitcoin is a good investment for you will depend on your risk tolerance, and your willingness to wait it out and see what happens to its value. In general, a keen eye for market fluctuations will help you determine the right times to buy and sell your Bitcoin and ensure you do not see substantial losses.
Sources
- https://www.nerdwallet.com/article/investing/what-is-bitcoin
- https://www.forbes.com/advisor/au/investing/cryptocurrency/what-is-bitcoin/
- https://www.coindesk.com/price/bitcoin/
- https://money.usnews.com/investing/articles/the-history-of-bitcoin
- https://www.investopedia.com/articles/forex/121815/Bitcoins-price-history.asp
- https://www.mlc.com.au/personal/insights/pros-and-cons-of-investing-in-cryptocurrency
- https://mint.intuit.com/blog/investments/pros-and-cons-of-bitcoin/
- https://www.cointree.com/learn/pros-and-cons-of-bitcoin/
- https://www.forbes.com/advisor/in/investing/cryptocurrency/advantages-of-cryptocurrency/
- https://www.bitcoin.com/get-started/how-to-buy-bitcoin/
- https://www.fool.com/the-ascent/cryptocurrency/articles/5-reasons-you-should-invest-in-cryptos-besides-bitcoin/
- https://www.investor.gov/additional-resources/spotlight/directors-take/thinking-about-buying-latest-new-cryptocurrency-or
- https://www.fool.com/investing/stock-market/market-sectors/financials/cryptocurrency-stocks/is-cryptocurrency-good-investment/
Add comment