With the exponential rise in its value, crypto currencies like Bitcoin are attracting many investors, business owners and individuals to join the bandwagon. However, it is imperative to understand whether the investment would be beneficial in the long term.
There is no denying that Bitcoin has its advantages and investing in it could offer some large returns.
- Decentralized Currency: Bitcoin works without any central repository or administration and therefore helps to facilitate direct peer-to-peer transactions minus an intermediary
- Anonymity: Bitcoin purchases are completely anonymous and a user’s personal identity is never associated with a transaction. In fact, with every transaction, a different Bitcoin address is created
- No Taxes : Since Bitcoin is not associated to any third party organization, no sales taxes are charged on the transactions. At the same time, transaction costs are very low.
- No Transfer Fees : Standard wire transfers usually involve transfer fees, however, since no government body is involved, this cost gets eliminated
- Easily Accessible: Bitcoin transactions can be conducted using any device with internet access. A user doesn’t need to travel to a bank or a specific store to conduct business
Bitcoin may seem like a lucrative option for businesses that are trying to expand their operations across borders. However, its risks for investors cannot be ignored.
- Uncertain Prices: Crypto currencies prices are extremely volatile and thus investing in them involves a high amount of risk. prices are not monitored or regulated and as they keep rising, they may eventually lead to a burst and cause widespread losses
- Irreversible transactions: Bitcoin transactions are completely irreversible. Your crypto currency is kept in a digital wallet and each wallet has one public and one private key. The private key is like a username and password and it is completely irrecoverable. So if you either forget your private key, lose it, or if it gets hacked, the money inside your digital wallet becomes completely useless
- Limited Opportunities: Bitcoins are not accepted by all merchants. Only a few online merchants accept them thus, limiting your transaction opportunities
- No minimum valuation: There is not minimum valuation that can be guaranteed for Bitcoins since there is no central authority to govern. Thus, if a large number of merchants decide to leave the system, this will lead to a drastic fall in the value of the crypto currency causing large losses to its investors
Bitcoin investments are a two sided knife. However, it is definitely a currency like no other. The decentralized nature of Bitcoin is both a blessing and a curse. Depending on the nature of your business and the risk you’re willing to take, Bitcoin could be a gamble you’d want to pursue.
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