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Bitcoin is among the top most stable cryptocurrencies on the market. Although its course was filled with volatility issues and market expansions, Bitcoin remains the preferred cryptocurrency for a perfectly diversified portfolio. The Bitcoin price USD has reached a favorable phase at the moment, so you should check it out.
However, besides the good side of Bitcoin, the truth is that it might’ve become outdated compared to other cryptocurrencies that focus on sustainability, fast transactions and building communities. So, it’s not enough to invest in Bitcoin only ―you need an array of coins to balance its value properly and minimize risks. Therefore, we’ll analyze the pros and cons of Bitcoin investing and see if it’s really worth it.
No transactional borders
The most significant benefit of buying, selling or investing in Bitcoin is that it’s highly accessible. Therefore, it allows for international transfers regardless of the country. There are some exceptions, of course; some countries have permanently banned the usage of any type of cryptocurrency, such as China, Morocco or Tunisia. That’s not necessarily because people refuse crypto adoption, but since it’s pretty new to the market, taxation regulation isn’t set correctly, and crypto can be the subject of money laundering.
But besides the countries that have banned cryptocurrencies, Bitcoin can be used almost anywhere, especially since more companies and businesses have allowed crypto transactions within their systems. Bitcoin worldwide adoption has yet to happen, but the idea is under discussion. At some point, we’ll be able to use bitcoins just as we use fiat money.
Volatility
Among the biggest downsides of Bitcoin is its volatility levels. Since its development, Bitcoin has had a total coin limit of 21 million bitcoins, which is the first reason why it’s so volatile. This leads to a phenomenon of an increase in price as the circulating supply gets to the limit, which is close because there are approximately two million bitcoins left to be mined.
However, Bitcoin’s volatility is also caused by the following:
- Investor actions. As wealthier investors hold their bitcoins, others with fewer assets won’t have the same opportunities to gain exposure;
- News. Articles that present people’s opinions on a certain matter might not reveal accurate information, affecting investors’ choices;
- Regulation. Since there’s a long way until worldwide Bitcoin acceptance happens, the lack of rules impacts Bitcoin’s prices;
Anonymity
Another good thing about Bitcoin and most cryptocurrencies is that you can make crypto transactions without adding essential information about yourself into the network. This allows people from around the world to make transfers in case their country doesn’t provide a proper banking system.
At the same time, since blockchain technology offers enough transparency, users can see all network transactions. However, there’s no public tracking back to the user who sold or bought crypto, despite the complete transparency. The information is recorded on a distributed ledger, allowing people to see almost everything happening on the blockchain, but only the users’ public key is seen. On the other hand, the private key is what enables investors to make transactions, which is a complex combination of letters and numbers that can’t be traced.
Lack of government regulations
The fact that Bitcoin was the first cryptocurrency ever also has the drawback of not providing enough safety for governments. Unfortunately, the truth is that even the crypto market is prone to scammers entering the system and deceiving others for illicit purposes. Plus, given that Bitcoin transactions are not reversible, the risk of people not getting their money back is even more concerning.
It may be too soon for Bitcoin to become legal tender. For example, the El Salvador case, in which the president made Bitcoin the country’s legal tender, is failing its people since the people are not ready yet for such a change, primarily when $60 million are known to have been lost since last year, and $375 million spent. As a consequence, the country faces a high deficit.
No central authority needed
Bitcoin was created especially for performing without needing other official authorities’ interventions. As a result, transactions are faster, people can make anonymous purchases, and the crypto earned is not taxable. However, in some countries, you still need to declare the income resulting from cryptocurrencies, and if it exceeds a specific number, you might need to pay for it, but there’s still not much clearance of the matter.
As Bitcoin is a decentralized currency, no legal authority can control what people are doing with their money. Therefore, they might reach financial freedom as their earnings only depend on their actions. Bitcoin is ruled by a system of independent nodes that approve transactions on the network. Nodes are incentivized for these verifications, which is how the transfer process goes smoothly.
Bitcoin is irreversible
Like most cryptocurrencies, Bitcoin transactions are irreversible, meaning that you can’t take your money back after a wrongful purchase, for example. And since there are no regulations, no one can help you if you’ve been scammed or made the wrong recipient, which is a considerable disadvantage.
Since transactions are irreversible, cryptocurrency wallets are also in danger because if the user loses access to their private key, they cannot get back those investments. This could happen even during a hard drive crash or malware. Even if there are numerous ways to keep your crypto, none of them can assure you 100% that your coins are safe. The controversy regarding blockchain technology is that it provides enough safety for investors due to its consensus cryptography and decentralization principles but not enough security for people’s holdings due to the lack of a central authority.
Final thoughts
If you want to start investing, you need to be wary of the benefits and disadvantages too. Similar to Bitcoin, many cryptocurrencies can provide you with considerable returns but also expose you to high risks of losing your money and never recovering them again. However, if you’re calculated enough and don’t jump right in, you might be able to make some passive income and avoid trouble at the same time.
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