Cryptocurrencies have been in the spotlight in 2017, and their uptrend is still not over. Last year in April, Bitcoin – the main representative of cryptocurrencies - traded at around $1,000. Today, its price is still up more than 700% compared to 12 months ago, which is a return on investment not many commodities are able to mirror.
The story of cryptocurrencies began in 2009 with the invention of Bitcoin – a currency solely valued by supply and demand and without the backing of any central bank – which makes the concept of cryptocurrencies very similar to gold and other precious metals.
However, many traders still don’t understand the key benefits and risks of investing in cryptocurrencies, and that’s why we’ve compiled a list of the most notable pros and cons you need to consider when buying Bitcoin.
The Pros:
Bitcoin can be used for real purchases. A growing number of businesses and websites are accepting Bitcoin for their goods and services. If tech-giants such as Microsoft and Dell are already accepting the cryptocurrency for their products, there is no doubt that other companies will follow.
Blockchain can change the world. The underlying technology behind Bitcoin and other cryptocurrencies is called blockchain, and its potential is already recognized by a number of industries, some of which blockchain has already revolutionized. Fintech and other startups are increasingly relying on blockchain to add value to the final customer.
Each transaction is anonymous. All payments you make with Bitcoins are completely anonymous, as there is no central place to keep records of each transaction. Only the amount of Bitcoin sent to an address can be determined – not the sender, recipient or the amount of Bitcoin that any individual holds.
The Cons:
Cryptocurrencies are very volatile. Being a relatively new phenomenon, Bitcoin and other cryptocurrencies experience heavy price fluctuations on a daily basis. However, with supply and demand forces and price changing regularly, this can create many trading opportunities for a savvy trader.
Bitcoin faces heavy competition. There are hundreds of cryptocurrencies currently listed on crypto-exchanges, and it seems that new ones are entering the market every day. Not only does Bitcoin face a growing competition from other cryptocurrencies, but even Bitcoin itself got split into two different currencies - Bitcoin and Bitcoin cash – in an attempt to increase security and transaction speed.
While Bitcoin and other cryptocurrencies have revolutionized internet payments and blockchain is about to enter into our daily lives, there are still risks associated both with investing in cryptocurrencies and with the technology itself. Furthermore, with the heavy price fluctuation, you need to analyze your crypto-investment to the tiniest details in order to protect yourself against large losses.
