Bitcoin Website Investment: Smart Move Or Risky Gamble?

Bitcoin is a cryptocurrency, a virtual alternative to fiat currency. It is built on blockchain technology, which uses a combination of private and public keys and network consensus for validation and security. Bitcoin is decentralised, and its value is influenced by supply and demand, investor expectations, and public interest and media coverage.

Bitcoin's value has been volatile, with its all-time high of around $73,000 in mid-March 2024, falling to $39,000 in January 2024, and then rallying to $62,800. Its value can increase due to growing institutional demand and increasing investor interest. However, it can also drop due to economic conditions, such as high-interest rates and inflation, and negative events like the failure of a crypto exchange.

Bitcoin is prone to price volatility, and it is essential to understand the risks before investing. It is a high-risk asset with no central governing body, and its value can fluctuate dramatically. It is also a non-productive asset, meaning it does not generate revenue or issue dividends. Additionally, it is not backed by any meaningful value and is not widely used as a means of payment.

Despite the risks, some prominent individuals and companies have invested in Bitcoin, and it has the potential for high returns. If you are considering investing in Bitcoin, it is crucial to do your research, understand the market, choose a reliable crypto exchange, and only invest what you can afford to lose.

Bitcoin's volatility

Bitcoin is considered a volatile investment asset. Its volatility is measured by how much its price fluctuates relative to the average price over a period of time. The volatility of Bitcoin depends on what other cryptocurrencies you compare it to. For example, Bitcoin is less volatile than 33 S&P 500 stocks, and in October 2023, there were 92 S&P 500 stocks more volatile than Bitcoin.

Volatility can also increase the cost of hedging, which is a major contributor to the price of merchant services. If Bitcoin volatility decreases, the cost of converting into and out of Bitcoin will also decrease.

The future of Bitcoin

Bitcoin's future is a hotly debated topic, with some predicting it will become the "21st-century gold" and others arguing it is the "biggest scam of all time".

The Bull Case for Bitcoin

Bitcoin advocates argue that it is too early to dismiss the cryptocurrency as a viable currency. They believe that the volatility associated with Bitcoin is understandable given that it is still in the early stages of adoption. As more people invest in Bitcoin, advocates predict that volatility will decrease.

Bitcoin bulls also argue that the cryptocurrency is already more efficient than credit cards, with transactions finalised in an average of 10 minutes compared to the days it takes for card transactions to settle. They also point to third-party solutions, such as the Lightning Network, which can process payments in milliseconds.

In terms of environmental concerns, Bitcoin supporters argue that the cryptocurrency is increasingly being run on renewable energy sources. For example, over 58% of Bitcoin mining used sustainable electricity in early 2022, according to the Bitcoin Mining Council.

The Bear Case for Bitcoin

Critics of Bitcoin argue that it is too volatile to be a reliable currency, with daily fluctuations of 5% being common. They also believe that it is too inefficient to work as a means of payment, taking an average of 10 minutes to process a single transaction.

Another criticism of Bitcoin is the massive computing power it requires. According to the University of Cambridge, it takes more energy to run Bitcoin than it does to power the entire country of Poland.

The future performance of Bitcoin depends on a variety of factors, including institutional adoption, regulatory changes, and macroeconomic trends.

On the positive side, Bitcoin has seen increased demand due to new "inscriptions" on its blockchain, which could support the adoption of its Lightning Network. This could result in Bitcoin becoming more of a payment method rather than just a store of value.

Additionally, the approval of spot Bitcoin ETFs by the SEC could be a key factor in influencing Bitcoin's price. These approvals would necessitate physical Bitcoin purchases, adding legitimacy to the cryptocurrency.

However, there are also potential downsides to consider. There are concerns over Bitcoin's long-term security, given the decreasing block reward for miners. There is also a divided opinion within the Bitcoin community regarding the impact of "inscriptions" on the network's functionality.

Another concern is the environmental impact of Bitcoin. If it continues to be criticised for its energy consumption, it could face increased regulation or even bans.

Overall, while Bitcoin has the potential to revolutionise the concept of currency, there are also significant risks and challenges that could impact its future performance.

Risks of investing in Bitcoin

Investing in Bitcoin and other cryptocurrencies is risky due to the volatile and fluctuating market. The price of Bitcoin is constantly changing, making it difficult to predict whether you will get a return on your investment.

The lack of regulation in the cryptocurrency market is also a concern. Currently, the market operates without any major regulations as it is too new, and governments don't have a clear stance on it. This lack of regulation could lead to problems with taxation and competition for government currency.

Another risk is the reliance on technology. Bitcoin is an online exchange that is entirely dependent on technology. Without it, Bitcoin is worthless. This makes Bitcoin owners more vulnerable to cyber threats and online fraud.

Hacking is a serious risk, as there is no way to retrieve lost or stolen Bitcoins. Many reports suggest that buyers lose their investments on exchanges and mining losses. Even with the protection of a smart wallet, exchanges are more likely to be hacked. Additionally, if a wallet key is misplaced or forgotten, there is rarely a way to retrieve the coins.

There is also a fair amount of fraud in the Bitcoin market. As Bitcoin has gained popularity, some exchanges have turned out to be fake, with unsuspecting investors being duped out of their Bitcoins.

Finally, the lack of a central authority backing the value of Bitcoin could result in legal complications. The value of Bitcoin is entirely dependent on the value that other owners and investors ascribe to it. Without a central authority, investors may be left in the lurch if complications with transactions or ownership arise.

Benefits of investing in Bitcoin

Bitcoin is a peer-to-peer network and digital currency that was first introduced in 2009. It is decentralized and independent of any government or banking authorities. Here are some of the benefits of investing in Bitcoin:

Lower fees

Bitcoin allows users to make financial transactions at lower fees than traditional online payment mechanisms. It is also a seamless method to convert bitcoins into fiat money and vice versa.

Lower inflation risk

All world currencies are controlled by their respective governments, which can lead to fluctuations in value as governments keep printing more money. In contrast, Bitcoin undergoes predictable inflation at a halved rate every four years, and the blockchain system is infinite, so there is little need to worry about cryptos losing their value.

Lower falling risk

Bitcoin investors believe that Bitcoin has a lower falling risk compared to other currencies because it is a global currency that does not depend on government policy, which can cause hyperinflation or the collapse of a currency.

Simple, easy, and cheap transactions

Bitcoin transactions are simple, easy, and cheap. As buyers cannot claim their money back after purchase, sellers can ship the product or service to the buyer without worrying about recovery.

Portable

With major currencies, it is difficult and risky to carry large amounts of cash. Bitcoin investors prefer it to other currencies because it is easier to carry around a million dollars' worth of Bitcoin in a memory card.

Untraceable

Once the seller gets the money, it cannot be traced back to them, and no government can trace the source of the funds.

Growing demand

Seeing the benefits of Bitcoin investment, more and more people are ready to invest in Bitcoin. As the demand and value of Bitcoin increase, so will its price.

Authority

Bitcoin is the backbone of almost all other cryptocurrencies and has proven to be a secure and reliable company, while others are still struggling to win people's trust.

Government support

Bitcoin is not owned by a single government or company; it is a public currency, which is one of the best reasons for its popularity. Almost all governments worldwide have allowed people to deal in Bitcoin, and it has won the trust of governments worldwide because of its high-security features and honesty.

How to invest in Bitcoin

Bitcoin is a risky investment with high volatility, so it's important to understand the risks before investing. Here are some steps to help you invest in Bitcoin:

Understand the risks

Bitcoin is a highly volatile investment, and its value can fluctuate significantly. There is a possibility that it could go to zero, for example, if several crypto platforms fail and there is a massive sell-off. It is not insured by the Federal Deposit Insurance Corporation or the Securities Investor Protection Corporation, so you should only invest an amount you are willing to lose.

Do your research

Before investing in Bitcoin, it is important to understand why you are choosing this crypto over other investment opportunities. Bitcoin has great returns, but it is also very volatile and heavily fluctuating. It is important to study the market and the current movement of cryptocurrencies before investing.

Choose a reliable crypto exchange

The easiest way to add Bitcoin to your portfolio is to buy it through an exchange. Research and analyse the market to find a good crypto exchange that suits your needs and has strong security. Some popular cryptocurrency exchanges include Gemini, Kraken, Coinbase and Crypto.com.

Invest based on your risk strength

Smart crypto investors will not invest based on hype but will consider their ability to take risks. There are many investment opportunities that are less risky than cryptocurrencies. If in doubt, seek advice from experienced crypto professionals and investors.

Divide your investment

One of the biggest concerns for Bitcoin investors is the fluctuation and dive in value. To minimise the risk of financial losses, divide your investment across more than one coin. There are several other cryptocurrencies on the market that have shown considerable improvement over the past year, so consider diversifying your portfolio.

Store your Bitcoin

Once you've purchased Bitcoin, you'll need to store it in a digital wallet. There are two types of digital wallets: hot wallets and cold wallets. Hot wallets are typically cloud-based and accessed through an app or browser, while cold wallets are small, encrypted portable devices that allow you to carry your Bitcoin with you.

Frequently asked questions