How do you define a good investment? What is your purpose of investing?
I guess a good investment would be one where you can get a good amount of profit, right?
So, is Bitcoin a good investment?
Let’s have a small discussion about its history and present day situation before reaching a final answer.
First of all, it should be very clear to you that Bitcoin is a cryptocurrency, meaning they are digital currencies and you cannot withdraw it from an ATM at your own sweet will. Now, the conceptualization of cryptocurrency is still a relatively new and raw and there are chances that many people try to make money by trading it without understanding the technological principle behind it. It is wiser to understand what you’re throwing your money into before you start weeping over its loss!
In a nutshell, the transactions of Bitcoin are recorded on a publicly accessible electronic ledger which is basically a registry of all past transactions called “blockchain”. The blockchain is made up of blocks, which are created by “miners” (these are the techgeeks who use advanced computing softwares to generate Bitcoin, it’s a vast topic in itself) when they find a solution to a certain problem statement provided the agency.
Bitcoin entered the digital market around 2009 as an open source software. Ever since then, it has had the maximum recognition globally. I mean, can you name five crypto currencies without Bitcoin coming first to your mind?
Now, talking of profit, in a not-so-long span of seven years the value of Bitcoin skyrocketed from $0.05 to $5000. Do the math to see percentage increase!
In 2017, Bitcoin was priced at $17,000 per Bitcoin but within a year of reaching, it enormously dropped to almost 80% of its peak. The year 2018 saw it falling back in the race again in the first quarter and rose to $8,200 per Bitcoin. Now, this gives you an idea about the possible rise and falls of its value in future, even though it’s not predictable.
This volatility of Bitcoin becomes a major setback for people willing to invest in it. There are stories of people whose investment in Bitcoin grew by 200-300% within a year are definitely alluring but same value may also fall. And since it’s on the internet, there is a risk it being stolen and tracing it back would much, much harder.
Another drawback is that, the process of mining Bitcoin is way more exhausting than mining metals, contrary to what it may sound. The mine farms which are basically a set of computers solving complex mathematical problems. It is not exactly sustainable in terms of energy consumed.
Regardless of that, the crypto market has developed in the last two years due to better supervision and regulatory measures in place by both institutional and government agencies. As a result of these measures, many people are starting to revise their investment options. Another reason why you want to invest in Bitcoin is because of its anonymity. Privacy of transactions is almost always welcome.
It goes without saying that one can easily invest in Bitcoins. But the point, keeping the risks of its volatile nature in mind, is that it is better to be careful about how much you invest in Bitcoin. To be on the safe side, let us assume you can only afford 2 Bitcoins with 1% of your wealth, go for it. If Bitcoin crashes, you still have 99% of your wealth. If it doesn’t, which has more probability of happening, you get a good amount of profit.
And a good profit is a good investment indeed!