Bitcoin is only one of the thousands of digital currencies available today. However, it is also the most well-known and it has the largest market cap. As an investment asset, Bitcoin is easily traded and also has a price against the dollar.
Bitcoin offers an alternative way to diversify your portfolio and serve as a hedge and a safe haven. That said, here are 6 reasons why Bitcoin is a good investment:
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It Has Multiple Uses
Initially, Bitcoin was introduced as a digital currency that facilitates everyday transactions with lower costs, a stark contrast to other forms of payment online. However, Bitcoin is more than just a method of payment. Bitcoin’s monetary policy makes it possible for everyone to see how many Bitcoins are in circulation and when new ones will be created. This makes Bitcoin transparent, easy to access, global, and resistant to censorship and economic turmoil.
Here are some of the possible uses of Bitcoin:
- Digital trading of securities
- Transactions involving real estate applications, land titles, and other property
- A method of settlement between financial institutions
- Transactions involving insurance claims
- Payment avenue for remittances
- Platform for customer rewards and crowdfunding
- A way to facilitate document stamping and auditing
Many of these are still in the infancy stages of development. However, once they are adopted into mainstream use, Bitcoins are expected to revolutionize the financial industry and rapidly increase in value. If you choose to invest in Bitcoins now, you can expect good returns in the long run.
It is Scarce
One of the defining hallmarks of Bitcoin is that there will only ever be 21 million coins produced and released into circulation. This means that is can either remain consistently valuable or rise in value, compared to other types of currencies (digital or fiat) that can be produced interminably.
Bitcoin’s scarcity is comparable to gold. Keep in mind that there is a limited amount of gold that can be found on earth. This means that as new gold is mined, there is less left to be found and it becomes more difficult and more expensive to find and mine new ones as more time passes by.
This is also the case for Bitcoin. There is a limited amount of Bitcoins to be found and mined. And as time goes on and more are found, they become more difficult to mine.
It Can be Both a Short- or Long-Term Investment
Short-term investing or trading involves taking advantage of the constant rise and fall of the price of Bitcoin. Because of the volatility of Bitcoin, trading can be very risky. Make sure that you only choose short-term investing if you are prepared to spend a lot of time doing market research and analyzing industry charts.
Having software like https://bitcoin-code.org/ can also make your trading life easier since it offers tools that will help you detect price changes and trends in the market. These tools would also make it possible for you to perform multiple trades and transactions, with a very high level of accuracy.
Another method is to hold on to your Bitcoins for five years or more. Many investors have found great success in this strategy, especially given the rise in Bitcoin value over the last five years. More importantly, it is certainly the easier method. Instead of sitting at your computer all day analyzing charts and trying to predict trends, you can just sit back and wait for a significant rise in Bitcoin’s value.
It Has a Huge Profit Potential
An investor who purchased 200 USD worth of Bitcoins in 2011 would be a millionaire by now. This shows that the potential gains from Bitcoin is more than potential losses. With industry experts speculating that Bitcoin will eventually become a global currency in the near future, you can expect to see significant price hikes for your investment.
While mainstream adoption of Bitcoin has yet to take place, once Bitcoin is recognized as a valid legal tender globally, international trade around the world will flourish. For some people, this might be wishful thinking, but remember that the number of people who are using Bitcoin as a way to pay for simple transactions is exponentially growing every day. It is not impossible to expect huge profits when mainstream adoption is on the horizon.
It is a Hedge against Inflation
Fiat currencies are regulated by their respective governments. As a particular government keeps printing more money, the value of its currency fluctuates. When the currency decreases in value, the purchasing power of consumers who hold that specific currency also goes down. This means that the consumers have to pay more money in order to acquire certain products. Essentially, inflation functions like a tax on what consumers have already acquired.
This is not the case for Bitcoin. As mentioned previously, Bitcoin is scarce and there is only a limited amount of Bitcoins that will ever be produced and released into circulation. Bitcoin is not controlled by any one government, and it does not have to depend on policies that can fail and bring hyperinflation or even a total collapse of the currency. It does not depend on the value of the dollar or even on the stability of any country’s economy.
As an investor, you can add Bitcoin to your portfolio as a hedge against inflation that would most likely affect the other assets that you own.
It is Transparent and Anonymous
It seems antithetical for anything to be both transparent and anonymous; however, Bitcoin is both. Bitcoin is transparent because of the blockchain, a public ledger that shows the number of Bitcoins owned by any user, as well as any transaction that involves this digital currency.
At the same time, it is also anonymous. The blockchain does not indicate the identity of its users, and only lists public keys. In fact, any user can create a new public key or address for every transaction he or she goes into. If you are worried about people knowing about your investment activities, Bitcoin is definitely a great option to consider.
Conclusion
There are many reasons to invest in Bitcoin, but remember that you should also take into account the risks involved. Make sure to diversify and do not tie all your finances into this promising yet volatile asset.
