Bitcoin is one of the most well-known cryptocurrencies out there, but others include Dogecoin, Polka Dot, and Litecoin.
You may have seen the story of the Californian man who is about to lose 250 million dollars-and all because he can’t remember a password. This money is in the form of Bitcoin, a cryptocurrency that was created in 2009 and exploded in popularity in the following years.
All these cryptocurrencies are one hundred percent online, and just having one unit can be worth over ten thousand dollars. So why isn’t everyone investing in cryptocurrencies, and taking advantage of all the great things they offer? Well, it’s because, as is the case with pretty much everything, cryptocurrencies have cons that go along with those pros.
High Reward: High Return on Investment
If people who are interested in investing in Bitcoin do so in a smart, slow manner, and make sure they are only putting in small amounts of money, they could be very pleased with their return on investment and the amount of money they make because of it. Monitoring the value of Bitcoin and the days on which it is worth the most will also help increase the amount of money a person can make off cryptocurrencies.
Investing in Bitcoin is thought to diversify investments, and help people who have only ever worked with stocks branch out. Recently, even celebrities like Reddit founder Alexis Ohanian, YouTuber Mr. Beast, and Tesla founder Elon Musk have encouraged their fans to invest in cryptocurrency.
High Reward: More Direct Transactions
Cryptocurrency buying and selling focus on connecting people directly, instead of connecting one person with an intermediary, who then moves the money to the other person. Bitcoin and other cryptocurrencies like it are very decentralized and have no central banking system, which means that the power is in the hands of the owners. If they want to buy or sell, they can do so relatively easily without having to worry about extra fees and charges.
For Americans who would rather have control of their own money than put it into the hands of the government, Bitcoin is a good option. Although it isn’t a typical currency that can be used everywhere, it still equates to value and is viewed as money by many users, so this opportunity to buy and sell without middlemen is popular.
High Risk: Fluctuating and Unaccepted Value
However, one of the biggest issues with Bitcoin is that the value of the currency is changing all the time. One day, one unit of Bitcoin can be worth six thousand dollars, and the next day, it could rise to twenty thousand, just to fall back down to fourteen thousand in another twenty-four hours. So if someone makes a big investment on a day when the value is high, they may lose big when the value falls tremendously in the next few days and could lose thousands of dollars.
Although the value of the U.S. dollar has decreased and can change based on inflation rates, twenty dollars is always going to buy you twenty dollars’ worth of materials, and it is accepted at every business and company in the country. Currently, Bitcoin is not widely accepted as a real currency and is even banned in certain countries. Trying to use cryptocurrency to buy something will likely get you nowhere. Until more businesses accept cryptocurrencies as money, they will exist only as an investment option.
High Risk: Cybersecurity and Fraud Concerns
Conducting any sort of business or transaction online is risky; now think about storing millions of dollars on a computer. Bitcoin has been developing safety measures and making it harder for accounts to be hacked and for money to be stolen-remember the man who can’t remember his own password, and can’t even change it to access the money?-, but there will always be the risk of cybersecurity problems, and fraud when Bitcoin trades are made.
There are no intermediaries in the buying and selling of Bitcoin, so there is hardly any regulation. This can be great for those who want to avoid extra fees, but it also means it’s harder to make sure the trades are legitimate, and will not result in anyone losing their money. Criminals, hackers, and scammers often see Bitcoin as a breeding ground for their dirty work.
If you’re thinking about investing in Bitcoin, make sure you weigh the benefits and the disadvantages; remember, high risk and high reward go hand in hand.