Bitcoin is the one thing in the world that everyone wants to invest right now. I said a thing because most of the common people want to hold it, trade it or own it, but little worried about touching it. Is it paper cash, currency, assets, commodity or something else? Well, it could turn out to be any instrument in the future but let me explain a little bit about what is Bitcoin today and its advantages and disadvantages before you start investing in it.
There are many explanations of Bitcoin but in simple terms, it is a digital code that is used by some people as a currency. Some might call it a virtual currency that relies on cryptography for security. Let’s learn more about Bitcoin in the form of its advantages and disadvantages. I have found that most of the advantages turn outs to be disadvantages and disadvantages turns out to be advantages in the long run. Let me weight advantages and disadvantages in terms of investors who are already holding bitcoins.
ADVANTAGES OF BITCOIN
Investor Friendly? Bitcoin is a global currency that cannot be governed by any governments or change in the policy of single government like changes in interest rates or other policies. If the government of one country falls because of war, corruption news or any other negative news then it is not going to affect the Bitcoin.( Can you imagine a global currency without any governing or controlling body?)
Early Bird Sale? A predefined schedule limits the total number of Bitcoins available in the market or system. They have a protocol that limits the total number of bitcoins to 21 million, and there will never be more bitcoins than this. If they are limited just like some commodities then Bitcoin will always be in demand and will create more values/services for investors. (If we look at the history of the monetary system, we could not agree with above advantages. Well, who can stop them from pumping more units just like Federal Reserve OR any central banks? There is no controlling body remember?)
Tax heaven? Bitcoin users and investor can do whatever they want to do with their money. One cannot trace Bitcoin transaction unless the user or owner wants to show it. This is more private system than the current monetary system that traces your credit and debit cards. No third party or government have access to your financial transactions. Now, if they can’t trace it then they can’t tax it. The only way to get or taxed is if someone volunteers for it. You can also send or receive money anywhere in the world without worrying about borders, holidays or any authority issues. Currently, there is almost no fees or charges within Bitcoin payments (Some governments may not like this because of security purpose and they may ban the use of bitcoins. Western countries like US and UK are comfortable with the latest technology, but other countries like Canada, Australia are still confused and not clear about the legality of Bitcoin. China and India have already banned transaction of bitcoins. I have read somewhere that your death and tax are hardcore truth on this planet. Can you imagine the world with no tax?)
Secure? No one can steal your bitcoins unless they have physical access to your computer system. In the current system, few details like your credit card number or pin number are required to get the hook of your financial details.
DISADVANTAGES OF BITCOIN
Caretaker? Who will watch out for your investment? Who will guarantee you minimum valuation you get for your investment? What if few large groups decide to sell and leave the system? Who will bail you out without any governing body?
League of extraordinary? Bitcoin does not have worldwide acceptance. Till day only drug dealers and some conmen were using this digital currency. It’s is believed that mostly bitcoins are used to finance illegal activities.
Consumer protection? Now few online merchants have started accepting it. What if government forces these merchants or change some laws to not use bitcoins? What if you buy something online from these merchants and you don’t receive good or defected goods?
How will you recover your money? Once Bitcoins are sent, the transaction cannot be reversed. There is no consumer protection service.
Resilient? Bitcoin is a few years old child. Bitcoin is highly volatile compared to currency market or S&P 500. Either side movement of 4 to 5% is very common in Bitcoin while, gold and currencies have daily movement of 0.1 to 0.5%. (Volatility considered to be beneficial for traders and aggressive traders though)
Are you going to be the only one? Bitcoin was created by Satoshi Nakamoto. It could be any individual or group of people or any organizations. Many other digital currencies have been and continue to develop to fill in the blanks. Some of the small competitors are ethereum, ripple, monero, zcash.
Bulletproof system? Bitcoins was based on an old and gold bartering system. But even old bartering system has some limitations and had to look for some new monetary system. Let me try with one example here. Let say an actor is ready to give 2 kg of rice to his barber, but his barber doesn’t need rice but beer for his service. So, now the actor has to find wine shop owner who accepts rice.
INVEST? There you have it almost investors. Now, you have two sides of Bitcoin. You have to weigh everything, the cream, and stones before making any investment decisions. I believe Bitcoin has development to do yet so invest very little part of your saving OR very little percentage of your passive income. Invest only that won’t affect your lifestyle at all if it’s gone in seconds.
HOW TO BUY? If you want to keep this sticky gem in your locker then there are some websites you can buy from. They will provide you wallet (just like a bank locker). Be careful in choosing website as you don’t want to get stolen. You can also get Bitcoin by providing some services to another Bitcoin holder. You may also ask for bitcoins as a payment option for the goods you are selling. Buying bitcoins is not difficult, but buying it from right sources is very important.
“Bitcoin is the currency of resistance. If Satoshi had released Bitcoin 10 years earlier, 9/11 would never have happened”
– Max Keiser
“Bitcoin, and the ideas behind it will be a disruptor to the traditional notions of currency. In the end, the currency will be better for it.”
– Edmund C. Moy