After a long period marked by challenging events, Bitcoin is back on a stronger position, making headlines for its remarkable performance. But despite the substantial returns that make it an appealing investment, it’s essential to understand that this asset has risks. So, before deciding whether it should have a place in your portfolio, you should look beyond the headlines and ask yourself what your risk tolerance is and whether your financial position allows you to afford to lose money.
It is worth noting that Bitcoin isn’t a black-and-white investment – it has pros and cons, and you should ensure you understand it before you buy bitcoin with credit card or through another method. Historically, the digital asset has offered great returns to investors, and it has been associated with gold due to its incredible potential. On the flip side, Bitcoin is volatile, which means it experiences dramatic dips quickly, putting your investment at risk.
In other words, both a positive and a negative scenario are possible when investing in digital assets – and if experiencing losses gives you the shivers, you may not be prepared to navigate the troubled waters of crypto. In this blog, we will take a look at Bitcoin to help you decide whether you should include it in your portfolio.
Understanding Bitcoin as an investment option
It’s already a decade since Bitcoin was introduced to the financial world and after so long, people are still debating what kind of investment it is. There are two parties with different perspectives on Bitcoin. Advocates see it as a revolutionary invention that is set to change the game in Finance and has the power to completely change how society perceives money due to its decentralized nature. On the other hand, skeptics don’t see any utility in it despite the countless times Bitcoin has demonstrated its value.
Bitcoin differs from traditional financial assets in some aspects, but investing in it is similar to currencies, bonds, and stocks. While shares and gold exist physically, Bitcoin is a digital commodity. It’s a unique digital asset that allows investors to control their wealth by eliminating governments and banks. When debating whether you should buy Bitcoin, it’s worth remembering that the asset can be used as a medium of exchange, allowing you to purchase and sell services and products. Moreover, it is a store of value, and will remain so as long as there is still demand for it.
Future events are on the horizon, and everyone is looking forward to them for a good reason, as they can potentially increase mainstream adoption of Bitcoin. For example, the 2024 halving could be a catalyst for a bull market, just as it did previously, generating substantial growth. Investing in Bitcoin is available to anyone (even those who are unbanked), and the good news is that BTC transactions are seamless, private and flexible, as there are different methods to buy it.
What Bitcoin means for the future of Finance
Technology inclusion is crucial in today’s financial landscape, and the banking department can’t work effectively by sticking to traditional technology. This is where Bitcoin comes into play, resulting in faster and more secure transactions, and enabling transactions to be completed instantly.
With its potential to enable cross-border transactions, Bitcoin has also changed how businesses operate, eliminating costly transactions associated with traditional banking. Although Bitcoin has faced criticism from those skeptical about its long-term growth, more financial institutions and businesses have embraced the digital asset, marking a shift in how the public perceives cryptocurrencies.
Bitcoin has had a significant impact on Finance, and it’s not surprising why. In traditional banks, processing transactions takes a lot of time, which is an issue that every participant in the finance department faces. No one likes to wait so long to complete a transaction, and Bitcoin provides a solution to it, eliminating all the hurdles and resulting in a seamless process. Not only does Bitcoin make transactions faster, but it also reduces the costs associated with them, as no banks and payment processors are involved. Besides, cryptocurrency-based transactions offer security, which makes them a more appealing alternative. There are, of course, issues that need to be addressed, but cryptocurrencies remain a game-changer for the financial sector, threatening traditional banking and offering cutting-edge technology that changes how people use money.
So, should you invest in Bitcoin?
Well, it depends on different factors. Are you in the right financial position to do so? What is your reason for investing in Bitcoin? Are you ready to face the risks and the potential losses? If so, Bitcoin could be a suitable investment for you. Although it’s important to take price predictions with a grain of salt, there are many signs that Bitcoin will experience substantial growth sooner or later. Some forecasts suggest that Bitcoin could surpass $17 trillion in market cap, and that’s not surprising, given its significant potential. After all, Bitcoin doesn’t depend on central banks or the government to function, nor is it hindered by domestic currencies, which gives it significant value.
If you decide to invest in Bitcoin, you must create a long-term investment plan, which will give you exposure to the asset over a longer period instead of timing the market. A long-term strategy will also help you cope with the market’s volatility. Looking back at Bitcoin’s past performance, the asset has generated substantial growth in the long run ever since its launch. But of course, this doesn’t guarantee any future outcome, so you should be careful about how much you invest (and when). As advice, you should avoid becoming overexposed to Bitcoin and instead focus on including multiple assets in your portfolio. The way you diversify depends on your financial goals and risk appetite. For instance, you may choose to invest in different cryptocurrencies, such as Ethereum and BNB, or you may want to include non-crypto assets, such as bonds, commodities, and stocks.
Bitcoin has a promising future, so make sure to keep an eye on it to see how high the asset could go.
