The Pros and The Cons of Investing in Bitcoin
Year on year cryptocurrency is gaining traction in global markets. Once only talked about amongst die-hard tech lovers, crypto has now gone mainstream and is spoken about in all walks of life. The technology behind it, blockchain technology, is also rising in prominence and is being utilised in industries other than just finance.
While there are many digital coins out there for people to invest in and trade, the one on everyone’s lips whenever crypto is mentioned, is Bitcoin. Bitcoin is the most popular and most talked about digital currency. Many have tried to emulate it, however failed to gain the industry recognition that Bitcoin carries. Developed by a pseudonymous identify only referred to as Satoshi Nakamoto, Bitcoin currently has a circulating number of 21 million coins.
Like other crypto coins, Bicton can be volatile, however those who understand how the crypto market works are making considerable income. To master Bitcoin investing, one needs a thorough understanding of the coin’s pros and cons. This article will guide you through all you need to know before setting off on your Bitcoin journey.
Do Banks and Hedge Funds Trade in Bitcoin?
We are starting to see a rise in the number of crypto hedge funds available as they look to expand their financial portfolios. There are different types of crypto hedge funds. The first consists of portfolios that are built entirely of crypto. The second mixes different asset types, one of them being crypto.
Investment Banks on the other hand have been reluctant when it comes to Bitcoin investing due to its volatility. Many fears that investors would sell as soon as the price drops, and with unpredictable price movements it’s impossible to predict when this would occur.
Hedge Funds see many advantages in bitcoin investment. Firstly, they see minimal threat from payment fraud and identity theft compared to traditional securities. The fast and accurate settlement process is also appealing. Bitcoin is not governed by any national body, making global transactions less regulated and smoother. As a result of these benefits, we’re seeing the hedge fund market continue to embrace Bitcoin as it becomes a larger part of their overall strategy.
What are some of the risks of Bitcoin investment?
While many investors have made a small fortune on their bitcoin trading endeavours, there are risks that investors need to watch out for:
- Lack of historical data: many investors on the traditional stock exchange leverage historical market data to make decisions on future outcomes. Due to Bitcoin being relatively new there is minimal data to assist in decision making.
- Price fluctuation: Bitcoin prices are unpredictable and make fluctuate by the hour.
- Consumer Protection: any bitcoin transactions investors make cannot be retrieved or undone. There is no intermediary guarantor which means minimal consumer protection.
- Theft: crypto trading takes place entirely online, making it a favourite for cyber criminals.
Virtual Currency Concerns
Virtual currency has its fair share of vulnerabilities and concerns that investors need to take into consideration.
- Anti-social acts: as a result of its anonymity, there are cases where virtual currency is used to finance illegal activities such as drug trafficking.
- Market Fluctuations: virtual currencies are not always impacted by economic factors in the same way the stock exchange is. This makes it more unpredictable and difficult to manage.
- High losses: While many have gotten rich from crypto, there are those who have lost it all. Outside of crypto being volatile, there can also be loss from security breaches and technical malfunctions.
Will Wall Street Influence Crypto Trading?
Wall Street can have both a positive and negative influence on crypto. It can negatively impact it through hypothecation, which occurs when a firm that has shares in a particular company signs the shares to another entity as collateral. If Bitcoin were to be re-hypothecated several times over, there would be concern over who the actual owner of the Bitcoin is.
On the flip side Wall Street can positively influence Bitcoin through the introduction of Bitcoin futures to brokers. Futures would allow traders to better predict Bitcoin volatility, making it a safer investment.
Like any investment, Bitcoin has numerous pros and cons to consider. There’s no sure thing in the investment game, however the good news for Bitcoin trading is it’s becoming a more accepted form of payment. While it has it’s challenges, as all crypto coins do, it’s emerging as arguably the most legitimate and trustworthy crypto on the market.
The information contained within this website and resource section is not intended to be a substitute for financial advice or promotional offer on the investment or purchase of Cryptocurrencies, digital tokens or related assets. Although care has been taken in preparing the information provided to you on this site and in the resource section, we are not held responsible for any errors or omissions and accept no liability whatsoever for any damage or loss you may incur through the result of your own actions and decisions when deciding to purchase or invest in Cryptocurrencies or related digital assets. You should never engage in trading unless you fully understand the nature of the transactions you are entering into and the extent of your exposure to loss. We recommend you always seek financial/or legal advice counsel relating to your investment and purchase circumstances. This material has been prepared for informational use only.