The interest in investing in Bitcoin (BTC) is increasing, as the currency does not stop appreciating. After three years, BTC broke its price record and reached BRL 220,000 last year. However, many investors do not know Bitcoin in depth and, for this reason, are afraid to invest in this asset. Just like any investment, it demands analysis of advantages and disadvantages, investing in cryptocurrencies also requires knowing what can be a risk and what can be a benefit for the investor.
Knowing this, we list here the main risks and benefits of investing in Bitcoin and other cryptocurrencies to shed some light and help you to get to know the world of virtual currencies better. But we suggest you to read more information before going further.
What is Bitcoin?
In short, Bitcoin is a decentralized digital asset. Therefore, governments and Central Banks do not control cryptocurrency. BTC issuance is limited to 21 million units and will never change; to date, about 18.6 million BTC has already been mined.
Here on the Blog, we explain cryptocurrencies in detail. In this way, to better understand this asset, access the article that explains how Bitcoin mining works.
Benefits and advantages of investing in Bitcoin
Investment in Bitcoin and other cryptocurrencies is promising in 2024. Here are some reasons and positive points that lead to this.
As stated, Bitcoin cannot be “printed” by rulers. This means that cryptocurrency does not suffer from inflation. On the contrary: BTC is considered a deflationary asset, that is, it appreciates over time. Fiat currencies, on the other hand, tend to depreciate over time. Just follow the performance of the Real against gold and other currencies.
Increased institutional interest
More and more companies are buying Bitcoin. This phenomenon, known as institutional investing, pushes the asset price upwards as the issuance of new BTC is limited. Only Grayscale, which is an investment fund, has almost 600,000 BTC, which is equivalent to BRL 120 billion in cryptocurrencies. Furthermore, Nasdaq-listed Microstrategy is also investing heavily in BTC; the same goes for Square, which is owned by Jack Dorsey, the CEO of Twitter.
Bitcoin as a protective asset
Many investors believe that Bitcoin can be used as a hedge asset. This type of asset is sought after by the market in times of crisis, such as the one caused by the Covid-19 pandemic. Currently, gold is the main hedge asset in the market. However, the situation is changing. Thus, with Bitcoin replacing gold, the trend is for cryptocurrency price appreciation.
Key Benefits of Cryptocurrencies
Now that you know the points you should consider about Bitcoin, we present the main benefits that cryptocurrencies offer to investors. With this information, it is easier to direct your investment in cryptocurrencies and expand your profit possibilities in this promising market.
Great Potential for Appreciation
Since they emerged, investing in cryptocurrencies has shown unprecedented upside potential. Those who invested in the first few years made huge profits – and this potential continues to show a trend.
Since the great crisis of 2008, the traditional financial market is no longer seen with the same eyes by investors. And cryptocurrencies rely on blockchain, which is already considered more secure than Wall Street and has been shown to be very efficient in securing virtual transactions.
Ease of Access to Information
Until recently, any details on how to invest in cryptocurrencies seemed a mystery worthy of Hollywood, but currently with the growth of this market, there is already a lot of information to prepare and qualify investors.
More and More Companies Are Investing
Companies around the world are investing a good part of their resources in the crypto world, which is providing greater security and market regulation signals, pushing up the valuation of cryptocurrencies.
Agility and Democratization of Transactions
As an example of all the advantages that the virtual world is bringing to world society, transactions with virtual currencies can be carried out with agility and security protocols for the user and with the possibility of anyone having access to the crypto world.
There is no printing of currency, there is no demand for huge offices and buildings, nor the need for brokers and large commercial groups to make the existence of cryptocurrencies possible, for example. This brings the cost down and democratizes this universe, since we are talking about a virtual market.
Acceptance for Payments
Many countries have already started to regulate virtual currencies and they are already being accepted for payments for products and services.
Privacy and Anonymity
As there is no regulatory entity and negotiations are carried out directly between users in a virtual way, only information from security protocols needs to be visible, while personal data does not need to be shared, maintaining secrecy.
Main Risks of Cryptocurrencies in General
It is very common to see people wanting to invest in cryptocurrencies because they are amazed at the high profitability potential of virtual currencies. But while it is possible to make a lot of money with cryptocurrencies, there are some risks that need to be considered in order to avoid unexpected losses, and here are the main risks you should be aware of. Check out the negatives:
Absence of Regulatory Authority
Cryptocurrencies were created to be a dynamic and agile way to carry out negotiations and investments in the virtual world, directly by the users involved. While this can be an advantage, it can represent a risk, as there is no authority that directs decision-making and rules for good market practices.
Lack of Specific Regulation
The lack of regulation is a point that demands a lot of attention from the investor, as many countries have not yet regulated or even recognized cryptocurrencies, which because they are global, hardly any standard will be able to dictate the general rules of the game.
High Market Oscillations
The virtual world as a whole is very dynamic and every day new products and services appear for the public. With cryptocurrencies, this excess of dynamism can be a negative point, as there can be a lack of control in a market that is not yet fully regulated, leading to sudden changes that impose risks of crashes.
Cyber Attack Risk
Although investments in cryptocurrencies have security protocols, such as blockchain – which has proven to be very safe and efficient and so far has not recorded any successful attacks – the high valuation and high gains with virtual currencies are constantly in the crosshairs of criminals. virtual.
China is one of the most closed and controlled countries in the world, suffering from government interventions in virtually every area – and that’s where about 50% of cryptocurrency miners are. With the current interventions against the cryptocurrency market in China, the shares of most of these currencies become fragile.
Lack of Economic Ballast
The real value of traditional currencies is guaranteed by the wealth of a country, the so-called economic ballast; in the case of virtual currencies there is nothing that offers such a guarantee.
We know that it really seems like a lot of details when investing in cryptocurrencies, but it’s much better to know where you’re stepping than to take shots in the dark, isn’t it?
So continue this journey of learning and information, as the world of cryptocurrencies offers great investment opportunities for you to plan your future. What did you think of this article? Was it helpful for you? If so, share it with others so that we can bring more knowledge about this subject to more people.
After all, cryptocurrencies will become the new normal when carrying out transactions, and even for investments.