Cryptocurrency might not be anything new, but over the last few months, it has certainly become more mainstream. Between tweets from Elon Musk changing the value of digital currency Floki overnight to PayPal introducing Bitcoin onto its platform, more people than ever are aware of cryptocurrency.
Should I Buy Bitcoin?
A lot of people might be asking themselves: Is it too late to buy Bitcoin? The cryptocurrency market is extremely volatile and it’s important to be aware of this before you venture into it.
If you speak to financial experts, everyone has a different opinion on the future of Bitcoin and what it is likely to look like in the coming months. On complete opposite ends of the scale, you’ll have people telling you that Bitcoin is nothing more than a speculative tool that isn’t going anywhere, to others certain that it will overtake gold in value and turn the current banking system upside down.
This leaves the normal person on the street unsure of what is best to do when it comes to investing in Bitcoin and other cryptocurrency options.
So, to help make things a little easier here are 5 misunderstood facts about Bitcoin that you should know.
1) Bitcoin is Only Speculative
Although some people believe that Bitcoin is only used for speculation, realistically this is not true. When you look at the statistics it is clear that Bitcoin is used for more than just speculation. On average it settles around 305,000 transactions worth around $10 billion every day. This puts it only a small amount behind the Federal Reserve Settlement System (the system used by financial instructions to carry out wire transfers), which settles 550,000 transactions every day.
Of course, some of these transactions could be speculative but a great deal of them represent regular investment purchases and for things like funding anti-corruption efforts, where it is sometimes the only funding option available. It is also a really popular way to make peer to peer payments in some parts of the world – for example, in Nigeria where it is estimated that 32% of Nigerians use Bitcoin regularly for this purpose.
2) Bitcoin is Too Volatile To offer Any Long-term Value
Although there is some truth in the fact that Bitcoin is more of a risk than a standard savings account, that doesn’t mean it should be considered a bad thing. Gold was removed from any formal monetary system in the US in the 1970s as it was considered too volatile – this period was called a “price discovery” period, where there were big changes in the value that happened quickly until things settled down and found their average value. Many people will tell you that Bitcoin is in a similar period and will soon settle down to a much more stable and reliable value.
3) Governments Don’t Accept Bitcoin
Bitcoin and cryptocurrency in general is still pretty new in the grand scheme of things, which means that not all Governments are quite on board with what it all means and its possibilities. However, that doesn’t mean Bitcoin isn’t accepted at all – we know that Governments can sometimes be slow to pick up on changing trends and even slower to react. Currently, in places like Nigeria and Russia, the Governments don’t have much to do with Bitcoin at all; however, the US and the UK are starting to become a bit more accepting. For example, top security regulators in the US have been teaching courses on Bitcoin and crypto at MIT and the Comptroller of the Currency for the US Office recently gave banks the go-ahead to provide custody services for Bitcoin.
4) Bitcoin Uses Lots of Energy
Some people argue that Bitcoin mining wastes lots of energy and that it is something we should be aware of in an environmentally conscious world. However, others insist that it can only be considered a waste of energy if it is used for no purpose at all, whereas mining for Bitcoin wouldn’t come under this category. Although mining for Bitcoin does use a significant amount of energy, there are plenty of miners that do this as sustainably as possible, by using renewable energy sources such as hydroelectric.
5) Bitcoin Lacks Regulation
One thing that may concern new investors is the lack of regulation that is in place when it comes to buying, selling and trading Bitcoin. With other financial investments within the UK you have regulations in place and guarantees by the Government which help to keep your money safe. For example, if your bank was to go bust you would be protected. Currently, cryptocurrency is not controlled by the Government or any regulating body, which is something to be aware of. That doesn’t mean that you should be against investing altogether, but being aware of investment risks and approaching things in the right way is definitely recommended.
Financial investments always involve some degree of risk but if they are successful they can offer great rewards. Bitcoin being volatile and unregulated doesn’t mean that your chances of making money are zero, but it does mean that going into any investment like this should be done with open eyes. Make sure you do as much research as possible about what it means to invest in cryptocurrency and never invest more that you can afford to lose.
Stay on top of any industry news so that you have a good idea of what your money is likely to do and can make sensible decisions on when to withdraw from crypto or whether it is a good time to invest more. The concept of this isn’t very different to other risky financial investments such as stocks and shares – just take a sensible approach and try to be as knowledgeable as possible about the topic and you’ll be on the right track to making Bitcoin investments work for you as much as you can.