Despite the volatility in the Bitcoin trend the acceptance has sprouted over the past few years. Yet people are confused on whether Bitcoin is a good investment option in 2021 or not. It has become easier to invest in Bitcoin via user-friendly apps which command low fee charges and important comparison features.
Reasons to Invest in Bitcoin
· Increased acceptance of Bitcoin: Many famous companies are accepting Bitcoin. Furthermore, the adoption of the Blockchain wallet has seen a constant rise since 2009. This indicates the popularity of this cryptocurrency is here to stay.
· Increased Investment in Bitcoin: According to trusted sources, the number of investors involved in purchasing Bitcoin has steadily grown. This activity is conducted through platforms such as PayPal and Cash App.
As per the statistics, the Cash App’s Bitcoin revenue has risen to $1.6 billion. Ina recent report they also claimed that their gross profit in Q3, 2020 was around $30 million which in itself is an attractive number.
· Best fir for Macro Climate: Another reason for investing in Bitcoin is its adaptability to the macro investment environment. It is spell bounding to understand that while Bitcoin was born in 2008-09 there existed a global financial crisis. Bitcoin thrived even when government and bank bailouts sucked businesses and the economy.
Years later, during the current crisis, Bitcoin has managed its popularity fairly well which makes it interesting to find out the value proposition that Bitcoin has to offer in the coming days.
· Easier S2F Measurement: ‘Stock to Flow’ is one of the famous concepts in the investment industry. It quantifies the exact amount of scarcity of a good. Here, stock represents the supply in circulation, while the flow represents the accurate amount of new supply each year.
As Bitcoin is an open-source cryptocurrency that follows a fixed supply schedule so it would be easier to measure the S2F with absolute accuracy.
Advantages of investing in Bitcoin
1. Liquidity: Regarded as one of the most liquid investment assets, Bitcoin can easily be traded due to its worldwide establishment through trading platforms, exchanges, or online brokerages.
A bitcoin can easily be traded for cash or assets like gold at low fees. Bitcoin is highly liquid and hence a great investment vessel if for short-term profit generation. It is important to note that digital currencies can also be used for long-term investment depending on the level of market demand.
2. Low Risk related to Inflation: Bitcoin is different as compared to traditional world currencies in terms of the fact it is immune to inflation. There exists an infinite blockchain system that eradicates the problem of cryptos losing their value.
3. New opportunities: The concept of trading Bitcoin and cryptocurrency is relatively young. Daily new coins are hitting the market. This brings swings in factors like price and volatility, which may lead to the development of massive opportunities.
4. Minimalistic trading: For stock trading, the user must have a certificate or a license while bitcoin trading involves a simple buy or sell mechanism. These transactions are quick unlike the ones in stock trading which could days for settlement.
Disadvantages of investing in Bitcoin
1. Bitcoin is Volatile: It is important to have a close eye on the market as the bitcoin’s price value is never stagnant. It keeps swinging back and forth. Therefore, with such an unpredictable market gaining a good return on investment is a hard job.
2. Risk of online hacking: Bitcoin exchanges allow users to buy and sell cryptos using a mobile application or a website. This can expose them to the threat of hacking which may lead to loss of investment.
3. Minimal Regulation: The bitcoin market does not face any kind of taxation by the government and is deprived of major regulations. Hence, the governments do not own a firm stance on it. This can eventually lead to fraud and malpractices.
4. Restricted Usage: Many companies still do not recognize Bitcoin as a legitimate mode of payment making it an impractical investment. Also, bitcoin has a fixed supply which is 21 million.
5. Risk of Losing Wallets: A user can lose their bitcoins in case the hard drive crashes or any virus corrupts the wallet file. There does not exist a way to recover this loss.
1. CoinSwitch Kuber, is a cryptocurrency exchange in India that allows its users to invest in Bitcoins with just Rs 100.
2. Bitcoin has broken records every month since October 2020. Recently it surpassed the mark of $50,000 (₹37 lakhs) and may head towards $60,000 (₹43.5 lakhs) soon.
3. Analysts forecast that Bitcoin might hit $100k by the end of 2021.
4. The total market capitalization of Bitcoin is $1.15 trillion which is higher than the combined market cap of J.P Morgan, Bank of America, and The Industrial and Commercial Bank of China. These are the three largest banks in the world.
How to Invest in Bitcoin?
· Several Cryptocurrency Exchange platforms help users to buy and sell Bitcoins. These platforms also provide options of Ethereum, Litecoin, Uniswap, etc. for transactions.
These operate 24*7 throughout the year and are self-regulated, unlike the stock exchange. Through means of exchange, a user can buy or sell fractional shares of Bitcoins.
In India, most of the exchanges propose a minimum capital requirement as low as ₹100 – ₹500. To enable the transactions a small fee may also be charged.
· If a user is not interested in facilitating a transaction through a platform then in that case they can choose the P2P (person to person) mode of purchase.
Under this alternative, the crypto exchanges or platforms act as facilitators. They help users to close the transaction by searching for them a seller who is interested in purchase.
At first glance, this method may seem more direct and easier but it is not very often that one finds an appropriate seller that fits in the deal. Additionally, P2P transactions are time-consuming.
It is quite evident that people across nations are wanting to understand if Bitcoin is a good investment option in 2021. The magnificent performance of bitcoin over the past years has attracted both traditional and institutional investors. Bitcoin as an investment tool has both merits and demerits. A wise decision to invest in Bitcoin comes with knowledge. However, it is equally important to have a keen eye on how the market fluctuates.
1. What is bitcoin?
Bitcoin is a decentralized digital currency. It allows the users to buy, sell or exchange directly with another user without any 3rd party intermediary.
2. Is Bitcoin prone to fraud?
Since Bitcoin is unregulated so anyone can create an exchange platform and start selling on it. The users should be cautious and should invest in trusted platforms only.
3. Why the price of Bitcoin fluctuates?
Crypto Market is volatile just as Stock Market. Both of them witness ups and downs. Since the crypto market is much younger so it responds to the developments and hence fluctuates more.