Why People Are Starting To Invest In Bitcoin
The main purpose of engaging in trading is to make a profit, and it can be a form of investment or gambling. Some people trade commodities, such as agricultural products like corn, garlic, or rice, or precious metals such as gold, silver, copper, etc. These can be classified as investments, which can potentially reap some profit in the future from the money you put in. The time gap may be short or long, and it depends on the item that had been invested in. Similarly, you can invest and trade in Bitcoin now that it has become a currency accepted by the market. But why are people starting to invest in Bitcoin?
What is Bitcoin?
Before knowing whether or not Bitcoin trading is worth it, you need to know what you are getting into and what exactly Bitcoin is. Bitcoin is a virtual currency or cryptocurrency that came into the picture in 2009. Being a digital or virtual currency, Bitcoin does not exist in the form of physical bills or coins, unlike the traditional currency everyone is used to.
Another thing that differentiates Bitcoin from fiat currency is that it is not being monitored or regulated by any financial or government institution. Because of this, the value is also not backed by government, banks, or commodities. In short, Bitcoin is decentralized. Following this suit, Bitcoin balances are kept open for the public. In addition to that, to get fresh Bitcoins, you have to use powerful computers to mine Bitcoin. Moreover, you can also trade Bitcoin in different platforms. If you’re interested in trading Bitcoins, you can check out the Bitcoin Rush Software.
That said, here are some reasons why people are starting to invest in Bitcoin:
- Good Investment Value
Investments always have risks tied to it, which can be the determining factor of what type of investment you want to get involved with. Putting your money in a time deposit is a very conservative investment and gives you a very low return. On the other hand, buying stocks in the equity market will give you a somewhat sizeable profit, but the risk is high.
With Bitcoin, the price movement should also be considered. Some people buy Bitcoin and keep it for a long period because they know that the price of a piece of Bitcoin will usually go up the longer you keep it. Based on Bitcoin’s past movements, you are given an idea of what you are venturing into, and you will also see that there is future demand for Bitcoin.
Similarly, with Bitcoin, you need to study it to find out if it is a worthy investment. Trading in Bitcoin can come off as a good investment since it is not tied to the value or economic level of any country, unlike traditional currency. It can prove to be a good investment since, historically, the value of Bitcoin keeps a positive trajectory.
- Price Volatility
As mentioned, Bitcoin is a form of currency, thus buying it can also be considered a form of investment. But unlike traditional currencies, Bitcoin is not the currency of a specific country, but is instead a virtual currency. This means that no one controls it. Its fluctuating behavior depends on speculation most of the time, and there is no way to capture the exact behavioral pattern of the value of Bitcoin.
Unlike Bitcoin, the value of fiat currency will depend on the economic, financial, and social activities of a country to which the currency belongs. For example, what drives the value of the US dollar to appreciate or depreciate will depend on how the US government manages the country’s economy. Its foreign and domestic trades will affect the demand of dollar, and its foreign and domestic financial and economic policies also have a bearing on the price of dollar vis-à-vis other foreign currencies.
Bitcoin, however, is not generally affected by these factors. The past price behavior of Bitcoins can seem like a roller-coaster, wherein it can go very high and drop very low. So, if you buy Bitcoin now, you won’t be able to accurately tell whether the money you put in will go down by 90% or will rise by 100%.
In trading of any kind, it is very important that you diversify your assets for trading. With Bitcoin, you can achieve exactly that. It offers a way for you to spread the risk in your portfolio. Since Bitcoin is independent of the foreign exchange market, stock market, real estate market, and mutual funds, trading Bitcoin can offer a way to mitigate your risk in case a recession occurs. By including Bitcoin in your portfolio, you are diversifying your portfolio and thereby creating a kind of risk mitigation. By doing this, you are spreading exposure in different assets and limiting the risk in each asset.
- Useful and Scarce
Similar to other commodities, there is only a limited number of Bitcoins in circulation. As the supply goes down, the inflation rate of Bitcoin also goes down. When trading Bitcoin, you can be assured that your inflation levels are in check, unlike with foreign currencies where inflation depends on the economic and political state of the country.
In addition to that, Bitcoins are actually very useful. Because Bitcoin’s inflation rates are not affected by politics and economics, it can actually serve as a hedge when there is a financial crisis in your country, and you can be assured that the value of your Bitcoin won’t follow global trends.
Moreover, Bitcoin can also be sent anywhere in the world. So, if you trade Bitcoin, you can easily liquidate this and send it to another person in a different country. What’s better is that you pay less fees compared to international fund transfers of foreign currency, thus providing a very convenient way for people to exchange it.
Another advantage of trading Bitcoin is that information is very transparent. Bitcoin works around what is called blockchain technology, in which all transactions are publicly open since the whole system is not centralized. But while transactions can be viewed by anyone, personal details and information remain hidden, thus keeping you safe and anonymous.
- Acceptance as Payment
More and more retail establishments are already accepting Bitcoins as payment. So, when you trade Bitcoin, you won’t need to worry about how to liquidate it. Even Amazon is starting to accept Bitcoin as an official form of payment. As more establishments acknowledge Bitcoin as payment, this will mean that the value will also keep increasing since it is becoming more legitimate. This is good if you want to keep investing in this cryptocurrency.
Now you know the reasons why people are starting to invest in Bitcoin. It is such an interesting invention and could be the currency of the future, so be open and study how you can trade Bitcoin and use this cryptocurrency to your advantage.