Bitcoin is all the rage in the investing world these days, even as it is extremely hard to categorize. Many adopters of the technology think of it in terms of its usefulness as a currency which allows you to make and receive payments in no time at all, with anybody from around the world, without excess fees. Others think of it in terms of its value as an investment opportunity since, unlike most currencies, it rises and falls in value with heightened volatility. You might be reading about the people who became involved with Bitcoin back in the early days of its existence and reaped the benefits of that early involvement. But that doesn’t mean that it’s a good idea for you, the average investor, right now.
As with any investment opportunity, you need to go into the Bitcoin realm with a good idea of both its potential and its drawbacks. You then must assess what it is you’re looking for from your capital, whether it short-term gains or long-term progress. For those who might need help defining those standards, finding a personal finance analyst, you can trust can help you decide wisely. In the meantime, when approaching Bitcoin, you need to understand some of the basics behind it and the circumstance surrounding it before you can assess whether it is the right asset for your portfolio.
- The Technology
Bitcoin is built on a technology known as the blockchain. Without getting bogged down in the technological specifics, the blockchain essentially allows Bitcoin to act as a currency would without any oversight from a governing body or a financial institution. The decentralized aspect of it is in many ways its greatest attribute and greatest weakness. On the one hand, it makes paying and receiving money incredibly simple and hassle-free. On the other hand, …
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- The Enemies of Bitcoin
The problem with it being decentralized is that Bitcoin has the potential to muscle out institutions like banks and credit card companies if it were adopted on a widespread level. Those behemoths will not go down without a fight. Already many governments are throwing roadblocks at Bitcoin, while certain credit card companies are distancing themselves from it as well. This kind of pushback is exactly the reason why Bitcoin is so volatile, because practically every time some institution announces some sort of negative response to it, the price drops.
- The Long Haul
The wisest way to approach Bitcoin, especially if you believe in its potential to overcome all the obstacles set against it, is to buy some and don’t do anything but hold on to it. Trying to time such a volatile asset by making frequent trades with it is a recipe for heartbreak. But holding on to it should mean that you can avoid the worries about its volatility and simply enjoy its long-term potential.
There is a risk with every investment, and perhaps Bitcoin holds even more risk because of its uncertain standing on the world stage. But you might just be able to succeed with it if you can hold tight through the peaks and valleys.
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