Are Bitcoins a Viable Investment Option?
Some of us would be legitimate millionaires if only we earned a dollar each time someone asked us this question. This is not a question that warrants a straightforward answer because of the complexities associated with bitcoin investment. So, let us start over. The answer to the original question is ‘maybe’. It’s not like we’re singling out bitcoins here, the answer would remain ‘maybe’ even if the question was about equity investments. Yes, there is a tremendous possibility of extremely high rewards if one continues with bitcoin investments. However, just like any investment that fetches one high reward, there is always a flipside – equally high risks. Eventually, it all comes down to having a realistic understanding of the risks versus rewards. Let us elaborate further.
An Introduction to Bitcoins
It is important to make a slight distinction here. Bitcoins are not akin to traditional mediums of investment. Bitcoin is an entirely new form of currency. However, this currency is not backed by any central bank or any world institution thereby protecting it from governmental regulations and economic policies. In simple words, bitcoin is a type of electronic currency (the technical term being cryptocurrency) through which. It is possible for individuals to make transactions across the world without the necessity of using traditional forms of money, payments, or governmental procedures.
Regarding Legality of Bitcoins
Our deputy PM has a response – “For now, the nature and scale of cryptocurrency trading in Singapore do not pose risks to the safety and integrity of our financial system. Its use in making payments is small, and trading volumes of cryptocurrencies in Singapore are not high. They are much smaller than in countries like the U.S., Japan, and South Korea.”
It is natural that people have their reservations about the legality and the sustainability of bitcoin investments. This is partly because some believe their governments don’t encourage bitcoin trading and investments. Having said that, the citizens of Singapore have plenty of reasons to smile because the Singapore PM sees no reason to ban cryptocurrency trading. Additionally, according to the requisite Wikipedia page concerning the legality of bitcoins, the Singapore Government considers it a legal form of currency. However, the Monetary Authority of Singapore does plan to tax the businesses that deal in bitcoin exchanges. In essence, those Singaporeans unsure about bitcoins being a viable form of investment because of resistance from the government should know their government isn’t particularly opposed to the idea.
Investing in Bitcoin – The For
There are, naturally, several compelling arguments for why bitcoins are deemed viable investments.
Perhaps the most compelling argument for investing in bitcoin is that all transactions are secured, verified, and protected by the Blockchain technology. Experts have labelled the technology as perhaps the most significant development since the invention of the internet itself. Blockchain works as an incorruptible digital ledger, which keeps a record of all Bitcoin transactions recorded; thereby inspiring confidence from investors and industry experts alike. The sophistication of the blockchain technology renders bitcoins safe from fraud and duplication. The fact that Governmental organisations across the world are relying on the technology to document and protect sensitive information speaks volumes about its security.
The sheer volume of people investing and trading in Bitcoins has led some organisations and establishments to come to accept Bitcoins as a legitimate form of payment. Yes, it will be a while before Bitcoins rise in stature and prominence. But it has to be said that the progress has been encouraging. News conveying the opening of a cashless cafe, which accepts Bitcoin as a form of payment made the rounds of the internet last December. This is what the CEO, Ronny Tome had to say about the development. “Right now, cryptocurrencies are mostly used for speculation on markets … We want to make it part of our daily life,” They certainly believe cryptocurrency is the way forward and this endorsement displays genuine seriousness.
Investing in Bitcoin – The Against
All seasoned investors must understand the risks associated with the investments they choose to make. Let us then, also consider the primary argument against investment in Bitcoin to help you make a more informed decision.
It would be false to deny the risks associated with investing in Bitcoin. The value of the currency saw a meteoric rise as the decade progressed before it plateaued earlier this year. And experienced a minor blip following the unfolding of international events. The currency doesn’t exist in a vacuum and it’s unwise to believe the currency is beyond the reach of some of the stronger international bodies. Having said that, the acceptance (and adoption) of cryptocurrencies by major international bodies is sure to legitimise it for all investors. If that happens, this is as sound an investment as any. For now, however, we’re all playing the waiting game.
In this section, it’s preferable to approach the question strictly from the perspective of your investment portfolio manager. Today, it is hard to find a means to generate a return on investment at such a breakneck pace. It is for this reason that it’s a bad idea to not invest in Bitcoin for the sake of portfolio diversification. Having said that, leaving all your eggs in one basket alone hardly qualifies as an approach a financial expert would approve of. Once again, it is not like we’re singling out Bitcoins, it just so happens to be the universal law of financial investment. Diversifying your investment is the means to share the risks while not missing out on the more lucrative investment avenues out there. And yes, Bitcoins certainly do qualify as a lucrative investment option. Its not the kind of investment opportunity a curious investor should pass on.
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