Bitcoins: to invest or not to invest – that is the question
There was a time when people haрpily used cattle, clothes, knickknacks or glittering pieces of precious metals to make their trade relationships easier. Then some smart men got behind a breakthrough – they invented paper notes and currency. Now we are facing with a new technological and intellectual leap ahead from the clucking birds and bellowing mammals – we are coming into the age of digital currencies or so-called cryptocurrencies. One of them is Bitcoin. It can be bought and sold in return for traditional currencies on several exchanges or used to settle international transactions through the Internet without messing around with bank charges or exchange rates.
Unlike traditional currencies issued by financial entities, Bitcoin has no central monetary authority. Instead it is running on a network of volunteers’ computers. We won’t delve into the operation of this system as it seems to be really complex, let us rather decide whether we should invest in Bitcoins or not.
On the one hand, cryptocurrencies cannot be considered as an effective store of wealth because of their high volatility and a number of cyberthefts draining digital wallets of Bitcoin holders. Another reason that deter people from investing in Bitcoin is a rising competition from other cryptocurrencies like Ethereum.
On the other hand, cryptocurrencies can still be attractive to some investors by their potential for anonymous transfers, or by the fact that the number of Bitcoins is fixed (the case of inflation is excluded). While the ECB and the BOJ keep engaging in quantitative easing in pursuit of economic growth thereby increasing their money supply, there is no way any central bank can inflate the value of Bitcoins.
From all has been said we may conclude that Bitcoins are perceived as greenfields by many investors. They have to go through the phase of experimentation and evolution to become a trustworthy investment, meanwhile, given the recent increase in Bitcoin prices, you may consider these cryptos as a good option for a small percentage of your portfolio.