FX.co ★ Pros and cons of investing in bitcoin

Experts seriously believe that the outgoing year 2017 can remain in the history of mankind as the year of cryptocurrency. Since the beginning of the year, the total capitalization of the cryptocurrency has soared by 876%. The stock market would have to wait about 20 years for the same level of profitability that investors brought in the digital money in this period. However, considering the advantages of investment in cryptocurrencies, in particular in bitcoin, one should keep in mind its disadvantages.

Blockchain technology potential

The enormous potential of the blockchain technology in general is the main reason for the unprecedented growth in bitcoin. The blockchain is a decentralized payment system, through which transactions can be registered without financial intermediaries. The creation of tokens is based on this technology.

Updating the bitcoin blockchain

It was a very important step for investors to update the bitcoin software in late summer 2017. Due to it, the network capacity has grown many times, and the transaction costs have decreased. The purpose of the upgrade was to attract a number of corporate customers.

US dollar weakening

At the beginning of 2017, the US currency reached its lowest level against the euro. When the dollar becomes cheaper, investors usually use gold as a safe-haven asset. Currently, bitcoin is becoming such a safe asset.

Institutional investors' interest

A number of institutional investors, such as Fidelity and Goldman Sachs, decided to take a closer look at bitcoin. The management of Fidelity, like the representatives of Goldman Sachs, is experimenting with bitcoin trading, especially taking into account the growing liquidity of this market and the increased interest in cryptocurrency operations.

Bitcoin as means of payment

For investors, the potential of No. 1 cryptocurrency as a means of payment is very attractive. A number of companies have been using bitcoin as an accounting unit since 2014. At the moment, many organizations are ready to work with bitcoin. Experts do not rule out that the upcoming renovation of the blockchain will increase the capacity of transactions and attract new companies.

Possible lifting of restrictions in China

The recent rumors about a possible change in the situation with crypto exchanges in China has become the catalyst for the cryptocurrency growth. An attitude to bitcoin in the People's Republic of China remained the same, triggering a dizzying jump in its rate throughout the world.

In addition to the advantages of investing in bitcoin, there are several drawbacks. Experts identify three key risk factors in the cryptocurrency market.

Belief in final success of blockchain technology

This peer-to-peer cryptocurrency concept is still relatively new in the market (just 4 years old). Though bitcoin is the first of its kind, it already has a lot of competitors. Over a period of time, one of the competitors may become more successful than Bitcoin. As there is not much history to predict the cryptocurrency trend in future, you may be taking a huge risk by investing in it at this stage.

Risks related to bitcoin regulation

Many experts think about the usefulness of the cryptocurrency regulation, believing that this will help to legalize bitcoin as a currency. However, with control measures tightening, bitcoin will not be able to enter many global markets. At the same time, investors will not be able to buy it.

Emotions of investors

The emotional attitude of investors contributes to the growth of the cryptocurrency. However, experts warn that business based on emotions is very unstable, it can lead to depreciation of assets. They emphasize that the increased advertising of all operations with bitcoin helps investors to feel their importance and supports the hope for the "bubble". Now it is not the time to invest in cryptocurrencies, experts conclude.