Holding Bitcoins is a bit like living in the Wild West. You never know what’s going to happen. If you’re interested in speculation, the purchase of Bitcoins may be a good idea.
However, there are several reasons why holding Bitcoins can be a mistake. Bitcoins can lose value suddenly, suffer from a lack of governmental oversight, and offer no protection in the case of loss or theft. If you’re thinking about investing in Bitcoins, ensure that purchasing Bitcoins is financially advantageous for your unique situation. You might be better off sticking to a government issued currency.
Bitcoins are disadvantageous for the average person:
1. It may not be useful for your needs.
While there are a growing number of merchants willing to deal with Bitcoins, there still aren’t very many. How useful is this form of currency from a practical standpoint? You can’t take it to your local big box store and load up on groceries. If you’re considering purchasing Bitcoins strictly for purchasing goods or services, think again. Other forms of currency are more widely accepted and convenient. There’s no advantage to using Bitcoins at most places, unless you require the anonymity that Bitcoins provide.
2. Some financial experts believe the value of Bitcoin will ultimately crash.
Right now, there’s little to no government regulation of Bitcoin, and that’s exactly why many users have adopted this form of currency. Many financial experts believe that governments will eventually get involved and impose some degree of regulation. When this happens, it is speculated that Bitcoin users will cash out and abandon the system. This will lead to the value of Bitcoins crashing.
Even Warren Buffett has instructed investors to stay away from Bitcoin.
3. It’s too volatile.
Unless you’re interested in currency speculation, the volatility of Bitcoin could be considered a disadvantage. It’s possible to lose 50% or more of the value of your Bitcoin holdings very quickly.
It’s more than a little stressful to hold a currency that might drop precipitously in value over hours or days. It’s clearly not the way to store your life savings unless you enjoy playing the financial version of Russian roulette. Bitcoin values are primarily based on supply and demand for the currency. Experts doubt these factors can be predicted accurately.
4. Bitcoins lack oversight and guarantees.
A complicated system exists to keep Bitcoin on the straight and narrow. However, it lacks a formal regulating body. Your bank account is safe from fire, robbery, and just about anything else you can imagine. However, if your Bitcoin wallet is lost or corrupted, you’re finished. Even if you can show that someone stole your Bitcoins, the police rarely get involved. The government has been unable to define Bitcoin, much less show an interest in chasing down Bitcoin thieves.
5. Bitcoins can be difficult to maintain.
Imagine carrying or storing a lot of cash. It’s worrisome and easy to lose. While Bitcoins don’t take up any space, they can be just as fragile and easy to lose. A home fire can wipe out all of your electronic devices and your bitcoin wallets. Bitcoins can be easier to keep safe than cash, but it’s much less safe than keeping money in your bank account. Bitcoins have a few advantages if you’re interested in currency investing.
For the average consumer, however, Bitcoins provide more disadvantages than advantages. If you’re considering the purchase of Bitcoins, make a list of the reasons why. Are those reasons worth the risks? Perhaps so. Only you can decide.