How justified is long-term investment in Bitcoin?
Bitcoin is a digital currency created in 2009 by an unknown person or group of people under the pseudonym Satoshi Nakamoto.
This cryptocurrency has no central issuer, and its issuance and transactions are regulated by a network of nodes running Bitcoin software.
Bitcoin has quickly become popular among investors who see it as an opportunity to capitalize on its high volatility.
The reason for its popularity is the unprecedented increase in the price of this digital asset from $0.03 after the start of circulation to a maximum of 68,000 US dollars.
However, there are several reasons why long-term investment in Bitcoin may not be worth it.
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Bitcoin is a speculative asset
Bitcoin is a speculative asset, meaning its value is determined by supply and demand. It is natural that an increase in demand causes an increase in cost, and an increase in supply causes a fall in price.
The history of Bitcoin shows that its price is subject to florins . Since its inception, the price of the electronic coin has increased almost a million times, from a few cents to $68,789 USD in November 2021.
However, during this period, the value of the digital currency fell sharply several times, including to $3,000 in 2018.
This high volatility makes Bitcoin a risky asset for long-term investment. If the price falls, investors could lose a significant portion of their investment.
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Bitcoin has no real value
Bitcoin has no real value. It is not a commodity that can be used to produce anything or provide services. Its value is based solely on what people are willing to pay for it.
The situation is strongly reminiscent of the “Tulip Fever” in sixteenth-century Holland, when the price of one tulip bulb was equivalent to the value of 3 kilograms of gold. After the excitement died down, even rare tulips began to cost no more than a couple of florins .
If the demand for Bitcoin falls, its price will also go down. This is due to the fact that Bitcoin will not have fundamental factors supporting its value; the cryptocurrency is not backed by real values.
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Bitcoin is not legal tender
Bitcoin is not legal tender in most countries around the world. In some countries, such as Japan, it is recognized as a means of payment, but its use is limited.
Bitcoin's inability to be used as legal tender limits its potential as an investment asset. If Bitcoin cannot be used for everyday purchases, it is less attractive to investors.
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The crypto market is susceptible to attacks
The Bitcoin network is susceptible to attacks. In 2017, there was a major attack on the Mt. Gox, which resulted in the theft of over $400 million worth of bitcoins. Every day, hackers try to steal coins from cryptocurrency wallets.
Such attacks can lead to loss of funds for investors. In addition, they can undermine confidence in Bitcoin and lead to a decrease in its value.
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Bitcoin has no future
Some experts believe that Bitcoin has no future. They claim that Bitcoin is a bubble that will eventually burst.
Already now it is being actively replaced from calculations by stablecoins , the rate of which is more stable. Retail chains are gradually abandoning the use of Bitcoin as a means of payment.
That is, Bitcoin only has its speculative component, and such assets are more suitable for short-term trading than for long-term investments.
It can be assumed that Bitcoin will break the $60,000 mark more than once, but with the same probability the price may fall below the $20,000 mark.
Read about other cryptocurrencies in the section - https://time-forex.com/kriptovaluty