Edward Granaghan is a frequent traveler living in Cream Ridge, NJ. When he is not staying physically fit or traveling from Cream Ridge, NJ, Edward Granaghan maintains an interest in investing. In recent years, he has carefully considered the prospects of investing in cryptocurrency, including the original and most popular cryptocurrency, Bitcoin. He believes that there are both advantages and drawbacks to investing in Bitcoin.
The concept of investing in Bitcoin can prove confusing and somewhat controversial, even among experienced investors. Numerous publicly traded companies maintain nine-figure investments in cryptocurrency, while other influential investors like Warren Buffett have consistently questioned the value of Bitcoin investing. Before deciding whether or not to invest in Bitcoin, investors should consider six key points.
To start, many investment professionals caution against the volatility associated with Bitcoin investing. It is not uncommon for daily values to fluctuate by 5 percent or more, and prices can shift by double-digits over 24-hour periods. Between November 2021 and November 2022, Bitcoin’s value fell almost 80 percent from its all-time high, but then recovered to a new record high, underscoring the currency’s lack of reliability as a stable investment asset.
Cryptocurrency proponents believe that volatility is natural for such a new form of currency that has yet to achieve widespread adoption. A Fidelity Digital Assets study determined that overall volatility has decreased in recent years, and that Bitcoin may continue to stabilize in the future. If rates of adoption continue to increase, price stability should even off and major fluctuations will become less frequent.
Other investors worry about Bitcoin as a usable form of payment. For example, the average Bitcoin transaction takes 10 minutes to process, compared to the near instantaneous processing time for credit card and cash transactions. Detractors believe this makes Bitcoin impractical for everyday purchases such as groceries. But others claim the opposite, pointing out that credit card payments actually take days to fully process, while also stating that third-party providers are actively working to make cryptocurrency payment processes more efficient. Lighting Network services, for example, support Bitcoin payments in milliseconds.
Not all cryptocurrency issues directly involve the currency’s viability and reliability. For instance, many critics raise concerns about the environmental impact of Bitcoin and other cryptocurrencies. Data from the University of Cambridge’s Bitcoin Electricity Consumption Index found that Bitcoin usage relies on more energy than it takes to power all of Poland, resulting in massive carbon emissions. Once again, supporters point to changing technologies that have allowed Bitcoin to shift to more renewable sources of energy. The Bitcoin Mining Council reported in 2023 that more than 60 percent of Bitcoin mining ran on sustainable electricity.
Ultimately, investors need to determine Bitcoin is suitable for their investment portfolio. Bitcoin is not backed by any real value other than scarcity, but skeptics question whether this is a workable long-term system. However, Bitcoin offers investors and users many advantages, including its decentralized nature, which provides inherent value. While not all investors may see the value in Bitcoin, cryptocurrency investments can often help diversify healthy portfolios.
