Did you know that bitcoin appreciated from four cents in 2010 to over $1,000 (one thousand dollars) in 2017 and was the best performing currency in 2016? Monumental, right?
Well, in January 2017, the Central Bank of Nigeria (CBN) warned Nigerians against the use of virtual currencies, including bitcoin, ripples, and litecoin. The apex bank said anyone trading in bitcoin was doing so at his or her own risk as it is not a legal tender in Nigeria.
However, with Nigeria’s economic situation, the CBN’s harsh clampdown on bitcoin and other cryptocurrencies have been met with some stiff resistance. And though, it’s been about ten months since the ban, the question remains –is bitcoin worth investing in?
What is bitcoin?
Bitcoin is the first ever decentralized digital currency, created and held electronically. No one controls it. Bitcoins aren’t printed like naira, dollars or euros – they’re produced by people using software that solves mathematical problems. Its most important characteristic is that it is decentralized as no single institution controls the bitcoin network.
How bitcoin works?
Since no bank is involved, so when a person A transfers bitcoin to another person B, all the information is recorded in a public ledger, known as the Blockchain. This ledger records all of the transaction that have taken place since the last ledger.
For transferring bitcoin, you can have a private key of your own wallet and get the public key of another’s person wallet. Every bitcoin wallet can have one or more public keys that can be distributed to everyone but can have only one private key which only the owner of that wallet can know.
Pros:
- Bitcoin is inflation-proof.
- It is relatively still in its infancy.
- It has cheaper transaction fees.
- It can be much more secure and reliable.
- It is subject to capital gain without a cap limit value to fiat currency.
- It eliminates third parties between you and your money.
Cons:
- There have been a number of high-profile cases of bitcoin hacks.
- Bitcoin has zero intrinsic value. It’s a digital “currency” only if some people are willing to recognize it as currency.
- It is not the same as fiat money, which, while not backed by gold, is backed by the full faith of the government.
- Bitcoin is more about speculating on price than an investment.
- Bitcoin is still a very volatile asset and is only something for risk-loving investors.
Now, before investing your hard-earned money on bitcoin, take the following precautions:
- Start with a small amount.
- Find ways to invest your Bitcoin in securities such as loans and IPOs.
- Trade some Bitcoin for Altcoins – each cryptocurrency was created with a different set of goals.
- If you are looking for a stable store of value or a steady price increase over a specific time period, then bitcoin is not for you.
To sum up; an investment in bitcoin is likely to get you good returns. On the other hand, the probability that you will lose some or all of your investment is high. So don’t invest money that you cannot afford to lose.
Ultimately, it is up to you to decide whether an investment in bitcoin is in your best interest.
Are you considering investing in bitcoin? Share your thoughts!
“Cons:
There has been high-profile cases of bitcoin hacks.”
No hacking of the Bitcoin network has ever been successful. Coins can be stolen through hacking your computers and steeling your passwords but the network is virtually in-penetrable.
“Bitcoin has zero intrinsic value. It’s a digital “currency” only if some people are willing to recognize it as currency.”
This belongs in the PRO category. The fact that people willingly assign value to this rather than being coerced into using it like Fiat currency is a testament to its true value.
“It is not the same as fiat money, which, while not backed by gold, is backed by the full faith of the government.”
This one is strange. I have to assume you mean the government of the protocol itself because the government has nothing to do with bitcoin.
“Bitcoin is more about speculating on price than an investment.”
Belongs in the PRO section. As bitcoin gets older we will start to see the predictability of the coins value and will greatly accelerate its adoption as we’ve already been witness.
“Bitcoin is still a very volatile asset and is only something for risk-loving investors.”
Treating Bitcoin like a high risk investment is probably wise. Only invest a small amount at set intervals and hold it for a rainy day. Things go well, you may become a member of the 1% club. If not, who cares?
Don’t you further buttress her points, though? And as per some concerns belonging in the PRO category, do you mean professional or PR? Also, many a time, it takes a few burnt risk takers to either stir confidence in others or warn them of inherent dangers as the case may be.
Hi JoelHFX.
For the record, this is an objective review of bitcoin. And so, I’m somewhat confused as to whether your response is an attempt to refute the claims in this article or bolster them up.
Now, the article says bitcoin (not the network) is susceptible to hacks. Did you hear of the MX Gox’s hack in 2011, 2013 and 2014?
Also, based on the theory of portfolio investment, bitcoin has zero intrinsic value because of its volatility. It could be potentially valuable if it were a global currency. Otherwise, it’s simply all demand and supply.
You argued that the government has nothing to do with bitcoin. I disagree. Wouldn’t it be right to argue that in this case, the CBN as the controller of Nigeria’s monetary and financial sector is the government? Currencies get their value from being backed by the government as legal tender.
The point of this article is that, like all markets, bitcoin has its own share of oddities, especially since it operates in an uncensored financial system. But it’s still an investment option that is worth considering.