Risk and Rewards Associated With Bitcoin
Key points
- Do the Risks Outweigh the Benefits?
- Price History of Bitcoin
- Other Investments and Bitcoin
- Volatility of Bitcoin
- Conclusion
In October, Bitcoin reached its all-time high price of $67,000 in the crypto market, and according to many experts, by the end of this year the prices of Bitcoin will reach $80,000, and will continue to grow in future. While some experts are very optimistic about the future of Bitcoin, others believe it to be a hypothetical bubble that could burst at any point of time.
Instability of the Bitcoin market is the primary driving factor that has led to the growth of Bitcoin, and it is also the reason that makes it a risky venture. Hence it is essential that all the risks and rewards associated with Bitcoin are accessed properly before adding it to the investment portfolio.
Do the Risks Outweigh the Benefits?
Unlike all other investments (bonds and equities), cryptocurrencies including Bitcoin are a more risky venture. Instability of the price is one of the major risks associated with Bitcoin, there are some other risks that can be associated with Bitcoin investment. Risks such as fraud, lack of regulation, cyber hacking, limited usage, over-reliance on technology and many more are significant risks associated with Bitcoin.
This year alone, Bitcoin has witnessed a major swing in prices, where in May the price of Bitcoin was $30,000; it is now trending at $ 56,923, almost double of what it was in May.
Price History of Bitcoin
The first price increase that Bitcoin witnessed was back in 2010, when the value of single Bitcoin grew from a fraction of a penny to $0.08. Since then Bitcoin has witnessed multiple swings in its prices. The primary reason for this price surge is identified to be caused by traders and investors, betting on ever-increasing prices. With mainstream adoption of Bitcoin, institutional investors are entering the market and the price performance of Bitcoin is evolving.
Other Investments and Bitcoin
Another factor to consider is the performance of Bitcoin in comparison to other assets. An investment of $1000 made in 2014, has risen to $100,000 in April 2021, whereas the same investment made in Amazon (AMZN) would have risen to the value of $10,000. Comparing the two investments, Amazon investment fell way short to that of Bitcoin.
Volatility of Bitcoin
Even though over the years Bitcoin has grown in value and its acceptance as a mainstream currency has risen significantly, there has been no decrease in its volatility. It has been understood that over the years the only thing that has remained steadier than returns are the risks associated with it.
Conclusion
Even though this article doesn’t provide a complete picture of the risk and returns of Bitcoin, it still provides a general idea of Bitcoin and its prices in future. Every investment has risks associated with it, same is the case with cryptocurrency like Bitcoin, where the risks are much higher but the returns are also very high.
Disclaimer: The article is just to provide information and shouldn’t be considered as any financial advice. It is advisable to conduct thorough research before investing in any cryptocurrency.
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