Many people have become captivated by Bitcoin and the way it has risen in value from its humble beginnings. Even as it has suffered some course corrections in recent months that have diminished that value, its potential for another surge always seems to be just around the corner. That’s because Bitcoin if it makes it to its highest level, could one day replace fiat currency as the primary way that people conduct transactions. As a result, people continue to pile on board the Bitcoin train, even now that it has been around for about a decade and the initial glow has faded somewhat. For some younger investors who feel a kind of ownership towards it, they may even choose to make Bitcoin the sole asset in their portfolios.
It’s all right to be excited about the prospects of Bitcoin going forward. In fact, investing in Bitcoin certainly seems like a wise move overall, as the benefits that it provides to the everyday user seem to far outweigh the obstacles being thrown in its place. As a matter of fact, you would do very well as an investor to follow the lead of a trading program like Bitcoin Trader if you want to wade into the Bitcoin investing waters. But using Bitcoin as the only investment that you have isn’t the wisest move in the world, even if you believe in it with every fiber of your being. Here are a few reasons why you should think twice.
1. The Risks
All investments are risks, whether it’s the stock of a 100-year-old company or the newest digital coin offering. The risk for Bitcoin is even greater because there are many powerful institutions that see it as a nuisance and a scam. That’s not to say they’re right in any way. But it does mean that there is the possibility, however remote, that Bitcoin could one day cease to exist. Which would mean your entire nest egg would disappear as well if you made it your only investment.
2. Lack of Balance
If there is one thing that practically every investment professional agrees upon, it is the concept of diversification. Having a bunch of assets coming from different sectors of the market prevents your portfolio from taking a major hit when one struggles. This means that investing in any asset all by itself is a poor idea, not just Bitcoin.
3. Other Uses
If all you have is Bitcoin in your portfolio, you might be less inclined to use Bitcoin to buy goods and services. Considering that it is very useful in this area, both in terms of the quickness by which transactions are rendered and the lack of fees which are attached to these transactions, it might not be a wise sacrifice to make.
Bitcoin can be an effective part of a diversified portfolio, providing the potential for both short-term explosiveness and steady long-term growth. But it shouldn’t be the only egg in your investing basket.