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Should you invest in Bitcoin despite volatility?
Review

Should you invest in Bitcoin despite volatility?

Dec 28, 2023

Bitcoin’s popularity reached considerable heights on the market, bringing it close to being adopted as a legal tender worldwide. While only El Salvador has officially made Bitcoin legal for payments and transfers, other countries accepted it within a limited framework.

However, allowing Bitcoin and cryptocurrencies to be operated in the financial system wasn’t easily achieved. Governments and citizens don’t trust these digital assets to be safe and functional, a phenomenon fueled by their complexity. Indeed, explaining what Bitcoin is and how it can bring value into our society isn’t that simple because it relies on high-tech and computational skills. On the other hand, digital literacy among people is still developing, so we can figure out why people learning where to buy Bitcoin are so few lately.

Besides that, Bitcoin has one feature that makes it pretty risky. Volatility is one of the best and worst things about crypto because it can sometimes leverage great money but can also strip people of their portfolio’s values when it drops. So, are there any reasons to still buy Bitcoin?

Volatility is one of the best and worst things about crypto

How does volatility work?

Volatility is not a new concept to investors. It acts similarly in both stock and crypto markets, driving price fluctuations and making the assets more or less valuable in some aspects. However, the stock market’s volatility is less dynamic than crypto because it’s linked to company earnings. On the other hand, crypto prices are changing due to unstable investor sentiment and media involvement.

When it comes to Bitcoin, the first digital asset created in 2009, volatility is triggered by the following:

  • Supply and demand. Bitcoin’s supply is limited to 21 million coins, so demand is increasing as it gets closer to an end. However, there are moments when this factor is affected by investors’ purchasing power;
  • Investor sentiments. Bitcoin holders can be affected by FOMO and other feelings that are not based on empirical research on the market, which can frequently influence the majority to buy or sell out of fear;
  • Official regulations. When countries impose specific regulations on Bitcoin, they can offer investors more freedom or limit them. For example, the US is currently battling against crypto, influencing users’ liberty to use it legally;
  • Media. Usually, the media tends to pose a negative image of Bitcoin due to a lack of understanding, but good news can positively alter people’s perception of it and encourage investors to continue their operations;

Considering how many factors affect its price, Bitcoin can sometimes experience significant cost spikes. That’s why it’s regarded as the most volatile coin on the market because its popularity can shut down prices or make them explore.

However, Bitcoin is still worth it

Indeed, Bitcoin reaching massive prices can discourage newbies from investing because it’s as considerable work compared to the beginning of the coin. Even mining is difficult, so if you’re not prepared to deal with mining pools or invest in computational power, it can be pretty challenging to benefit from Bitcoin.

Still, there are plenty of reasons why you should start buying it. First, its price history proves valuable since it overcame numerous difficulties and returned to normal. This means that long-term users will have consistent advantages from investing in a span of a few years.

Another reason for buying Bitcoin stands in its fixed and finite supply. While some consider this a flaw, the truth is that the asset will get more valuable as the asset reaches its end. Experts forecasted this moment to occur in 2040 when miners will get their rewards from transaction fees.

Also, the fact that Bitcoin is decentralized and can be used anywhere in the world contributes to its reliance. So, whether you want to buy it or sell it from and to someone far away, there’s no limit to that because you only need digital wallets and addresses.

Bitcoin as a reliable alternative to banking services

The main goal of Bitcoin’s creation was to be helpful to people whose countries’ banking systems lacked functionality. Indeed, banking systems are unavailable everywhere, and some countries don’t make it easy for citizens to open their bank accounts.

On the other hand, anyone can use Bitcoin and have their own digital wallet. At the same time, people can control their assets without the need for third parties to interfere. But since using the coin requires an internet connection and gadgets like smartphones and computers, this can also be a challenge for many.

However, solutions are leveraged quite often. For example, in Africa, a small company created a system in which people would only need to use a regular phone and their SIM cards to send requests for buying and selling Bitcoin, which the business would solve. This has helped many people receive donations and create a more stable financial portfolio.

Bitcoin is changing how people perceive money

Bitcoin has struck the world with its uncommon structures and innovation. People were and still are pretty skeptical when it comes to investing in it, but they don’t realize how it altered their perception of money and finances.

Having Bitcoin puts users in an active position of earning money, whether they do it for the short or long term. That’s because they must be wary of the market’s condition and the level of development of their portfolios and also improve their strategies over time.

These actions help them prepare for unforeseen situations, such as economic crises and worldwide disasters. Hence, people won’t be as affected financially since they’ll always have a safety net. That’s why investing in Bitcoin and crypto is helpful to improve financial and digital literacy.

Conclusion

Crypto volatility affects all investors and users who deal with mining, investing or trading because it leads to price changes in a dynamic way. With Bitcoin, volatility is somehow at a higher level due to its limited supply and increasing demand, making it risky to hold. However, the benefits of using Bitcoin are plenty. They can help investors face volatility by committing to a long-term strategy of owning Bitcoins, so they gain significant value over time.

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