The Pros of Bitcoin
The pros of cryptocurrency are straight forward: Avoiding government regulation (if you’re into that), Evading taxes (again, if you’re into that), possibility of extreme losses and gains, and trustless monetary value exchange. The Pros of investing in it as a long-term asset for wealth building are dubious and short sighted, in my opinion, as I outline here. But I do believe Bitcoin has value but it’s mostly for skirting regulation and living in a trustless world – which could have some value. But let’s dive into some of the actual pros.
Avoiding government regulation:
It’s no secret that avoiding government regulation is one of Bitcoin’s and cryptocurrencies benefits. The entire cryptocurrency space is known for its numerous scams and nefarious acts like Bit-connect, Ponzi Coin, or most famously Mt Gox’s volume spoofing bots and subsequent hack. Everything goes in a space filled with unregulated and poorly monitored financial instruments. This is both a good and bad thing. It’s bad because largely it means people get taken advantage of despite doing research and due diligence on various “investments”. But it’s also good because there can be innovation and production on a faster pace than normal markets. I personally don’t believe Blockchain technology is all that interesting or really innovate. However, I think smart contracts are actually innovative and creative and have a lot more potential. Smart contracts likely would have never been developed without the unregulated cryptocurrency world that we know today. But, of course, regulation is bound to come as the space grows. So, this benefit will only last so long.
While, I don’t recommend doing this, it’s certainly much easier to avoid taxes in cryptocurrency due to its generally unregulated and typically not super great KYC rules (although for some exchanges they have way harsher KYC rules than any bank I’ve ever seen in traditional finance – looking at you Bittrex and Kraken – you don’t need a picture of me holding up sign next to my face). But there’s plenty of ways to get around these rules by simply doing in person cryptocurrency transactions through peer-to-peer groups found online. It’s an easy way to exchange cryptocurrency for cash or vis versa or simply buying other assets with cryptocurrency.
Possibility of extreme loss and gains
This comes with the nature of being a new area to invest in. It’s like investing in electrical vehicles a couple of years ago, high risk, high reward payouts. There is extreme risk with buying into Bitcoin or any other cryptocurrency. These financial products have some potential to gain massive amounts of money and support if they do what they are suppose to and achieve the dreams of their creators. However, the issue is the vast majority of these projects will die and never be heard from again. For example, if you had invested in the top 100 projects from the bull run of 2017 you would have pretty much lost 88% of your investment as only 12% of the top 100 cryptos surpassed their prior all-time highs in the 2021 bull run. However, those that did like Bitcoin and Ethereum doubled or tripled their prior all-time high. Extreme risk but extreme pay offs.
Trustless monetary exchange
This pro is largely what it says. You can exchange money with anyone around the globe in a matter of minutes or hours (depending upon confirmation times and fees). If I wanted to, I could decide to pay someone in Venezuela. I’ve actually tried to pay people in other countries for services they have provided to me using cryptocurrency. Ironically, it was easier for them to just accept western union instead of cryptocurrency so I’ve never actually done this. However, it’s theoretically possible and also possibly cheaper than western union (although again it’s fee dependent). However, the major benefit is I don’t have to rely upon western union blocking the transaction because I could potentially be sending money back to my home country as a refugee which could have financial sanctions on them.
Cryptocurrency as an investment:
But just because there’s benefits for cryptocurrency as a currency. There are very little benefits for cryptocurrency as an actual investment other than merely as a lottery ticket. I think if you’re okay with having some portion of your portfolio be a gamble then you’re perfectly suited to investing in cryptocurrency. But otherwise, you should consider sticking with more traditional investments. I’d recommend that most people build wealth using Stocks and Bonds instead of cryptocurrency for the simple fact that it’s less volatile. If you wish to grow your wealth long term, I’d recommend investing with using m1 finance (you’ll get an extra $30 dollars with the referral link) it’s a great platform for long term investing. And finally, if you’re looking for further ways to enhance returns check out our high risk and ultra-high risk newsletter. If you’re a first-time investor, try checking out the easiest portfolios out there. Or if you’re looking to get out of debt, try getting motivated with “The power of Budgeting .”
However, if you’re looking to get in on getting into cryptocurrency, at least give yourself an extra $10 dollars with this referral link. It’s free money after all.
Note: the m1 referral link gives the reader $30 extra dollars to invest with if they choose to fund a taxable with $100 dollars within 30 days of opening the account or fund an IRA with $500 within 30 days of opening an account. The author of this article will receive a $10 dollar compensation as a result of the reader opening an account. The compensation for both parties occurs 30 days after the deposit occurs and assumes the full amount is retained in the account until the end of 30 days from the deposit day. YNAB offers a free month of use this will be given to both the author and reader if the reader subscribes after the free trial period and buys a month of subscription. The author uses both Coinbase and M1 Finance and both links are affiliate links. Coinbase referral link gives the reader an extra $10 if they purchase $100 worth of Bitcoin.
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