The cryptocurrencies are denominated as virtual tokens, and the whole system works on decentralized networks; the networks work on blockchain technology. This technology is impossible to cheat because it records and stores every bit of data, and some of the blockchain operates as a public database.
Cryptocurrency makes the transaction easier with a low or no transaction fee. People can transfer their money from any corner of the world securely and efficiently. Bitcoin is one of the cryptocurrencies that have the highest number of users and is used on a daily basis.
Bitcoin is one of the oldest coins; it is approximately a decade old, and from nothing to costing $24,708 for each coin, bitcoin made a fortune for many. It touched $64,400 at its all-time peak. On the graph, you can see that the growth is quite exponential in some parts, and you can expect a dip. So to be sure, you have to trade wisely, so before trading in bitcoin, let’s first understand the pros and cons of bitcoin trading.
Pros of Bitcoin Trading
Decentralized
Decentralization is one of those features that makes bitcoin and every cryptocurrency almost impossible to attack. No government or organization can take down bitcoin because the bitcoin network is distributed. The distribution is made across numerous computers, and these are known as nodes.
The protocol that solved the Byzantine Generals' problem was the Bitcoin protocol. The Bitcoin protocol was the first to solve it and create a decentralized network. The decentralized system later helped every cryptocurrency grow.
The benefit of the decentralized system is that no organization can determine the flow of the cryptocurrency, which makes the coin stable and secure and the cryptocurrency monopoly-free. The flow of bitcoin is generally controlled by its developers.
Store of value
With its huge market cap and scarcity in the market, Bitcoin had the title of "digital gold." Bitcoin has gained the trust of many sophisticated investors, and they have accepted it as a store of value. Getting accepted as a store of value is colossal.
Generally, commodities, currencies, or assets are said to be the store of value because they can hold value for a long period of time (including inflationary times). As the bitcoin is accepted as a store of value, people can use it easily, meaning the user can sell the currency or asset for cash easily; it doesn’t need a strong market for trading.
Secure
In terms of security, every transaction is authentic, which is done by public key cryptography. It makes Bitcoin remarkably secure. Cryptocurrency is generally used for security and privacy. The blockchain ledger works on different mathematical puzzles, so it's not easy to decode. Here, no one can change or manipulate any data. Even centralized power cannot manipulate the data or gain control over it.
Inflation Hedge
Bitcoins are considered an inflation hedge, as the immense growth of bitcoin has everyone's eye on it. Bitcoin has been promoted as an inflation hedge by many crypto investors and advocates for nearly a decade. Many sophisticated investors now believe that bitcoin is an inflation hedge.
Many investors believe the reason behind the decrease in buying power we experienced in fiat currency is because of bitcoin tokenomics. The other reason investors are turning to bitcoin is because of the ongoing printing of money by central banks all over the world.
Outsized Returns
People who had invested in bitcoin knew at what percentage they got returns. Even if the user has invested a little, the returns are really high. Bitcoin had exceeded the second-best-performing asset class, the NASDAQ 100, by a significant margin. Have you ever thought, "When was the first time you heard about bitcoin?" The historic rise of bitcoin produced many bitcoin success stories, which spread like wildfire.
Easy Transfer of Funds
Transactions in bitcoin are seamless; people can transfer money from any part of the world with no interruption. Users just have to verify and proceed with the transaction. Once verification is complete, you can experience the lightning-fast transaction. People can transfer their funds quickly, no matter if the transaction is international or domestic.
The cons of Bitcoin trading
Volatile
The volatile nature of bitcoin is comparatively higher than that of other assets. Bitcoin has a limit of 21 million; beyond that, no one can mine bitcoin. It makes bitcoin scarce and hard to get, just like gold. But the market fluctuation is totally different from gold.
News like a negative comment from a big investor can easily affect bitcoin, making it more volatile. Even security breaches have a negative impact on the market.
Illegal transaction
Due to bitcoin being decentralized, no government body can make changes to or track the data and information of the sender and receiver if they don't want to reveal it. This makes it easy for criminals or people involved in illegal activity.
People can buy drugs using bitcoin as a mode of payment. So it makes it hard for the officials to track down the criminals.
No refund or cancellation
People get easily cheated because of this drawback. On the platform, whether you transferred the coin knowingly or unknowingly, you cannot retrieve it if you want to. There are many cases where there is some dispute between two parties, but the funds have been transferred, so there is no way they can get their money back.
Even when you transfer some funds, check the wallet address correctly; if there is some mistake in the address and you are done with the transaction, there is no way you can get the refund.
Energy concerns
To mine bitcoin, it requires an advanced computer system, and the whole mining process consumes a lot of energy. Even to secure the network, the same amount of energy is required. Energy concerns rose, but as of now, many miners are switching to renewable energy.
To support the green revolution, the renewable source is set up, but it is in the initial phase, so it will take some time to scale.
Vulnerable to hacks
Hackers cannot make changes to the blockchain or steal bitcoin directly. As the system is so secure, they targeted the exchange platforms to steal the data. As the exchange platforms store user details so users can get their ID, this makes the platforms vulnerable to data theft, and hackers can easily take the data to transfer funds from that account.
Many exchanges were hacked in the past, and people lost thousands of bitcoins worth millions. After that, exchanges upgraded their security system to make them less vulnerable to hacking.
Data loss
If any user loses their private key, there is no way to recover the key or get back your cryptocurrency. developers made untraceable ASCII documents with strong hacking defenses. There are many cases where users have bought many bitcoins but don’t remember the private key or don't have the physical drive. In the end, they lost all their bitcoins and their assets. It’s better to keep your key safe and easily reachable.
Conclusion
Coming to the bottom line, I hope you understood all the pros and cons. If you want to invest in cryptocurrency, you can give it a shot, but you have to be ready to take risks. If you are mentally prepared to lose the amount of money you want to invest, you can go for it.
