Trading is never without risks and with cryptocurrencies like the Bitcoin, the risks are amplified. Bitcoin is a decentralized digital currency that is not regulated by any bank or financial institution. While there have been many more crypto assets that have come about after the Bitcoin launch, none has gained as much popularity as the Bitcoin.
Bitcoins may be used for buying goods and services today and many leading merchants and retailers like Expedia, Overstock, etc are accepting Bitcoin payments. Bitcoins can also be exchanged with individual users for services offered by then, or exchanged with other currencies, virtual and traditional, on cryptocurrency exchanges. At the same time, there have been instances of the Bitcoin being used to facilitate transactions for illicit products like weapons or drugs. So, it makes sense to have an idea about the pros and cons of this cryptocurrency before trading it.
Pros of Trading Bitcoins:
- Bitcoin has higher liquidity compared to the other crypto coins. This is why Bitcoin holders can retail most of the inherent value even when converting to a fiat currency like the Euro or USD. Others tend to lose a lot of value during such conversions or cannot be exchanged directly in the first place.
- More and more businesses are now accepting Bitcoin as payments for goods or services. So, for people keen to lower their exposure to traditional currencies, Bitcoin adoption is a big boost. Moreover, the automated bitcoin trading bots like Bitcoin Trader is contribute the speed of trading and higher returns.
- Bitcoin transactions are much faster compared to traditional money-transfers. Even when the Bitcoin crosses international boundaries there are no international transaction charges or any red tapism to navigate. This is a common problem with ATM cash withdrawals or credit card payments.
- Transaction fees for Bitcoins are lower than other digital payment mediums. The fees may be variable but it is very unlikely that the transaction will surpass 1% of the total value.
- When you have USD or any other traditional currency in your bank account, or conduct PayPal transactions, your privacy is not fully protected and risks are the same as when you give cash physically at a store counter. While online bank accounts are protected against hackers private retailers and public authorities can always track where you spend your money or get your money from. Bitcoin transactions are however anonymous, and while you can view transaction flows, you cannot identify the parties.
Cons of Trading Bitcoins:
- Bitcoin has been prone to multiple incidents of frauds and scams; however, when traditional currencies are involved in such events, law enforcement agencies take action.
- The use of Bitcoins in illicit activities has tarnished its reputation greatly. Dark Web marketplaces have exposed users to frauds and threats of criminal prosecution. The global legal system does not seem to be equipped to stop this problem.
- Bitcoin value is highly volatile. So, this cryptocurrency is prone to dramatic price swings within short time-periods, and after the infamous Mt. Gox incident, prices fell by 50%. Such high volatility may yield short-term benefits to traders but it is not good for conservative investors.
- The biggest drawback is that there are no refunds in Bitcoins, like what payment processing services and credit cards offer. So, those affected by frauds end up losing their money because Bitcoin does not refund.
- Bitcoin mining takes up a lot of power and the biggest mining companies are in China where the power is derived from coal plants. The smog caused as a result makes the environment unsafe for people.