Categories: CoinsEducation

Investing With Bitcoin, A Good Idea Given The Current State Of The Currency?

Every day which passes represents a step-up in the overall popularity of Bitcoin, which makes people from all around the world begin asking a series of different questions which would normally be asked about normal currencies in general. One of these is whether any company, or individual should be willing to accept investments in the currency and try out investing with Bitcoin.

To put things better into perspective, trading stocks and making investments in government controlled currencies has been going out for an incredibly long period of time. As more and more people decide to adopt Bitcoin, many of them begin to wonder whether keeping investing in a certain stock market is a wise thing to do using the currency. Additionally, companies from all around the world are wondering about the same thing. Should they go ahead and accept an investment from a certain trust or organization in Bitcoin?

Well, it depends. Economic analysis has proven that the volatile state of the coin can sometimes make trading with large sums a risk, which is understandable. While the exchange rate may be of $240/ 1 btc today, it can drop to $100 in a month in the case that severe fluctuations happen. Additionally, as you may already know, the value of the Bitcoins receive from a transaction can also increase, thus making it more profitable from all the points of view.

To put things better into perspective, the wisest idea at this moment would be to show a concrete example. Company X needs $100,000 to be able to launch a new product by the end of the year. To get the money, they decide to approach different investors and organizations with the power to give out that amount of money. Unfortunately, they find no one willing to grant even a part of it, regardless of the possible returns. However, they do not feel like giving up, after already investing a certain amount of money in the project. Fortunately, ‘John’ approaches them and offers a deal: 400 Bitcoins in exchange for a return of 500 Bitcoins in 5 years. By doing so, John is risking all of his money (both because investing can be dangerous, but also because the value of the coin can decrease) but is also hopeful, as he believes in the project. Now, the next logical question would be what Company X needs to do? Accept the payment and take the risk of having to pay back an incredibly larger amount of money if the value increases? What if the value decreases and they only have to pay around $1000 for 500 Bitcoins in the next 5 years?

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This example doesn’t only give out a couple of questions, but it also gives out the solution to most of them. Investing and accepting Bitcoin investments, with returns which are also promised in the cryptocurrency is a two sided blade. There may be an increase or stagnation, each with the possibility of helping out both the investor and the company which is being invested in, depending on the flow of the market at later, which makes it very similar to gambling.

To sum things up, the volatile state of the currency at this moment would not really allow for secure, huge and long-term transactions to take place. If things are designed to go over a short period of time, then everything would be alright, but proceed with great caution if you find yourself in the position of accepting or investing with Bitcoin.

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Daniel Dob

Daniel is a bitcoin investor and journalist for numerous news outlets in the financial sector. When he's not writing, trading, or interviewing people, you can find him swimming, reading or taking one of his hobbies to the next level.

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