Is it a good time to invest in cryptocurrency?
A currency is simply a place to store money; it is not an investment in and of itself. So, what are your options?
If central banks decide to ban Bitcoin tomorrow, its owner will be unable to use it for any other purpose.
Is bitcoin a safe investment? The most important thing to remember is that a currency is nothing more than a place to store money. The money is not an investment in and of itself. When was the last time you bought a bunch of dollars, yen, or even Indian rupee, stashed it in your locker (within legal limits), and boasted to your friends about your dollar, yen, or Indian rupee investment? You don’t invest in a currency; you simply store your funds there.
The question now is whether cryptocurrency is secure. It is dependent on who released it. There are three basic types of currencies.
One is a currency with intrinsic value, such as gold or silver. Two, a currency that has been issued in exchange for a specific commodity. Central banks, for example, used to hold gold and issue currencies against it when the world was on a gold standard. Third, there is fiat money, which is money that the government declares to be legal tender.
Even if the world decides to ban gold as a currency one day, people may still be able to use it to make jewellery, sheets, cables, and other items. Though one might argue that gold’s usage value is much lower than its market value, the point is that the holder would still be able to use it.
Do cryptocurrencies such as Bitcoin, for example, have any intrinsic value? No, it’s not true. So, if central banks decide to outlaw Bitcoin tomorrow, the owner will be unable to use it for any other purpose.
The fiat currency, like the fiat currency, has no intrinsic value but is backed by central banks. So, even though the Rs 500 and Rs 2000 currency notes are no longer considered legal tender tomorrow, you can still take them to the central bank and exchange them for new legal tender currency notes.
If cryptocurrencies like Bitcoin are outlawed in the near future, they will have no inherent value and will not be backed by any government. As a result, there is a significant risk of losing all of your money.
However, if cryptocurrency is issued by a central bank in the future, I believe it will be safe, but only as a means of storing money, not as a great investment.
Is bitcoin a good long-term investment?
Cryptocurrency, like any other currency, is simply a place to store money, as we’ve already established. It’s not even close to being a good investment.
If we describe investment, I believe it will be helpful to readers. That is, anything you buy or hold today that has the potential to produce cash flows in the future, even if you don’t sell it.
Consider this scenario: You buy a house and never sell it, but it continues to generate rental income. You purchase a farm and never sell it, but you continue to make money by selling the farm’s produce. You buy a business and never sell it, so it continues to make money.
The prices of gold, fiat money, and cryptocurrency fluctuate in the market when you purchase them. These fluctuations give the impression that the investments are good or bad. They, on the other hand, do not make anything.
Also, a currency should never be viewed as a good investment; otherwise, people would not use it to purchase goods. You would never use bitcoin to buy anything if you knew that if you didn’t use cryptocurrency (bitcoin) to buy a laptop and keep it with you, bitcoin would appreciate much more than what you could have made by using the laptop.
Anything that people accept as a currency must be extremely stable. Many argue that bitcoin will be stable and have the characteristics of a good currency in the future.
Even if we assume that cryptocurrencies like bitcoin will become stable, we must consider the fact that central banks will be unable to control the supply of bitcoin on the market. Central banks will be unable to control inflation and deflation during an economic boom or bust unless they have control over the supply of a currency in the market, which will be detrimental to the economy.
Central banks combat inflation by reducing the amount of money available in the market, and they combat deflation by increasing the amount of money available. Any alternative currency whose supply is not regulated by central banks will either be limited or banned by central banks in the future.
Are there any investments that are better than cryptocurrencies?
Investing in big companies (for the long term) with a sustainable competitive advantage that trade at a discount to their fair value is always a good idea. Betting on the Indian economy through benchmark indices like the Sensex and Nifty is another excellent choice for a novice investor who does not understand the intricacies of investing.
However, there is no denying that the blockchain technology that underpins many cryptocurrencies appears to be very promising. It’s important to understand the difference between betting on blockchain technology and cryptocurrencies like Bitcoin or Ethereum. Another way to invest in Blockchain technology is to buy stocks in companies that are quickly embracing this game-changing technology.
