Introduction
It’s been more than a decade since bitcoin was first introduced. It gave the world a whole new concept of virtual currencies. Now, after 13 years, this currency has seen many ups and downs, more than any other asset. Bitcoin has provided investors with an excellent opportunity and a whole new market. However, it has also seen huge jumps and time-to-time dips in the last few years. This currency is all the rage because of the enormous potential this seems to have. It is believed that bitcoin can revolutionize the global payment method. Just like bitcoin, crypto enthusiasts also need to understand NFTs economics.
Risks and Returns
The Bitcoin currency has given considerable returns to investors. Its gain has been tremendous over the past few years. It is because of the ever-growing demand for this asset. Bitcoin has bought a whole new blockchain technology, which has expanded its uses in other industries. It all has contributed a lot to its demand.
The value of Bitcoin is around 30000$ as of June 2022, which was once valued at 13$ back in 2013. Its high returns in less time have attracted many buyers throughout the world. But one factor that has always questioned the existence of Bitcoin is the government’s attitude towards it. Bitcoin is created by mining, which requires a large amount of electricity resulting in carbon emissions.
It has forced the government to take some serious action against it. Another factor government is concerned about is its anonymity, which allows illegal buyers to trade in restricted kinds of stuff like weapons or drugs. But beyond all this, Bitcoin has found a way to become one of the most traded communities throughout the world. People even started them to use for trade exchange and payment mechanisms.
More and more people started to trust this currency with each passing day, and it is believed that the number will keep increasing. The currency is now traded daily not only because of its easy system and low capital requirement but also because of the potential returns it can yield.
Bitcoin’s gaining popularity doesn’t imply that this is the safest option to choose from. One should understand that Bitcoin only holds value till people think it has value. Any institution does not back it, and its holders are exposed to the chance that its value could go to zero. Moreover, the dips in these currencies are too spontaneous. The market can crash thousands of dollars in seconds. It has been seen in the past, so it becomes vital for the investors to invest what they can afford to lose.
There was a monetary reward in exchange for the considerable risks that users accepted.
“Assets in financial goods, including such call option and perhaps more exotic choices, are regarded exceedingly dangerous, particularly when you short them — that seems to be, sell them to others,” he continued. “It’s difficult to predict higher return, but our opinion is that certain goods can provide rates of return of 30 percent to 40 percent annually.” Therefore, the large predicted profits are merely compensated for the higher levels of risk committed.”
Cryptocurrency is dangerous, while Users may reward those willing to take such a chance handsomely. So, it appears that the commodity’s refusal to stay is still due to this capacity to take risks.
“There are not too many new cryptocurrencies,” Dr. Aretz noted, “and also the vast majority of them have been connected to a somewhat known currency.” Possessing that said, it’s an unusually high level of instability for a currency. My opinion would be that the wild fluctuations we’re witnessing are founded on the assumption that all those betting on the monetary system had low financial expertise.”
Conclusion
Users can easily see that Bitcoin provides the highest returns compared to other commodities but, at the same time, is exposed to higher risks than any other. The risk is significant because of its highly volatile nature. So, it is imperative to understand what type of investment you want to make. If you are open to risk exposure, bitcoins can be a top choice; however, this may not be suitable if you are risk aversion.
