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3 Things You Should Consider Before Investing in Bitcoin

Updated on April 7, 2017

With the price of Bitcoin recently surpassing that of gold, more and more investors are becoming interested in getting some of their own digital cryptocurrency. However, the same question that Bitcoin enthusiasts have asked since Bitcoin’s inception is still relevant. Is Bitcoin a good investment? Here are 3 things you should consider before investing in Bitcoin.

1. The Price of Bitcoin Is Extremely Volatile

Although we have seen the price of Bitcoin rise past the current price of gold, we have also seen the price spike at $1,000 in the past and then drop down to $200 and remain there. The problem with Bitcoin is that you never know how the prices will work. Bitcoin is a relatively new currency and the honest truth is that the currency’s market could crash at any moment and your investments could go down with it. If you decide to invest in Bitcoin, remember to buy low and sell high and keep in mind that there is always the possibility that the low may not ever get higher.

2. You Will Have to Pay Taxes on Bitcoin

Bitcoin is not exempt to taxation and the type of taxes that you will have to pay are extremely complicated. If you are solely an investor, paying taxes will be relatively easy because you will only have to pay the capital gains and losses of all the Bitcoin that you have bought and sold. If you are a miner or you earn Bitcoin through games and other means, the taxes become much more difficult. Not only will you have to pay taxes on capital gains, but you will also have to pay taxes on Bitcoin as if they were a paper currency and you might possibly have to pay self-employment taxes on that earned Bitcoin as well.

3. There Is Always the Risk of Your Bitcoin Being Stolen

Security comes at a price, and that is especially true when it comes to securing your Bitcoin. Online wallets and free digital desktop wallets are always at risk of being hacked. Even high-end wallets that are expensive aren’t completely secure. Not only that but if you lose the security keywords that are given to you when you first create your wallet, your Bitcoin is gone forever. If you want to prevent these things from happening, make sure that you purchase a secure wallet and store your security words in a place that will keep them from harm. Also, store your Bitcoins in several wallets. If something should happen to one wallet, whether it be hacking or loss of your security words, you will not have lost all the Bitcoin that you own.

So, is Bitcoin a good investment? It all depends on those who are investing in the digital cryptocurrency. If you are interested in cryptography and you believe in what Bitcoin is and what it is trying to achieve, then you should probably invest in it. If you are an investor who doesn’t understand the mechanics behind Bitcoin and is looking for a way to make money, this probably won’t be a good investment for you. For everyone who intends to invest in Bitcoin, remember the 3 things that have been listed in this article before investing any money into Bitcoin.

Is Bitcoin a Good Investment

Is Bitcoin a Good Investment?

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