Reasons to add Bitcoin to your portfolio

I am not a financial advisor, and this article is simply my personal opinion. I’ll go over a few things to think about before committing a small portion of your net worth to an alternative investment like Bitcoin. All investment decisions should be made after extensive research or consultation with a financial fiduciary.

1. Scarcity

The limited supply of 21 million Bitcoins is arguably its most appealing feature. Bitcoin is a digital ledger that requires a block, which is a digital page of the network’s most recent transactions. Mining is carried out using the processing power of GPUs or ASIC hardware, which is programmed to solve a series of complex problems. This incentive structure necessitates miners using the most recent hardware in order to maintain the Bitcoin network’s security. Bad actors are unable to manipulate the transaction history of Bitcoin’s blockchain using this system.

The reward for each block is cut in half after every 210,000 blocks mined. This ensures Bitcoin’s scarcity and increases security. In 2009, each solved block was worth 50 bitcoin to the miner (BTC). A miner will receive 6.25 BTC in 2020, and this figure will be cut in half until the year 2140.

There is no other form of money in existence that can be verified as precisely as Bitcoin’s scarcity. To confirm these numbers, all you need is a computer, an internet connection, and the Bitcoin Core wallet. Once you’ve configured Bitcoin Core, go to “Window” and then “Console,” where you can type in the commands required to verify everything that happens on Bitcoin’s blockchain.

There are several blockchain explorers that can parse this data and present it to users in a more readable format. Additionally, users can create or customise their own blockchain interface if they so desire. Because this type of record keeping is so easily accessible around the world, it is a nightmare for criminals. Most people still believe that Bitcoin can be used for illegal purposes, but it would be the least desirable way to launder money. It would be much easier to avoid government scrutiny if a criminal laundered billions of dollars in physical cash rather than using Bitcoin. Bitcoin is by far the most convenient way to transport money across space and time, and it can be easily tracked using sites like oxt.me. Governments, on the other hand, would prefer that their citizens use a network like Bitcoin to conduct transactions.

The main issue governments have with Bitcoin is that it is not centralised or controlled, which is why many governments have been slow to develop industry regulations.

2.Decentralized 

The second most important advantage of using Bitcoin is that large entities such as corporations or governments cannot control or confiscate it. While miners can mine and validate each block in the blockchain, nodes (computers) can store the entire Bitcoin transaction history. Every node confirms with the others that a new block of transactions has been added to the ledger. This allows the Bitcoin network to be audited independently by a third party.

As long as there are miners willing to continue mining for the block reward, the network is self-governing. Miners and nodes can be found all over the world, and shutting them down would be impossible unless every country agreed to censor or ban internet use.

3. Transparency

All cryptocurrency transactions are recorded on the publicly available blockchain ledger. Anyone can use tools to look up transaction data, such as where, when, and how much cryptocurrency someone sent from a wallet address. Anyone can see how much cryptocurrency is stored in a wallet.

This level of transparency has the potential to reduce fraudulent transactions. Someone can demonstrate that they sent money and that it was received, or that they have the funds available for a transaction.

4.Bitcoin is inflation-resistant

The number of bitcoins created is mathematically metered and predictable, with a set schedule. The current supply of bitcoin is 19 million, with a cap of 21 million units.

5.Bitcoin is censorship-resistant.

Bitcoin operates on a decentralised network, which means that no single entity, such as a government or financial institution, controls it. Because of this, it is difficult for a single party to censor or restrict transactions, making it a censorship-resistant form of currency.

One of the key features of Bitcoin that appeals to many people is its resistance to censorship. It enables financial transactions to take place without the use of intermediaries such as banks or other financial institutions, as well as lowering the risk of transactions being blocked or frozen.

6.Institutions are investing in bitcoin.

BlackRock

June 2022, BlackRock’s Aladdin announced a partnership with Coinbase Prime to provide institutional clients with direct access to cryptocurrency, beginning with bitcoin. In addition to Coinbase Prime, Blackrock’s Aladdin could bring trillions of dollars into the asset class over the next few years.

Bank of New York Mellon

BNY Mellon launched a cryptoasset custody platform in October 2022 to protect assets for institutional investors. BNY Mellon, which controls more than 20% of the world’s investable assets, could use bitcoin to scale financial services more cost-effectively.

Eaglebrook Advisors

Eaglebrook Advisors and ARK Investment Management collaborated in October 2022 to provide financial advisors with access to actively-managed crypto strategies, such as direct cryptoasset ownership, low minimums, and portfolio reporting integration.

Fidelity

Fidelity officially launches retail bitcoin and ether trading accounts in November 2022, allowing investors to trade and custody them on its platform.

7.Bitcoin is seizure-resistant.

Bitcoin uses cryptography to secure transactions and operates on a decentralised network, making it difficult for any one party to seize or freeze a user’s assets. Unlike traditional bank accounts, which can be seized by governments or financial institutions, Bitcoin transactions are recorded on a public ledger that cannot be tampered with, ensuring that users retain control over their assets.

Furthermore, because the network is decentralised, there is no centralised point of control, making it more difficult for any one party to seize the assets of the users. This makes Bitcoin a potentially appealing option for individuals and organisations concerned about the possibility of having their assets seized or frozen.

8.History

Many investors avoid allocating a portion of their investment portfolio to Bitcoin because the industry is regarded as too speculative, young, and volatile. However, the tech and altcoin communities believe that Bitcoin is too old and will be surpassed by a newer and “faster” coin.These opinions may be influenced by an individual’s time horizon, self-interest, or a lack of further investigation into why Bitcoin already solves the problems that most altcoins claim to solve. Whatever camp one belongs to, one cannot deny that Bitcoin continues to provide the most stability, security, and return for its holders.

Consider comparing the amount of time Bitcoin has spent on the open market versus the S&P 500 for those concerned that it has not had enough time to prove itself. Bitcoin is traded 24 hours a day, seven days a week, including holidays, and it is not affected by trading halts. If a Bitcoin exchange decides to suspend trading for any reason, there are several other exchanges to choose from. In the worst-case scenario, where all exchanges are prohibited in a country, you can still trade Bitcoin locally if necessary.

Conclusion

Adding Bitcoin to your investment portfolio can potentially offer high returns, diversification, a limited supply, decentralization, and liquidity. However, it’s important to carefully consider the risks involved, as the cryptocurrency market is highly volatile and subject to fluctuations. Before making any investment decisions, it’s advisable to thoroughly research and understand the market and to consult with a financial advisor.