Home > Guide > Should You Invest in Bitcoin? The Real Value of the World’s First Cryptocurrency
Crypto Investment Advices,
Beginner, Bitcoin, Guide,

Should You Invest in Bitcoin? The Real Value of the World’s First Cryptocurrency

Do you want to make money on cryptocurrency? Forget about Bitcoin. There are more profitable and less risky ways to invest in cryptocurrency. Read the article for more detail.

Read time: 8 min
Cryptoassetsrank.com Published on Jul 05, 2018
'Should You Invest in Bitcoin? The Real Value of the World’s First Cryptocurrency' article image

Do you want to make money on cryptocurrency? Forget about Bitcoin. There are more profitable and less risky ways to invest in cryptocurrency. Read the article for more detail.

The real value of Bitcoin

Bitcoin does not generate profit, does not pay dividends or grant ownership of property. There is nothing behind its high price except the investors’ hope to sell it later at a higher price. When the investors lose hope, they will invest into a different asset, which will cause panic on the market and a drop of Bitcoin price.

Bitcoin has not succeeded as a digital currency. Bitcoin was based on the first generation blockchain technologies with a rigid limitation of the network capacity — 350,000 - 500,000 transactions per day. The increase in the number of users and transactions will lead to unconfirmed transactions queues and an increase of fees.

It already happened in 2017, when at the peak of Bitcoin popularity it took several days to process BTC transactions. At that time the system could process 4 transactions per second, which was definitely not enough, that is why a queue of 200,000 unconfirmed transactions emerged.

By the end of 2017 the problem had been partially solved by the SegWit update that increased the network capacity up to 7 transactions per second. However, that speed is not enough if Bitcoin replaces fiat money in trade and financial operations even in a small country. The speed provided by Visa is required for that: 24,000 operations per second.

Bitcoin has not succeeded as an ICO platform. Only 1% of all crypto startups is based on Bitcoin. The reasons why Bitcoin blockchain technologies are unpopular among the ICO organizers are as follows:

  • no tools for creating third-party applications and cryptocurrencies;
  • low capacity: 7 transactions per second;
  • the average fee is $1;
  • no fully functional smart contracts;
  • no scalability.

The Only Advantage of Bitcoin

Bitcoin is the principal currency on the cryptocurrency market. It is the most popular cryptocurrency with a wide spread and, as a result, the highest market cap and price.

Popularity of the search terms “Bitcoin” and “cryptocurrency” in Google Trends

When people want to invest in cryptocurrency, in most cases they mean investing in Bitcoin because they do not know other cryptocurrencies. Those who know about other coins, also buy BTC in order to exchange it for other cryptocurrencies because it is the only way to buy rare coins.

4 reasons why you shouldn’t buy Bitcoin

1: Technological handicaps

The growth of Bitcoin blockchain size. At the beginning of 2017 the total size of the Bitcoin blockchain was 120 GB. By the middle of 2018 it increased up to 170 GB. It will continue to grow exponentially until the chain size becomes too big for common users.

Bitcoin blockchain size according to blockchain.info

Software limitations. The options of Bitcoin blockchain are limited to buying and holding coins. This is not enough. Other cryptocurrencies use smart contracts and can immediately stop shady transactions.

Irrational energy consumption. Mining of coins requires large computational capacities that consume a lot of electricity. At the beginning of 2018 the Bitcoin network consumed the same amount of energy as Slovenia, a country with the population of 2 million people. According to the forecasts, by 2020 the Bitcoin energy consumption will be equal to that of Denmark and by 2030 — equal to that of France or Great Britain.

Energy consumption by the Bitcoin community according to digiconomist.net

Buying, holding and investing in Bitcoin mining increase the amount of wasted energy, that is why the second and third generation cryptocurrencies use more cost-efficient and eco-friendly ways of coin mining: PoS, PoI, PoQ, PoA, PoC.

Scalability issue. The SegWit update has not solved the scalability issue. It has only postponed its solution for several years.

2: The Greater Fool Theory

If an asset does not generate income and does not grant ownership rights, the only way to get profit from investing in it is to persuade somebody to buy it at a higher price. The asset continues to grow as long as there are buyers who are ready to offer a higher price. As soon as the buyers vanish, the asset price drops and the losses become the burden of the last buyer — “the greater fool”.

Investment bubble stages according to The Greater Fool Theory

Bitcoin matches this rule completely: it is bought in order to be sold later to other investors at a higher price. Nobody wants to use BTC to pay for goods and services because it is not reasonable to pay with the currency, the price of which can grow the next day.  

Bitcoin price dynamics at the cryptocurrency exchanges

Should you buy Bitcoin now, according to The Greater Fool Theory? No, you shouldn’t, because the price peak has already been reached.

3: Risk-to-reward ratio

The investment potential is assessed by two key parameters: a potential profit and probable loss of the invested money. By investing in Bitcoin, you could get 600-1,500% profit if the BTC growth rates were the same as in 2017. Those are big figures but they are outweighed by the risk of losing all the invested money, which is possible due to high volatility of the cryptocurrency market. Bitcoin and any other cryptocurrencies are high risk assets.

Bitcoin Price Decline in 2017 Correction ≥ 30%

Days in correction
Correction Start Date
Correction End Date
$ High price
$ Low price
$ Decline
% Decline
16
10 Mar
25 Mar
1,350
891
459
34
3
25 May
27 May
2,760
1,850
910
33
35
12 Jun
16 Jun
2,980
1,830
1,150
39
15
2 Sep
15 Sep
4,980
2,972
2,008
40
5
8 Nov
12 Nov
7,888
5,555
2,333
30
48
12 Dec
2 Feb 2018
19,666
8,095
11,571
59

In order to minimize the risks, you should invest in high risk assets using the strategy of venture capital funds: divide the invested sum into lots of small parts and invest them into different startups. On the cryptocurrency market it is better to invest into projects at the stage of initial coin offering because in this case the return on investment will be the highest. You can learn about the tokens currently available for investment from our ICO List.

Potential profit for 10-dollar investments into the best ended ICOs

Name
Starting Investment
ROI ICO
Curr. Price
Profit
Nxt
$10
1,982,617%
$0.118963
$19,826,160
Ethereum
$10
166,923%
$519.443
$1,669,220
IOTA
$10
62,876%
$1.27841
$628,750
CargoX
$10
44,234%
$0.0399009
$442,330
Covesting
$10
33,323%
$0.642739
$333,220

By buying Bitcoin at the beginning of 2017 and selling it at its peak price, you could have received 1,600% profit. Compared to investments into ICOs, it is a small income that is not compensated by the lack of risk diversification.

4: Conservatism of Bitcoin community

All large events and improvements of Bitcoin blockchain in the past have caused the division of its community into two groups. The larger group in this case becomes the “original” Bitcoin, while the smaller group forms a Bitcoin fork.

Bitcoin Forks Chronology

The following events made the cryptocurrency price drop dramatically:

  • -15% because of Bitcoin God hard fork;
  • -4% because of Bitcoin Cash fork;
  • -7% because of Bitcoin Classic fork;
  • -20% because of Bitcoin XT fork;
  • -23% because of an unnamed fork.

This is the reason why the Bitcoin community is apprehensive of improving their blockchain. Compared to other cryptocurrencies, it resulted in technical handicaps of the BTC platform and made it impossible to improve it dramatically.

in this article
Did you enjoy that? Why not share this article