Sitting in 2020, we don’t actually need to define cryptocurrencies or Bitcoin to a person who even has the slightest of knowledge about the latest technological advancements and developments in the financial space. Having been introduced in 2009, Bitcoin, the digital coin that holds the crown for being the world’s first cryptocurrency, has now become part and parcel of payment settlement pedagogies worldwide.
Where the world leaders are going gaga over Bitcoin and the excellence of its underlying technology, blockchain, there still exists a class of elite businessmen who prefer to maintain distance from the new-age currencies. One such name is Warren Buffett, a renowned business icon, investor, and philanthropist hailing from America. He serves as the chairman and CEO of Berkshire Hathaway. The spearhead is a keen observer of the financial world and has never shied away from giving his sharp remarks on the latest offerings. Interestingly, Warren has been quite skeptic about cryptocurrencies. He, on multiple occasions, has questioned the authenticity of virtual currencies and has kept himself away from getting involved in its trading or investments.
The leader’s cold attitude towards cryptocurrencies has been a worrying thought for all the big crypto players who are anxiously willing to see his participation in the industry. Investors like Warren Buffett can play a significant role in bringing cryptocurrencies to the mainstream business. His choice of investments and opinions can bring about a major boost for the crypto trading activities. Though there can be multiple reasons for big investors like Warren not entering in the crypto world, one of the prime reasons is the uncertainty revolving around them.
In this article, we are trying to culminate all the core factors which an investor looks for or finds before investing in a property or stock. This will help us understand if Bitcoin satisfies those criteria successfully or not. Have a look:
Chief Characteristics of Good Investment
- Objective fulfillment– The financial sector is ruled by investors from different divisions and with varied objectives. While some investors look for quick gains, others look for long-term profits. Thus, it becomes significant for the investors to opt for investment plans in which the risks involved do not fall in contrast with the objectives set by the investor.
- Safety– The safety of funds is a prominent factor in deciding whether to invest in a project or not. An investor aims to earn back his principal amount along with an additional interest profit at the end of the maturity period of the investment. Investments come with their own risks so it becomes important for people to go through all the ifs and buts related to the project before investing funds. Government securities and instruments often guarantee repayment of interest and principal, and so are quite popular.
- Good return– Return defines the profit attached to investment and it is consistent with the risk assumed by the investor. The more the risk involved in a project, the higher the returns on it. Investment in government securities offers low risk and high safety, but such investments also give low returns to investors.
- High Liquidity– An investment with an average return value and high liquidity is much profitable in comparison to an investment offering high returns and low liquidity. Investments are made to lend support to the investor at the time of need, and if the project fails to satisfy cash requirements, then it is simply an unnecessary blocking of funds.
- Hedge against inflation– Investors coming from countries with an unstable economic structure prefer hedge over inflation so that the value of their investments do not get reduced with time. They look for gains which neutralizes the deteriorated value while giving a profitable return.
- Concealability– Nobody prefers to reveal any information related to their investments, not even with their family and friends. This helps them to keep away the risks involved with the revelation of financial information. An investment made in securities, bonds, and shares is easier to conceal in comparison to real estate projects.
- Tax protection– Tax plays a major role in deciding the choice of investment. A prudent investor opts for front-end tax incentives while making an investment and tax relief while accounting for incomes.
Now, let us see the limitations which Bitcoin faces regarding its wide-scale adoption. The pointers include:
- High Volatility– Cryptocurrencies are highly dynamic and their values fluctuate drastically over time. Investment in Bitcoin or other cryptocurrencies involves high risks, which often restrains investors from making investments in crypto. As there is no central authority governing cryptocurrencies, they fail to evolve as a mainstream project.
- Limited utility– Despite becoming the leading cryptocurrency in the world in terms of market capitalization, Bitcoin still lacks a wide scale utility network for itself. Not many entities or individuals prefer making a transition from their regular cash mode to virtual currencies.
- Lack of legal status– Governments and financial bodies across the world have been keen to give a well-drafted regulatory framework to cryptocurrencies but have failed miserably. Lack of a proper legal setup had been a significant setback for cryptocurrencies.
- Blockchain or Bitcoin– When an investor makes an investment, he/she is allotted the required crypto tokens. However, it is the blockchain technology that forms the basis of the crypto world. Buying Bitcoin does not give an ownership status to the purchasers. If the core blockchain of a token becomes the basis for development within an industry, the native token holders don’t need to receive the benefits. Thus, to earn profits, investors need to buy stocks of that firm and not crypto.
- Lack of knowledge– Cryptocurrencies are a new concept, and so people are unaware of the terminologies associated with them. This exposes the investors to frauds, illicit transactions, wallet hacking, etc.
- Ponzi schemes– As the industry is gaining leverage, the market is flooded with a wide range of products. This situation paves the way for the entry of Ponzi schemes, which make the investors lose their valuable assets.
- Scalability issues– Bitcoin, unlike other payment methods, has limited scalability. Management and operation of huge trade volumes are quite difficult on the blockchain network as processing speed per block is quite low.
Conclusion
After reading the pointers above, you are now well aware of why prominent business personalities like Warren Buffett do not prefer making investments in Bitcoin. The crypto coin has its own set of limitations, which pro-investors like Warren cannot afford to avoid. But still, if you want to invest or trade in Bitcoin, then check Bitcoin Revolution – An auto trading platform. It is an automated trading platform which mainly focuses on making profit from Bitcoin. Explore to know more about this innovative platform or for the latest news on Bitcoin.
