Note. if you’re not familiar with the Clever Octopod and other aquatic block characters you may want to go back to Post 3 and familiarize yourself with the blockchain ecosystem.
Blockchain Investment Potential
The cornerstone of this argument is that while blockchain technology may have some potential, it is not worthwhile investing in cryptocurrency like Bitcoin for one or more reasons (The Motley Fool, Time). This argument is not saying you’re bound to lose your money if you do, but rather that cryptocurrency have certain features that make them undesirable as investment prospects. Some of the common arguments for not investing in cryptocurrency are:
- Volatility: Cryptocurrency is notoriously volatile. If this is enough to put you off an investment then cryptocurrency is not for you at this stage. It is important to remember however that volatility by itself does not pose a significant risk for long term investors as long they are willing to hold through bear markets. In fact, if you play your cards right and trade like a clever octopus, you can benefit from this volatility by buying in or increasing your investment during bear runs.
- Security concerns: While this is a valid point, it can be mostly eliminated by taking the right precautions during the purchase and storage of your coins. Having said that, we completely understand if someone does not feel comfortable investing their money in cryptocurrency due to security concerns. Hopefully the cryptocurrency community will continue to develop safer and more accessible ways to invest as this seems to be one of the main turn-offs for most people looking to invest medium to large amounts of capital.
- Regulatory risk: Regulatory risk refers to the risk of governments trying to restrict your access to Bitcoin due to concerns regarding its anonymity or lack of regulation. We have already seen this happen in China (Bloomberg) and it is certainly not outside of the limits of possibility that it could happen in other countries too. If it does, it will have a negative impact on price. Having said that, Bitcoin’s reputation has vastly improved over the past 3 years and most governments around the world have a permissive attitude towards it (Crypto Compare). Our belief is that most open governments around the world will remain positive towards cryptocurrency and continue to develop policy that regulates the market without restricting people’s access to it. This has certainly been the direction most governments have headed in over the past few years (The Telegraph, Brave New Coin, CNBC).
If the above arguments are enough to stop you from investing in cryptocurrency that is completely fine. Any investment decision needs to take into account both the risks and potential rewards and we all have different levels of risk tolerance. Our personal opinion is that the upside of cryptocurrency investment greatly outweighs the risk.
After spending a week researching arguments against blockchain, we actually found ourselves more bullish on the overall potential of the technology. Coherent articles with sensible arguments against blockchain are few and far between and the overall sentiment of the technology sector seems to be very positive. Despite the huge potential of the technology, it is important to remain skeptical when assessing individual use cases as blockchain technology is not the solution to every problem in the world. What are your thoughts? Are there any arguments against blockchain technology that we did not cover? We would love to hear from you on our message board below! Our next few blog posts will discuss various aspects of cryptocurrency investment, starting with a closer look at ICOs next week. Hope to see you there!.