Is it safe to invest in bitcoin?
Is it safe to invest in bitcoin?
Okay so first let’s understand what are Bitcoins:
Bitcoin is currency in the digital form introduced in the year 2009 in China. It was created by a group of programmers known as Satoshi Nakamoto. The motive of this currency is to make money free.
This currency is peer-to-peer and transactions take place between users directly. Also, these transactions are verified by network nodes and get recorded in a public digitized data called a blockchain.
So nowadays people are more focused on high return investment. They don’t want to lose a single chance for grabbing the right opportunity and one of the opportunities is to invest in bitcoins.
Then the question raised is it safe to invest in bitcoins?
Investing in cryptocurrencies is one of the riskiest ways of investing your money. Some people think that it’s the future of finance, but some people think that it’s just a bubble since cryptocurrency markets are unregulated and subject to market manipulations.
But many people feel Bitcoin has great potential, despite its bull run and sudden flash crash. So, let’s look more at the core fundamentals of bitcoin:
- Reserve currency: Bitcoins are the reserve currencies of the cryptocurrency markets, that means if any new ICO (Initial coin offerings- it’s the IPO for cryptocurrencies) launches then you typically will need Bitcoins to buy that.
- Halving of bitcoins: In every 4 years, the Bitcoins protocol automatically reduces the volume to half that can be mined due to its algorithm made by the programmer. It started from 2009 and it will end in 2140. In 2009 each block contained 50 bitcoins which were mined in every 10 minutes, then it got halved in 2013 to 25 then again in 2016 it came down to 12.5. So total 32 halving will be there and the final bitcoins will be super hard to get and until that time bitcoin price too would be super high for miners to mine those last ones.
- Standard digital gold: Bitcoins represents digital gold, it’s safest when economic challenges are around. For instance, during Brexit, it rose to 15%. So, this role has been important during global uncertainties.
- China as a source of the world economy: China’s role in the world economy is increasing. Since China currently has some currency restrictions thus money is being shipped out of the country through Bitcoins. So, this will drive increased usage of Bitcoins.
- Cryptocurrencies will become mainstream: Cryptocurrencies will become the standard for international trading. Although Bitcoins would be a minor cryptocurrency. But in future, many cryptocurrencies will be created and used.
On the downside:
- China’s New regulations: China is planning new regulations for Bitcoins and they have taken some proactive measures like stopping/limiting margin trading on bitcoins.
- What Bitcoin represents – Internationally some countries name it property, some call it a commodity, some call it as currency. So, it does not have an international unique identity.
- Donald Trump’s anti-Muslimism stance: If this continues then there may be some negative actions by the regulators of the market. Since Bitcoins trading is done anonymously thus it may affect severely.
- Exchange hacking: 1 out of 3 of all exchanges have been hacked and if any bad news comes in future related to this, then that will send Bitcoins into freefall.
- Hacking of Bitcoins itself: Technology is going ahead and in future hackers may de-stabilize Bitcoins through a major hack. Though it has never been hacked to date and has fewer chances of happening.
Thus, on balance, there are strong points in favour. But technology is so advanced we can’t predict the unknown risks involved in it.
So, if you decide to invest in Bitcoins, never invest more than you can lose as it’s riskiest you could lose everything.
Always remember this dialogue….
ANYTHING ABOVE SHOULD NOT BE CONSIDERED AS FINANCIAL ADVICE