Investing in Bitcoin: Here’s What You Must Know About It
Looking to invest into the latest and hottest currency of the year? Then you should learn more about cryptocurrencies and Bitcoin.
It has been only a couple of years since Bitcoin has risen its value and at the beginning of December, 2017, it saw a tremendous rise: £13,000. In just a week, the Bitcoin has increased by some good thousand pounds.
Not Your Usual Investment
Cryptocurrency is not a usual investment, as it is only a virtual coin that cannot be touched. It gets created through ‘mining’. What does that mean, you might ask yourself.
People mine Bitcoin through computers that will operate mathematical formulas and will check the transactions of Bitcoin that get written in a blockchain.
Yes, it sounds nothing like you have heard before. What is a blockchain? It is a ledger that records all the Bitcoin transactions.
In short, people are paying for a currency that is digital and it is worth only what people want to pay for. The cap for Bitcoin will reach 21 million. After it reaches that amount, the systems will automatically shut down and the value of a Bitcoin might get higher, because it will become rare - like gold and diamonds.
It sounds great, but as all investments, it is a risky and yet an attractive investment. Then add the fact that it is a digital currency, and it will all get even more risky.
The Pros and Cons of Investing in Virtual Currency
Financial regulators are warning people that they will lose their money, as Bitcoin is not a regulated currency. It does not have checks, balances, it doesn’t follow government rules or guides and so on.
The pro of owning virtual coin is that you could pay things with it or invest in it, without paying taxes. And the great thing is that it is impossible to get regulated.
But the cons are many, one of which is that it is highly volatile - its pricing can rapidly rise or fall.
Andrew Bailey, The Head of the FCA stated that ‘if you want to invest in Bitcoin be prepared to lose your money – that would be my serious warning’.
Being a decentralized currency, it is impossible to regulate the transactions in a country, as they cannot get traced. The blockchain record the transactions, but not the personal details of those that have made the transactions. While the Bitcoin is a highly volatile currency, a lot of illegal money get laundered through it.
Wondering what will happen to Bitcoin or other cryptocurrencies this year? We can only wait and see if these virtual coins will be a good investment or not.