Satoshi Nakamoto, the inventor of Bitcoin. He implemented Bitcoin software and released in 2009. Bitcoin also was known as “digital cash” is the first cryptocurrency. Bitcoin and cryptocurrency have gained popularity in recent past. But is it really safe to invest in Bitcoins and other cryptocurrencies? We are going to discuss the topic in detail so that you get a better idea about your next step.
So, if you have invested in Bitcoins then there is bad news for you! Bitcoins (BTC) and other cryptocurrencies price tumbled after South Korean cryptocurrency exchange Conrail was hacked! Cryptocurrency lose $42 billion!
Bitcoin shared a great bounce on May 29 but failed to break out of the 20-day EMA. This led to drop in bitcoin prices. Once price broke below the support levels, people were forced to liquidate their long positions. Therefore, you can see a rise in the selling of bitcoins when the digital currency broke below the critical support level of $7,100.
Cryptocurrency suffered huge loss but Ethereum held above the resistance line on June 09. Though it did not climb to buy levels at $630 on June 10, it re-entered the channel and slumped to $496.27 which is pretty much close to the May 28 lows of $492.5.
Litecoin has continued to fall! And this is the third time it has gone below $107
So, if you have no idea what you are doing, then it’s better you take some expert’s advice and then make an informed decision. You should play it safe! Let’s start with the basic introduction.
What is cryptocurrency
Cryptocurrency is a digital asset used to regulate the generation of units of currency. It is a virtual currency that uses cryptography method for security. Mining technology is used to create digital money which controls its creation and secure transactions while hiding the identities of its users. It is no longer possible to count the number of cryptocurrency on one hand. Thanks to cryptocurrency, no government in involvement between your transaction.
All the transactions in cryptocurrency are processed on a shared database called Block-chain. Few types of cryptocurrencies, other than bitcoin.
Ripple: It is Real Time Gross Settlement (RTGS) system currency exchange. It is also called Ripple Protocol.
Ethereum: is an Open source, block-chain based platform, and operating system.
Litecoin: First currency to use Lightning Network.
What is Bitcoin
It is an International payment system. Bitcoin (BTC) is the first decentralized digital currency because no bank is involved! Anyone can use Bitcoin. The transaction is based on the peer-to-peer network. In other words, you can directly send bitcoins to others as a gift or reward without revealing your identity! No one will come to know your identity!
Jack Miller, chief information security officer at SlashNext says “Unfortunately, many people assume that digital Bitcoins are somehow more secure than regular financial transactions.” Investing in cryptocurrency is actually risky because there is no bank or central body involved! So, if anything goes wrong with your transaction, you can’t blame anyone!
Is it risky?
Andrew McDonnell, president of AsTech, says “holding bitcoin requires maintaining the confidentiality of a Bitcoin address’ private key.” A bitcoin key is a secret number that allows bitcoins to be spent. So, if this private key is compromised, then hackers can send all the users’ bitcoins to themselves. Therefore, bitcoins keys are at risk. A major key will be to identify the target of hackers. Another very important thing to notice is, cryptocurrency is not backed up by any physical body, therefore, it is next to impossible to trace any fraudulent activities! this is why investors and traders should be cautious!
Problem with bitcoin and cryptocurrency
This is the major hurdle for bitcoin users. Cryptocurrencies are not declared as legal tender. The Reserve Bank of India (RBI) does not recognize cryptocurrency. According to a press release dated 1 February 2017, RBI has not issued licenses to a company for trading in any virtual/digital currencies. RBI also cautioned users, investors, traders, etc. dealing with cryptocurrencies will be doing so at their own risk.
Neither commodity nor currency
Cryptocurrency is ‘mined’ using complex formulae, so, we cannot actually call it a Commodity. It is not controlled by any government, therefore, it called as ‘democratic’. This is why cryptocurrencies don’t fall into any category. “It can be very risky for businesses, industries, and people to trade or invest in bitcoins as it is just a mathematical formula,” says S.P. Sharma, Chief Economist
Due to the lack of government involvement, terrorists and hackers are targeting cryptocurrencies to their advantage. The identity of bitcoin users remain relatively anonymous and hackers have found ways to mask their addresses. This makes it difficult for government authorities and banks to trace such illegal activities and frauds!
If you are using bitcoins or any other cryptocurrency, then you should be okay with value getting to zero! Investing in cryptocurrency is risky because prices are highly volatile! Bitcoins price rise up to 750% in 2017. Recently, prices fell 30% after cryptocurrency was hacked.
These cryptocurrency prices are not regulated by anybody, so a number of people get to start investing in it and prices climb higher! This might lead to the formation of bubbles, floating high but they are going to burst later.
At the beginning of the year, the analysts projected high target for bitcoins in 2018. And even after sharp fall in Bitcoins prices in earlier this January, many did not revise the targets! Stock analytics firm Trefis is also not very enthusiastic about the possibility of Bitcoin prices bouncing back this year. It has lowered its year ending price forecast from $15,000 to $12,000.
So, if you are planning to invest a huge amount or if you are willing to put all savings, then be careful! You might end up losing more money! This is the worst thing about cryptocurrency, you can’t really predict anything, the prices an go down to the lowest and you will be helpless! You can try investing small amount but make sure you keep a backup of your bitcoin key, keep your investment safe in cold storage (offline) unless you want to trade!
Tech-savvy and a passionate blogger. I have done software engineering from the University of Mumbai. Technology Specialist 2.0 in DOT NET. I also have my personal website http://glamourbytes.com/