A smart investor is always a one who identifies the opportunities in the market and moves according to such trend. Here i came with a topic that the investment professionals are talking about over all media platforms. It is non other than Bitcoin.
Yes, its a greatest source of return if you are a smart investor. If you haven’t invested in it, i would say that you have lost some really nice sacks of money. But what is this Bitcoin? How can an investor put his money in it instead of going with stocks or commodities?
What is Cryptocurrency? What are different types of it?
“A cryptocurrency is a medium of exchange normal currencies but has designed for the purpose of exchanging digital information through a series of process with certain principles of Cryptography. Basically this Cryptography is used to secure the transactions and control the creation of new coins”.
There are different types of Cryptocurrencies. But 6 of them are conidered as most important ones. They are
- Bitcoin (BTC)
- Ethereum (ETH)
- ZCash (ZEC)
- Monero (XMR)
- Dash (DASH)
- Stellar (STR)
What is Bitcoin and How it works?
Lets get discuss about it in brief. Bitcoin is a world wide cryptocurrency & digital payment system that uses peer to peer technology to operate. This cryptocurrency mechanism doesn’t need any approval from a bank or financial institution for transacting. Its totally a decentralised form of currency carried out collectively by a network. Being an open source payment platform, nobody owns control of it and everyone take a part of it.
If i would define the term “Transaction” in terms of a Bitcoin, i would say it as “A transaction between Bitcoin wallets that gets included in the Block chain”. It keeps a scereat part of data that used to be called Private key or seed which is used to sign the transactions by giving a proof that they have come from the owner of the wallet.
What is Block chain technology and How it works?
Block chain technology is “a global network of systems that records all Bitcoin transactions”. As i said earlier that Bitcoin is managed by its network and not any central authority. It operates on a user to user basis.
When it comes to the working part, it collects all the transactions in the form of various Blocks which will happen at a duration of every 10 minutes on a random basis. In terms of Block chain analysis, this process is known as “Mining”. When a particular user transacts through Bitcoin, it transfers the ownership of Bitcoin Balances from one user to another user (Owner). Each of these blocks represents an unique update of owners balances on network.
Now i have cleared your basic queries regarding Cryptocurrencies, Block Chain analysis and Bitcoin. Right? So let me give you some really good insights when you are looking to mint some money out of it as an investor. I am gonna mention 4 major things that you should keep in mind when you are investing in Bitcoin. Ready? Here we go.
Top 4 things that you should know about investing in Bitcoin
1. Very High volatility
As said by Vivek Belgavi, Fintech leader of pricewaterhousecoopers (PWC), “There is no enough ecosystem surrounding bitcoins to allow fundamental analysis to study it as an investment. The ultimate meaning of this scenario is that people are investing with improper information and entering into the era of speculation.
The prices of cryptocurrencies have not been regulated yet. Hence more people enter the market to invest, the prices tempt to get high and such price even climb high ever. This situation might lead to a phase of getting huge losses. Hence the important thing that you should remember here is that “Investment in Bitcoin involves very high risk and the prices are extremely volatile”.
2. Unregulated Investment platform
Unlike other safest investments which have been approved by governments and financial institutions, cryptocurrencies are not regulated yet. Where in some countries and specific state jurisdictions, trading in cryptocurrencies are considered as an illegal activity.
If you do a transaction through your credit card and got to know that it was a fraudulent activity, Bank takes the responsibility and acts as a compensatory system with respective investigations. But if you found that you have deceived in Bitcoin trading, it is highly impossible to retain your money. So one more thing you should keep in mind is that “It is highly dangerous to invest through unregulated trading platforms”
3. Liable to an illegal activity
The cryptocurrency space has been widely utilizing by extortionists and terrorists to their advantage because of lack of government control. Due to these extreme illegal possibilities, trading in cryptocurrencies has banned in some of the countries. In countries like India, trading in virtual currencies is still a doubtful activity due to non-approval of regulatories like Reserve Bank (RBI).
4. Don’t Invest, If you can’t understand
This is the common mistake that every one used to do when they are looking for better returns. Investing in virtual currencies consists of high risk and prices of such Bitcoin are highly volatile. That main thing to remember when it comes to safety is that “Centralized mechanism”. But this platform is completely deregulated and no proof of getting funds back when you loose in case of fraud.
You should be well enough to understand the functionality behind this system and smart enough to take the decisions based on drastic price performances. Otherwise it is not a platform to deploy your funds to seek good returns. Simple thing to remember is that “Don’t go for it, when you have no idea about it”.
If you are looking for other information on Start-ups, Capital Markets, Accounting, Taxation, Business incorporation and its legal formalities, do read more articles on my blog.
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