The Risks of Bitcoin that investors need to be aware of
Risk one-The volatility of bitcoin
Everyone knows how volatile bitcoin is and those who invest in this will see the value of this cryptocurrency fluctuate quite dramatically. Unless you can cope with the rises and falls of bitcoin then investing in bitcoin is not for you. There is little to be gained if the loss of your capital is going to cause you to lose sleep. I cannot stress enough the importance of using your discretionary spending money to play the cryptocurrency market.
What is discretionary spending?
It is money which is spent on travel, eating out, entertainment, hobbies and sports.
You would never spend the rent money or money which has been set aside for your retirement on entertainment such as a day out at the races so you should not use that money for playing the cryptocurrency market either.
A company called “Cryptopia ” which was an online bitcoin trading platform held funds invested in Bitcoin. It was hacked into and all those with bitcoin invested with cryptopia lost their money. There were some sad stories concerning the large amount of money lost by some individuals.
It has to be repeated that you should never play cryptocurrency money with funds you cannot afford to lose or to place too many eggs in the one basket as many of these investors appear to have done.
The other thing I have to add is that the actual amount of money lost by cryptopia investors is likely to be grossly inflated due to the rising price of bitcoin. If someone invested $1,000 in bitcoin and this rose to $10,000 in a few years only for them to lose the lot. It will go on record that this person has lost 10k when in actual fact, it was just 1k they lost.
Risk three-Lost passwords
An Australian man is locked out of his bitcoin wallet because he cannot even remember his password. The website where he has his bitcoin will lock him out of his wallet permanently if he has made ten failed login attempts. He has made eight. He has over 300k in his bitcoin wallet.
The lesson here is to write down your password and keep it locked away in a safe place.
The other piece of advice is to diversify your portfolio so that if something goes horribly wrong you will not lose too much in one hit.
Risk four-Government controls
Governments have the ability to ban crypto trading; China has done just that. Several agencies in China have joined forces to ban what they describe as “illegal” cryptocurrency activity. This is not to say other countries will follow suit but it just illustrates a point that governments do have the power to do this.
Two things in life are certain, death and taxes. You can be sure that at some point the taxman will want a piece of your bitcoin pie. Whether it be in the form of a Capital Gains Tax or the increased value of bitcoin. It should be remembered that if you are being taxed on the Capital Gains of your bitcoin then it may be possible to claim tax back on any capital losses. A good accountant will be able to advise you here.
Whatever form of capital gains you are investing in it should always be remembered that when there is the opportunity for capital gains there is also the possibility of capital loss. Investing in cryptocurrency is risky therefore, it cannot be stressed enough that the money you invest in bitcoin must be money you can afford to lose.
The Risks of Bitcoin that investors need to be aware of
If you are asked what the birth of cryptocurrency would bring to the world of finance, the first thing that will probably cross your mind is what is cryptocurrency? This thought however, will only come to the mind of people who are not well versed with the existing online currencies. But, if you are one of the few but dominant figures who know cryptocurrencies even if your eyes are closed, you would be able to answer the question more elaborately.So to speak, the actual start of the turmoil existed when bitcoin was introduced to the world and eventually became the most famous and wanted cryptocurrency. This project was started primarily to answer the lingering complains of people whose money and assets are held by one centralized unit (and often intervened by the government itself) and whose transfers are limited and frozen at a timely basis. With the start of Bitcoin, many had the option to acquire an online coin or currency that they can use similarly with fiat money. Although acquiring it is tedious and requires resources, many were attracted to it from the very start because many were wanting to break away with the confinement of a single entity controlling everything else in terms of finance.Slowly, Bitcoin started to gain actual monetary value and new types of cryptocurrencies came into existence as a possible answer to the problems that Bitcoin imposes and also to create their own currencies that people can opt to use as the one generated from the former is limited and hard to acquire.Although cryptocurrency was not widely accepted, it slowly gained its momentum and now, many other businesses even accept it as a form of payment or exchange. The very same thing is slowly happening to new crypto currencies. Although the profits are not guaranteed and the software running them is open-source, many still try to vie to acquire these currencies as another means of investment.If this kind of merge between technology and finance continues to improve over time, it will be no wonder if more and more people will divert their attention to acquiring these coins and more businesses will open themselves to exchanging and accepting them as actual reward or trade for good and services. Like everything else, the slow but steady approach of crypto currency could result to major changes in the way finance has been seen and treated in the past.More people are opening their minds to the existence and stability of such platforms and many are craving to break away from the scrutinizing eyes of the governing bodies involved in the storage and exchange of their assets. The future may seem dim this day but as more creative minds work together to make more convenience in the way finance and everything monetary is treated. Who knows maybe one day even fiat money can disappear for good.The question that remains now would be if the government will allow such major changes that will incur their lost or will such things also change the way our government runs and thinks.
In the times that we’re living in, technology has made unbelievable advancement as compared to any time in the past. This evolution has redefined the life of man on almost every aspect. In fact, this evolution is an ongoing process and thus, human life on earth is improving constantly day in and day out. One of the latest inclusions in this aspect is cryptocurrencies.Cryptocurrency is nothing but digital currency, which has been designed to impose security and anonymity in online monetary transactions. It uses cryptographic encryption to both generate currency and verify transactions. The new coins are created by a process called mining, whereas the transactions are recorded in a public ledger, which is called the Transaction Block Chain.Little backtrackEvolution of cryptocurrency is mainly attributed to the virtual world of the web and involves the procedure of transforming legible information into a code, which is almost uncrackable. Thus, it becomes easier to track purchases and transfers involving the currency. Cryptography, since its introduction in the WWII to secure communication, has evolved in this digital age, blending with mathematical theories and computer science. Thus, it is now used to secure not only communication and information but also money transfers across the virtual web.How to use cryptocurrencyIt is very easy for the ordinary people to make use of this digital currency. Just follow the steps given below:
You need a digital wallet (obviously, to store the currency)
Make use of the wallet to create unique public addresses (this enables you to receive the currency)
Use the public addresses to transfer funds in or out of the wallet
Cryptocurrency walletsA cryptocurrency wallet is nothing else than a software program, which is capable to store both private and public keys. In addition to that, it can also interact with different blockchains, so that the users can send and receive digital currency and also keep a track on their balance.The way the digital wallets workIn contrast to the conventional wallets that we carry in our pockets, digital wallets do not store currency. In fact, the concept of blockchain has been so smartly blended with cryptocurrency that the currencies never get stored at a particular location. Nor do they exist anywhere in hard cash or physical form. Only the records of your transactions are stored in the blockchain and nothing else.A real-life exampleSuppose, a friend sends you some digital currency, say in form of bitcoin. What this friend does is he transfers the ownership of the coins to the address of your wallet. Now, when you want to use that money, you’ve unlock the fund.In order to unlock the fund, you need to match the private key in your wallet with the public address that the coins are assigned to. Only when both these private and public addresses match, your account will be credited and the balance in your wallet will swell. Simultaneously, the balance of the sender of the digital currency will decrease. In transactions related to digital currency, the actual exchange of physical coins never take place at any instance.Understanding the cryptocurrency addressBy nature, it is a public address with a unique string of characters. This enables a user or owner of a digital wallet to receive cryptocurrency from others. Each public address, that is generated, has a matching private address. This automatic match proves or establishes the ownership of a public address. As a more practical analogy, you may consider a public cryptocurrency address as your eMail address to which others can send emails. The emails are the currency that people send you.Understanding the latest version of technology, in form of cryptocurrency is not tough. One needs a little interest and spend time on the net to get the basics clear.
What do you do if you want to learn driving a car? You will try to find an expert teacher, isn’t it? You do not want to avail the services of a novice individual to help you out, but a professional person can provide you the vital tips and most importantly guide you efficiently. Similarly, when it comes to investing in the stock market for the first time, you require a knowledgeable advice to attain your financial goals and get profitable returns.
If you are a beginner, then it is quite obvious that you may be having no information about the process of buying the right shares in the market. In such a situation, getting the right tips from an experienced financial advisor or a registered advisory company will truly prove to be a great blessing in disguise. However, there are some of the important things that have to be kept in mind while choosing the top stock market advisory company, which are as follows:
How much assistance do you actually require?
Before you make up your mind to hire an advisor, it is imperative that you must first decide about the kind of service you require from them. You may need their help at the beginning or during the time of any issues. This is because an advisor has to formulate a map according to your requirements. Hence, it is suggested to ascertain your needs first and then take further action.
Choose a top ranked advisory company
It is a very important point that has to be taken into the consideration. Availing services of the well known advisory company or a financial advisor is an absolute necessity. Make it a point to carry out a proper background or research work about the company. Check out their credentials, reputation, experience, etc before hiring them.
Asking for a sample financial plan initially makes sense
When hiring a financial advisor, then do not forget to ask for sample plan first. It is imperative to note that there is no such thing called the perfect plan. A sample plan will help you to determine whether an advisory company is actually making sense according your requirements or not.
The financial planners or advisory companies can really turn out to be the greatest asset for you if you choose the best one. They are just like the professional sailors who can help you out to sail through stock investment related problems quite efficiently.
Deepak is a financial advisor who likes to provide quality tips to the people facing any issues with regard to investing in the stock market. He likes to keep himself updated about the stock market by reading articles, news and blogs, etc.