I’m sure you haven’t been living under a rock, thus without deliberating intensely about the what, why and how of Bitcoins, I’m going to delve straight into what I intend to put forth here. By not being part of the Bitcoin bandwagon, are you missing out on anything? As a financial advisor and venture capitalist myself, all I can say is that without being backed by tangible assets, Bitcoin is fraught with risks and the delusion of cryptocurrencies is, in the long run, where does the real value come from? The very basis of market value in the long term is that it needs to have some sort of utility.
But, then again, despite being so volatile, surprisingly, investors in Bitcoin are increasing by the day.
Agreed, a huge plus to using Bitcoins is their low transfer fee, much lower than what you would have to pay when doing business through a bank. Moreover, Bitcoins can’t be fabricated, making it securer than physical money. But, this is what raises my questions over security. Your Bitcoin wallet can be stored in the cloud or offline, on your computer. The offline method is more secure due to the reduced risk of getting hacked, but can also mean that you can lose all of your Bitcoins if whatever device that houses the wallet stops functioning.
One more downside is because you don’t have to reveal your personal info while transacting, the doubt of fostering suspicious business arises. Lawbreakers and cybercriminals have constantly been using Bitcoins as there’s no way to link the money back to them. I was reading an article on how the popularity of this virtual currency in organized crime is being deemed as one of the chief factors in its rapid increase in value. In an opinion piece, Jason Bloomberg said that “The only reason Bitcoin has value to anyone is because of the underlying value as a medium of exchange for lawbreakers. If we could flip a switch and eliminate all illegal uses of Bitcoin, there would be nothing left of the cybercurrency.”
Bitcoin transactions are also irretrievable unlike those made with a credit card, so there’s a bigger chance of losing your money when dealing with sketchy sellers online. They are also highly volatile as their value can fluctuate by as much as a few thousand dollars in a matter of hours.
Plus, for analysts to study Bitcoin fundamentals as an investment, there isn’t enough of an ecosystem. People are merely investing with inadequate information and plainly joining a herd of risk-takers. Since they aren’t regulated, a major worry I have is that people are getting lured by the high prices, but one day when the bubble bursts, they may incur widespread losses.
Here are my final thoughts
Take a Bitcoin like a lottery ticket. It can spike magnificently or nose dive drastically. You aren’t missing much if you aren’t investing. The lack of Bitcoin’s origin is also a big issue. Not being regulated by a government, bank or financial entity, Bitcoin is a mere mathematical formula.