Cryptocurrencies forever changed the perception of personal finance and business. They are able to make a real revolution in the financial sector of the world economy. Cryptocurrencies allow you to manage transactions based on the principle of network horizontal decentralization, intermediaries are eliminated, overhead costs of production are significantly reduced, not to mention the fact that this technology is quite applicable in other sectors of the economy. Also, cryptocurrency investing guide allows to earn some money.
Blockchain is a technology with a great future that could simplify banking operations, speed them up, and make them safer. It is not by chance that now investments in startups involved in the blockchain are experiencing an unprecedented surge. The total volume of these investments in just five months of 2018 has already exceeded the figure for 2017.
Speaking about the attractiveness of Bitcoin, experts highlight several of its key advantages:
The credibility of Bitcoin is growing both from investors, and from business. So it will remain a means of payment.
Despite the high volatility and frequent fluctuations, the Bitcoin rate is constantly growing, which makes it possible for investors to make money when investing in cryptocurrency and gain profit on exchange differences.
As tax pressure increases throughout the world and the requirements for financial monitoring are tightened, in the event of increased financial instability, cryptocurrency investing will grow.
With cryptocurrency income and operations in most cases do not need to pay taxes.
The number of points that accept cryptocurrency as a payment for goods and services is systematically expanding all over the world.
Despite numerous advantages, digital money has several disadvantages. Naturally, they are characteristic of all financial markets, but in the case of using cryptocurrency, the risks are doubled due to their specific features. What threatens those who chose cryptocurrency as a tool for investment?
Cyber-attacks are a large-scale problem in the world of developing cryptocurrencies. Cases of hacker attacks become more common, and methods of fraud become more sophisticated. Cryptocurrency exchanges were repeatedly hacked, as a result of which many were closed due to bankruptcy. Bitcoin wallets and large sums that are traded on marketplaces have become especially attractive for thieves.
The International Securities and Exchange Commission has confirmed that more than half of the platforms have encountered cyber-attacks. For example, when hackers bypassed the security system, they changed the user verification methods on the well-known Bitfinex exchange, $ 70 million were stolen. In 2016, due to an error in the code, hackers got unauthorized access to DAO hedge fund participants’ digital wallets and stole more than $ 150 million. According to experts, the problem of security in the world of cryptocurrency will long remain hanging over the heads of investors.
The first of them were created at the time of the appearance of electronic payment systems. Now their counterparts are adapted to the cryptocurrency market and can be activated wherever the opportunity arises. The most common methods of cryptocoins theft are extortionists, phishing (unauthorized access to personal information), viruses and fake links (substitution).
Owners of digital money should be extremely vigilant and try to stay ahead of malware using reliable anti-virus protection, check all addresses and not follow suspicious links.
Lack of guarantees for damages
When performing transactions through the exchange, the user does not actually own the funds that are stored in his account, because the assets belong to the exchange and are controlled by it. The site only provides access to them at login. Thus, the owner fully trusts his cryptocurrency wallet to a third party, relying on the security measures that they take to protect money.
Due to cyber-attacks, Bitfinex users lost 36% of their assets. Later, the site was launched again, and in order to retain customers, the BFX tokens repaid the funds to theft victims.
The Tokyo Exchange MtGox went bankrupt after hacking in 2014, and also promised to compensate investors for the funds, but the situation has not yet been fully resolved.
Such cases are isolated. Most investors who lost crypto assets at other sites did not receive any compensation.
Unpredictable course jumps are partly due to the limited release of Bitcoin. This can lead to deflation. As more and more commercial enterprises start accepting Bitcoin as payment, its cost will decline.
High volatility may seem attractive for investing in cryptocurrency, but inexperienced market participants should step aside during big jumps in the course and wait out in order not to lose everything in one moment. Digital currency can be a tool for generating high returns, but only in the hands of experienced investors.
Decentralization is both an advantage and a disadvantage. Due to the lack of a governing body, no one will be able to maintain a minimum cost. If the majority of investors decide to abandon Bitcoin, then there is a risk that the course will collapse.
The situation is aggravated by the lack of an investor insurance system. They can not claim damages, despite the fact that some of the exchanges are positioned and act as virtual banks.
Bitcoin are intangible digital codes that are not proprietary. If they are stolen from a virtual wallet, the owner cannot identify the thief due to anonymity, as well as confirm his right to coins, due to the lack of personal property law). The same is true when transactions are made in the name of the unfair party.
However, investors have no choice but to do business with exchanges that do not have equity capital for insuring losses, unlike do ordinary banks, whose activities are regulated by law. Most likely, due to the virtual features of digital coins, they will never be completely safe.
Initial coin Offering (ICO)
Those who invest in ICO must be prepared to lose their money, since part of these schemes is directly related to fraud. They use the Initial Public Offering (IPO) method of initial public offers to raise money for Internet startups, but this is where the similarity with the IPO ends.
Often ICOs are high-risk projects that do not guarantee a return on investment. Each participant must recognize the level of risk and be prepared to lose the amount invested. There are few successful projects, but the number of people willing to invest money is not reduced. It is believed that it was precisely because of the massive infusion of Bitcoin into ICO that dropped significantly.
Bankruptcy and exchanges
For the period from 2012 to 2017, close to 48% of cryptocurrency exchanges closed, among which were quite promising. At the time of closing websites, users did not have time to withdraw money from the accounts, which led to multimillion-dollar losses. And the reason for this is not always hacker attacks.
Low profitability is the main cause of the collapse and the problem for most cryptocurrency exchanges, which can not provide sufficient funds to stay afloat for a long time.
Technical failures in the servers where Bitcoin wallets are stored are a common phenomenon. Investors who have suffered losses cannot claim a refund regardless of whether the problem is caused by malicious acts of hackers or carelessness when developing software.
Erroneous User Transaction
Error just one digit when entering the address of the counterparty leads to money loss. The transaction cannot be canceled, so the amount sent cannot be returned.
Loss of secret code
The loss of code, which is the key to the wallet, entails the loss of all assets. This can happen if the hard disk of the PC malfunctions or the flash drive that contains the code is damaged. This happens in 25% of cryptocurrency owners who have lost about $ 18 billion. It is impossible to recover the code and return the money.
Bitcoin is the dominant cryptocurrency, but as of the beginning of 2019, its share fell from 90% three years ago to about 30%. This happens as a result of the emergence of many altcoins — alternative cryptocurrencies and the growing popularity of some of them. This again shows that it is important to keep your eyes open and listen to what the community is saying.
If you want to invest in cryptocurrencies, Bitcoin is still a standard element of each portfolio, but is no longer the most powerful asset. There are many other coins in every well-balanced crypto portfolio today.
If you want to have a balanced portfolio at a certain point in time, a good strategy may simply be to reflect the ten most valuable coins for investing in cryptocurrency. More interesting is that you need to spend some time read about those coins, decide whether to make it the basis of your choice of assets.
How to buy cryptocurrency?
To begin, consider the purchase of Bitcoin. You can use Bitcoin investment trust in Second markets (USA), XBT tracker (Germany, Sweden), ETI Bitcoin (Gibraltar and Germany) and some others. All these investment products allow you to trade without buying Bitcoin. You can also exchange regular fiat currencies in various online exchanges. It is usually quite simple to buy Bitcoin by creating an account on the exchange. After registering, load your account with one of the fiat currency and start trading.
Other cryptocurrencies are more difficult to acquire due to the lower prevalence, but they are becoming increasingly popular. You should find out the level of trust in the chosen stock exchange and ask for feedback from cryptocurrency communities before you get your money there.
Time to buy
Time to buy does not have a clear certainty, but you should use common sense. It is known that the purchase of any assets at the peak of their value growth is not a reasonable solution, since the cost will most likely fall further and you will lose some of your money. It can be said, the rule is common for any business: buy cheap, sell expensive.
To trade in cryptocurrencies, they need to be brought to the stock exchange, but after you have finished, it is better to withdraw cryptocurrency to one of your wallets. There are several types of cryptocurrency wallets, which differ in the level of security and usability. The more convenient and quicker the way, the less safe it is and vice versa.
The long-term impact of cryptocurrency on the economy is associated with the convenience of its use for payments on the Internet and the transition of many businesses to the global network. The demand for cryptocurrency will only grow, increasing its value.
Not only small companies and online stores accept Bitcoin and other cryptocurrencies for payment. Such large companies as Tesla and Virgin, who are exploring outer space for business and looking to the future, also accept cryptocurrency. This suggests that advanced companies see it as a perspective, especially when it comes to transactions at space distances.
Large investment companies and banking consortia are already exploring cryptocurrencies and the possibilities of using them as an investment tool. Considering all this, it can be concluded that, most likely, in the future, demand for cryptocurrency in general will only grow in the long term.
Changes in the economic introduced by information technologies generate new opportunities for its development. The first cryptocurrency Bitcoin for several years of its existence has gained the image of digital gold, which indicates the urgent need for its appearance as a means of payment, circulation and accumulation.
However, it must be remembered that the cryptocurrency is unstable, is not regulated by anyone, does not guarantee the protection of the investor, is subject to extreme volatility and is very attractive to fraudsters.