Bitcoin speculation or investment
Over the last seven years, cryptocurrencies such as bitcoin and Ethereum have moved from being the pastime of tech enthusiasts to an intriguing prospect for investment. The rapid rise and fall of cryptocurrencies CCs has attracted a lot of speculators to trade in them. It is routine for even the established CCs to gain or lose 50 percent in a day. For the newer CCs, the moves can be as high as percent upwards or 90 percent southwards.
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Bitcoin speculation or investment
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- What Is Cryptocurrency?
- FCA warns on bitcoin speculation
- I'm not a crypto investing genius and neither are you: The perils of big returns
- What is Speculation? How Does it Relate to the Cryptocurrency Market
- Are cryptocurrencies short-term speculative bets or long-term investments?
- Demystifying cryptocurrency
- Is Bitcoin a Good Investment?
What Is Cryptocurrency?
Cryptocurrencies have exploded in popularity over the last decade, and almost everyone is talking about them or investing in them. However, cryptocurrency investments are unlike any other in the financial system. They defy conventional investment trends and are prone to ludicrous swings.
There are over 10, cryptocurrencies and a slew of cryptocurrency exchanges, with more being added daily. That's a lot to take in, especially for first-time investors. This article will go over the biggest risks that new and experienced investors should be aware of in this wildly volatile market. Unlike physical money or fiat , cryptocurrencies are not backed by banks or governments and are highly speculative. Cryptocurrency transactions exist as digital entries on a blockchain.
Cryptocurrencies are a trustworthy and secure system because of the public ledger system. While the blockchain may aid crypto security, the decentralized nature of cryptocurrency , combined with the anonymity it provides, poses risks.
The following are nine significant risks associated with investing in cryptocurrency:. Volatility is one of the most basic indicators of an asset's financial health, and cryptocurrencies are one of the most volatile investment options out there. In early , Dogecoin rose by over 20, percent, but by May , it had lost over a third of its value.
Wild speculation over the cryptocurrency's future sent the price soaring, both up and down. Speculation fuels the cryptocurrency market, with some investors quickly buying and selling their holdings as soon as there's a sign of a price drop.
A single negative popular tweet or news story about a cryptocurrency could cause its price to plummet quickly. Still, there are signs that the crypto market is getting its act together in terms of volatility.
Large trading and investment firms have recently acquired significant stakes in most cryptocurrencies. Those cryptos may begin to exhibit healthy volatility thanks to the stabilizing influence of these major companies.
Cryptocurrencies are held in digital wallets and traded through digital currency exchanges. Cryptocurrencies are particularly appealing to cybercriminals because of their online dependence and anonymity. To gain access to cryptocurrency wallets and trading platforms, criminals use a variety of phishing attacks. Individuals and companies interested in investing in cryptocurrency must adhere to strict internet security protocols to safeguard their assets.
Being aware of the latest threats is also helpful, as is understanding how to protect your crypto assets and crypto-wallets. But, this absence has drawbacks, especially when things go south.
For example, in most online financial transactions, electronic money transfer is usually backed and mediated by a financial institution. So, if there's a problem with the transaction, you can easily contact them and resolve it. With a cryptocurrency transaction, this isn't possible. Its decentralized nature makes it difficult to pinpoint the correct entity with which to file a transaction dispute. As a result, most cryptocurrency investors are advised to trade through reputable digital currency exchanges.
The majority of the top exchanges have excellent customer service that can assist with almost any problem. Still, the decentralized nature of most cryptocurrencies makes resolving legal disputes nearly impossible.
A peer-to-peer P2P platform is a cryptocurrency marketplace that connects crypto buyers and sellers directly. On a P2P exchange, any cryptocurrency transaction is paid directly between the two parties.
These exchanges are one of the simplest ways to convert cryptocurrency into fiat money. Yet, the human factor is where mistakes or negligence can cause your asset to be lost. Furthermore, there is always the risk of scams and fraudulent schemes, such as a buyer refusing to pay for cryptocurrencies received or a seller refusing to send the tokens, and so on. Finding a P2P platform that provides a digital asset escrow service is the best way to avoid most of these schemes.
The cryptocurrencies are held by the platform during the transaction using this service. The asset will be released to the buyer as soon as the buyer completes the payment process and the seller confirms receipt. This guarantees that both parties get what they want. If a disagreement arises, a platform representative will resolve it.
Cryptocurrencies are built on a cryptographic system that uses pairs of keys to authenticate transactions. One is a publicly available public key, and the other is a private key kept secret and used for identification and authentication.
A private key is automatically generated when you open a crypto wallet and grants user ownership of funds in that wallet. Related: The Best Bitcoin Wallets in The loss of a private wallet key means losing control or access to any cryptocurrencies in that wallet. Therefore, it is crucial that you regularly back up your private keys , preferably on a secure and isolated computer. Also, never store your private key online, especially if it is not in an encrypted format.
The popularity of cryptocurrencies has resulted in an increase in the number of cryptocurrency exchanges and trading platforms.
As a result, picking an exchange has become more difficult. Cryptocurrency exchanges offer the same level of services to the financial market as traditional financial institutions.
However, the lack of regulatory oversight has aided the growth of scam exchanges and market manipulation in crypto trading. Some trading exchanges have exorbitant trading fees and no policies to prevent manipulative or suspicious trading, while completely unregulated exchanges may employ predatory practices. Exchanges may charge exorbitant commissions while also making withdrawals nearly impossible.
Others may have weak security, making it simple for scammers to steal your money. The best approach is to find trading platforms and exchanges with reputable security and noteworthy reviews. Always read the fine print of their terms of services and avoid platforms with unrealistic claims. Regulation is one of the most serious threats to cryptocurrency's continued growth. Governments all over the world have enacted regulations to limit the use of cryptocurrencies in their respective countries.
Many governments regard cryptocurrencies as a way to circumvent financial regulations and facilitate money laundering. For the time being, most governments are researching how to integrate cryptocurrencies with their existing fiat currencies.
Others, such as El Salvador , have fully embraced cryptocurrencies, with some even launching or considering launching a national cryptocurrency. Still, there is a high risk of legislation that restricts the use of cryptocurrency. Crypto prices frequently fluctuate, making them a high-risk investment. You would have made a significant profit if you had purchased Bitcoin in January and sold it by late April. Holding your Bitcoin assets for a few days would have resulted in a significant loss in dollar value.
As most cryptocurrencies are volatile, their value fluctuates in relation to traditional currencies. In addition, because cryptocurrencies are speculative, investors are at the mercy of whatever value they have at the time of selling.
Cryptocurrencies are classified as capital assets, which means they are subject to the same tax regulations as stocks. According to the IRS, when you use cryptocurrency to buy goods and services or exchange it for other currencies, you are subject to capital gains tax. Also, any cryptocurrency obtained through mining is taxable. Cryptocurrency investors are required to report their earnings as income on their tax returns.
However, not all cryptocurrency transactions are taxable. Purchasing cryptocurrencies, storing them, and transferring them between exchanges or wallets are all exempt. Cryptocurrency laws can be complicated, but you can catch up to speed by reading the IRS's virtual currency guidelines.
Investing in cryptocurrency is extremely risky, and you must be prepared for any eventuality. It's the Wild West, and because of its decentralized and unregulated nature, it's rife with con artists and crooks. Inexperienced investors should invest only what they can afford to lose without suffering serious consequences. About to take the plunge into cryptocurrency? Make sure you research before parting with any of your hard-earned cash. Keyede Erinfolami is passionate about using technology to improve productivity in daily life and work.
When she's not writing, you can find her kicking butt at Scrabble or finding the best angles to take nature pictures. Has a healthy relationship with the Oxford comma. The 9 Biggest Risks for Crypto Investors Unlike physical money or fiat , cryptocurrencies are not backed by banks or governments and are highly speculative. The following are nine significant risks associated with investing in cryptocurrency: 1. Volatility Volatility is one of the most basic indicators of an asset's financial health, and cryptocurrencies are one of the most volatile investment options out there.
Cybertheft and Hacks Cryptocurrencies are held in digital wallets and traded through digital currency exchanges. Share Share Tweet Email. Keyede Erinfolami 72 Articles Published. Subscribe to our newsletter Join our newsletter for tech tips, reviews, free ebooks, and exclusive deals! Click here to subscribe.
FCA warns on bitcoin speculation
The CFO of an online education platform considers whether to adopt Bitcoin for payments and investments. The phone buzzed on the nightstand—once, twice, three times—waking Ankit Jain from what had been a restful sleep. Before he could reach the phone, three more texts came through. In Sun Valley talking crypto.
The cryptocurrency, or crypto, world has evolved dramatically since an anonymous author or authors, writing under the pseudonym Satoshi Nakamoto, published a brief white paper in detailing the mechanics of what would become known as bitcoin. While bitcoin is still the largest crypto by market capitalization, there are now some 6, cryptos in existence. For many, the crypto universe has developed beyond its origins as a new payment technology into an investment opportunity. Such impressive performance has naturally increased investor interest. So while many investors may insist that this time really is different, given the extreme volatility and uncertainty in determining appropriate valuations, we still see bitcoin and other cryptos as speculative investments and not suitable for all investors. Therefore, our aim here is to arm investors with knowledge of the crypto landscape and equip them with the tools to evaluate the myriad crypto options out there. Crypto discussions often ignore the increasing adoption of blockchain technology. Blockchain not only makes crypto possible, but also enables the broader movement towards decentralized finance DeFi , the secular force that we think is driving the advent of digital currencies. If crypto is to be taken seriously as an asset class and not just a means to speculate on digital art or sports videos, we believe investors should focus on opportunities within DeFi alongside bitcoin.
I'm not a crypto investing genius and neither are you: The perils of big returns
We hope that you'll find our new look appealing and the site easier to navigate than before. Please pardon any 's that you may see, we're trying to tidy those up! Should you find yourself on a page please use the search feature in the navigation bar. Many people have decided that bitcoin is the next big thing — and they are backing up their enthusiasm with dollars.
What is Speculation? How Does it Relate to the Cryptocurrency Market
The past year has been a wild ride for cryptocurrency, with prices reaching record highs as well as devastating lows. While prices have been on a downhill slide for the past few weeks, that could make it a smart time to invest. If you've been waiting for a more affordable time to invest, now may be the right moment. That said, cryptocurrency isn't right for everyone. While there are a few reasons to consider buying crypto in , there's also one good reason to avoid it.
Are cryptocurrencies short-term speculative bets or long-term investments?
Original data were collected via a survey of participants with experience in Bitcoin speculative investment. The partial least squares method was used to test the proposed model. Speculative investment behavior in the Bitcoin context is driven by strong impulse and weak self-control, leading to negative consequences. The extent of the imbalance between the two cognitive systems is greater with the subjective norm than without it, thus facilitating speculative investment behavior. Noteworthy differences in the impulse and self-control effects on Bitcoin speculative investment are found with differences in Bitcoin objective and subjective knowledge. Ryu, H. Report bugs here. Please share your general feedback.
Bitcoin's soaring popularity and value since its inception in is a curious case for many investors. Like the Internet boom, cryptocurrency also took only a few years to become a mainstream topic, and it is growing now more than ever. Many investors, as well as professionals, have made cryptocurrency investment a part of their portfolio. But Bitcoin and other cryptocurrencies, unlike fiat currency, aren't a physical asset.
Is Bitcoin a Good Investment?RELATED VIDEO: WARNING! Stocks Are Going To Resume Selloff Tomorrow ( Here's Why )
It is widely accepted that distributed ledger technology, such as blockchain, has enormous potential. Like many new technologies it could be truly transformational for many industries and have a meaningful impact on how business is conducted globally. Instead, the focus for investors at this point of the current crypto price cycle should be on how best to value cryptocurrencies, and what a reasonable expected long-term return should look like. Shane Woldendorp, from our offshore partner, Orbis, offers a view.
A lot of people still do not get the point of Bitcoin. They say it does nothing that could not be done before. That it has no intrinsic value. That it is dirty, both in terms of emissions and the way it is used by criminals. The charge sheet against Bitcoin is a long one. The cryptocurrency is volatile and its price movements are impossible to predict or explain, even in hindsight. The market is dominated by a handful of investors known as the whales, who can shift the price at will, or in the case of Tesla founder Elon Musk , with a single tweet.
When the demand for a cryptocurrency like Bitcoin exceeds the supply, the price tends to go up. When its supply exceeds demand, the price goes down. Bitcoin has always been a highly volatile commodity. In truth, cryptocurrency is one of the most volatile non-derivative financial assets on the market.