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Risky Bitcoin investment


Is it a good idea to invest in Bitcoins?
Bitcoin, the digital currency attracted massive attention when its value increased from around $106 dollars in September to over $1100 dollars early December. In mid-December it went back down again to about $490 dollars. Bitcoin is best known for being used in the online black market called the Silk Road, and that’s why many ask themselves whether or not they should invest.

There are those who have taken a chance and invested big money on the digital currency. The Winklevoss twins, best known for the lawsuit against Marc Zucherberg’s Facebook, made a personal investment of around $1,6 million dollars and The Peter Thiel Foundation has invested nearly $3.2 million dollars.

Many economists have warned against investing in the currency due to its volatility. A great example is the roller coaster activity over the past few months where the currency went up and down in value at a fast rate. The value of the currency increased drastically when it was declared that “virtual currencies were considered a legitimate financial service” at the United States Senate committee hearing in November 2013. But the currency dropped by 40% when China prohibited the Chinese financial institution from using the currency.

Whether or not the currency will ever be recognized as a legitimate currency by major national and international financial institutions, it is still recognized as a “commodity” even by China. In other words, merchants can chose whether or not they want to accept the currency in exchange for goods and services.

According to an online research there are currently 1,000 physical merchants and 20,000 online merchants that accept the digital currency as payment, amongst them is the well-known company Virgin Galactic.

There are even several ATM’s out there that can be used to exchange cash for Bitcoins. The first Bitcoin ATM machine that opened was in Vancouver in late October 2013, and was followed by others in Slovakia, Hong Kong, Helsinki, San Diego and Toronto.

You are able to transfer Bitcoins across the world without worrying about exchange rate or transactions fees, because it doesn’t apply for the Bitcoin currency. You’re not required to have a bank account or even verify your identity to use the Bitcoin cash machines and this worries the governments because it can be easily misused by criminals and terrorists.

Bitcoins are purchased through a process called “mining”. It involves a network of “miners” maintaining large CPU’s that solve irreversible cryptographic puzzles which unlock “blocks” of Bitcoins. The difficulty of the puzzles increases as the number of miners increase. This slows production to roughly one new block every 10 minutes.

Satoshi Nakamoto is the mysterious figure behind the creation of Bitcoin and the design of the process to avoid inflation of the currency. Satoshi Nakamoto’s virtual presence disappeared in December 2010.

We still don’t know how the digital currency will evolve. There have been many scandals and setbacks regarding the currency, from CPU’s crashing, government banning’s to accounts being hacked. The ones that invested in Bitcoins back in September has probably made millions by now, but for us that haven’t should just sit back and watch where the currency is heading. In other words, invest your time and money on something less risky.

About Hajar Madhat

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