Although bitcoin prices have been on a downswing in the past couple of days, experts claim that the king of cryptocurrencies will bounce back. With the roller coaster-like graph of bitcoins, numerous investors have drawn their attention towards this digital currency.
Bitcoin investing in Singapore is not uncommon. The circulation of bitcoins is only increasing as we write this article (until it reaches the upper cap of 21 million). Have bitcoins and their investment potential piqued your interest? Are you, too, looking forward to incorporate this popular cryptocurrency in your financial profile? Our brief overview on the opportunities bitcoins provide and the allied risks involved will enlighten you about bitcoins. It will help you make an informed decision in your endeavour to diversify your risk profile.
Bitcoin trading – a great addition to your financial profile
The fact that bitcoins are volatile makes it an ideal choice for trading. Being categorised as a high risk option, investing in bitcoins opens up the possibility of making high returns. Platforms like Coinbase and CoinHako give you the option to trade, sell, and exchange bitcoins with ease.
Investopedia defines bitcoin mining as the process by which transactions are verified and added to the public ledger, known as the blockchain, and also the means through which new bitcoin are released. Anyone with access to the internet and suitable hardware can participate in mining. The mining process involves compiling recent transactions into blocks and trying to solve a computationally difficult puzzle. The participant who first solves the puzzle gets to place the next block on the blockchain and claim the rewards. The rewards, which incentivize mining, are both the transaction fees associated with the transactions compiled in the block as well as newly released bitcoin.
Bitcoin is highly volatile in nature
Unlike paper currency, whose supply is unlimited, bitcoins are scarce. As mentioned above, there is a limitation on the total number of bitcoins that can be released in 100 years. To add to that, the cryptocurrency is quite volatile. If you observe the price chart of bitcoin prices over the last one year, you will see how drastically its prices rise and fall.
Currently, bitcoin is at a nascent stage, and a number of market factors influence it. For instance, take the classic supply and demand theory. If more and more people are willing to buy bitcoins, its value will increase. Conversely, if many people sell their bitcoins, then prices will dip. As bitcoin prices are unpredictable, it makes it a high risk investment. Instead of seeing it as a quick money-making scheme, research well before making a decision, or else you may be at a risk of losing out on your funds.
Bitcoin transactions cannot be cancelled
This may not be much of a risk but a possible downside to bitcoin investing in Singapore. Bitcoin uses blockchain technology to function. Blockchain is an open ledger that stores a chain of events accessible to all. If you want to go back and check a historical transaction, then you can do so from anywhere at any time. However, the technology does not allow you to undo or cancel any transaction. Once the currency leaves your wallet, it is gone, and the process cannot be rescinded. Hence, it is imperative you double check the transaction to ensure it is the right one.
Bitcoin theft is a growing concern
The growing interest in the field of cryptocurrencies has attracted many scamsters and cybercriminals. According to a report published on Investopedia, the most common bitcoin scams are hardware wallet theft, exchange scams, fake ICOs, cloud mining schemes and multi-level marketing schemes. Even trojans like CryptoShuffler have contributed to the loss of high net worth of bitcoins. Hence, it has become all the more important to secure your bitcoins. It’s no longer uncommon to hear about someone who lost thousands of dollars because they lost access to their bitcoins.
You certainly don’t want this to happen to you. Just as you carefully guard your physical wallet, you also need to take necessary online security measures to protect your bitcoin wallet. No doubt that with a few safety measures, you can secure your bitcoins from cyber theft but with newer technologies to hack into accounts, there is always a risk of theft while dealing with digital currency.
Investing in bitcoins has its own perks and downsides. We hope these pointers will help you make wise decisions in the area of bitcoin investing in Singapore.
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