Bitcoin is a high-risk investment. It is not an easy investment in terms of practical application. Whether you are capable of investing in it is known by your risk facing tolerance. There are drawbacks for investing in bitcoins, which is also why many investors hesitate to invest in bitcoins. There are also some benefits of investing in bitcoins, you should be aware of the uses for investing in bitcoins. This will help you make informed decisions whether or not to invest in bitcoins. Having a good understanding of bitcoins will help you to make the right decisions. There are many advantages and disadvantages of making investments in bitcoins. The Central Bank of UAE has issued that transactions with virtual currencies are prohibited. In the UAE, Dirham is the official currency.
Security and protection are two of the most important concerns of any investment.
Advantages of investing in Bitcoin Cryptocurrency
- High returns
- Fraud Protection
- Quick Settlement
- Safety
1. High returns
Cryptocurrencies are crowned as the potential top performing assets. In a short period, cryptocurrencies can give extremely high returns. Among the common investors, cryptocurrencies have generated huge returns.. Bitcoins have high potential to yield high returns when you make the right investment at the right time.
2. Fraud Protection
Without disclosing any financial information to the seller the bitcoins transactions can be performed. It provides a platform for digital transactions that hackers cannot get access to. The identity is hidden from others. Data breaches can be avoided and it provides protection to the investors. The consumer’s data is safe and confidential as it is stored in the blockchain. There is high transparency where it allows users to make transactions at their convenience.
The users can keep their coins safe and stable. The complete transaction is performed through the blockchain technology and this is the reason that blockchain provides the highest level of security.
3. Quick Settlement
In a few minutes the amount of money can be sent anywhere and to anyone irrespective of the destination. If you are dealing within the different currencies then the currency value will change and it may become expensive to make a deal. When you are making a transaction with Bitcoin the expense is negligible. Bitcoins can be transferred to any country and there is no geographical limitation on bitcoins. It can be virtually transferred and is very easy to make a settlement. It is considered as the global currency.
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4. Safety
Bitcoin does not have third party interference. No one can freeze and not have any demand on your coins. It cannot be stolen and the government nor any agency have the right to seize bitcoins. Bitcoins and the transactions on bitcoins need not provide any disclosure. The financial information remains very confidential as it uses the private key and also a public key. The two factor authentication provides safety and security to the cryptocurrency.
Disadvantages of Investing in Bitcoin Currency
- Huge losses
- Highly volatile
- Cyber attack
- Not a currency
1. Huge losses
There are no major regulations and bitcoins are highly volatile; this is the reason that Bitcoin investors incur losses. Anyone can access the entire source code and can affect the functioning of the cryptocurrency. No organisation nor an individual can have control over bitcoin. The transaction costs can be very high and it is very difficult to deal with the volatility. An investor can incur heavy losses at any time since the cryptocurrency is not regulated by any legal authority.
2. Highly Volatile
Bitcoins are highly volatile and have the ability to rise or fall at any time. Speculators make speculation and get profits from it. The investors who make investments have to face the drawback of market volatility. The cryptocurrency laws are different from country to country. There are no regulations and the price changes can happen at any time. Investors who have the ability to deal with volatility can take the risk of making the investment.
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3. Cyber attack
The risk of loss is very high with online transaction deals. If a hard drive crashes or a virus can corrupt the records. The cryptocurrencies coins are prone to cyber attacks and the investors can go bankrupt as there is no physical form of storage. If you have any issue with the bitcoin wallet then all the bitcoins money in the wallet will be at risk of loss. You cannot get your money back which you have lost.
4. Not a Currency
It is not an official currency, the UAE central bank has clarified that bitcoins are not legal tender. It does not recognise nor accept bitcoins as legal currency. There is no law in force to regularise and regulate the functioning of the UAE. The SVF regulation aims for licenses for entities that issue cryptocurrencies. Any transactions with bitcoin are not recognised as legal transactions in the UAE. Not just in the UAE, there are many countries where bitcoins are not a legal currency.
Take away
Bitcoin cryptocurrency is the world’s first decentralized digital currency. It is a revolutionary digital currency in the financial market. Bitcoin was created in 2009 by an unknown programmer. It is based on blockchain technology which is a tamper-proof distributed ledger. Security of cryptocurrency and its protection are the two important aspects of investing in bitcoin. In most countries, including the UAE, cryptocurrencies are not legal forms of currencies.
About the author
Vinay Kumar Goguru is a finance professional with more than 8 years of diverse experience as a researcher, instructor and Industry work experience with both public and private entities. Prior to MyMoneySouq, he spent 6 years in Berkadia, It's a commercial mortgage banking company. He has a "Doctoral Degree in Commerce" and two master's degrees with a specialization in Finance, one as Master of Commerce and other as Master of Business Administration. He has written several articles on personal finance, published by different International journals. He loves traveling, reading and writing is his passion. He has a dream of writing a book on his favorite finance topics.
