Are Bitcoins safe to invest in? This is a question that comes up often. Just as often as, 'Is Bitcoin legal?' And, 'is Bitcoin safe to buy?'
Firstly let's take this in the right order.
Is Bitcoin legal?
Bitcoin is legal around the world. A few countries have specifically banned the use of Bitcoin including:
However, these bans are largely ineffective as Bitcoin is very much an international currency and anyone with a computer and internet access can buy and sell Bitcoin at their leisure.
For the most part most countries accept Bitcoin although tend to surround it with legislation and regulations on the trading, particularly with regard to cryptocurrency exchanges. In fact many countries have encouraged it. Bitcoin is a legal currency in Japan and many other countries such as Singapore and Sweden accept Bitcoin as a currency. (You can check on your own country in the Bitcoin prices country list) Even some USA states are accepting Bitcoin as payment for services.
The varying degrees of compliance almost all revolve around the Know Your Customer (KYC) policy where a client of a cryptocurrency exchange but provide substantial identification of themselves in order to open an account.
Is Bitcoin safe to buy?
One can go out into the market place and buy any currency. This is what currency traders do for a living. They will buy a currency and make a small profit when it goes up against the currency they used to buy the other currency with. E.g. USD/YEN. A trader can use his USD to buy Japanese Yen and when the USD goes down against the YEN, sell the YEN and buy back USD and make a tiny profit. The safety of this depends on the experience, acumen and guts of the trader plus the overall general movement of the value of each currency which, in turn, depends on the economic climate affecting that currency. Currency trading has often been called a form of educated gambling. People devise software (called robots or bots) to do much of the work and complete thousands of trades each resulting in a few cents of profit for the trader. These are called Binary systems and if you get on a mailing list of one of these you will likely be inundated with emails to 'buy' a system and make a fortune. Of course most people don't as it still takes expertise, a thorough understanding of the market, plenty of money to ‘play with, and a good bucket of courage.
Buying Bitcoin with your dollars is very similar although you are not actually trading. You buy with the expectation that the Bitcoin will go UP against the dollar and so your Bitcoin will be worth more and you can, if you so desire, sell it for more dollars than you paid for it. As in any venture of this sort there are NO guarantees and history is not a good criterion for future trends.
Having said that, and noting the volatility of Bitcoin over recent months, if one is happy to play in that field by buying and selling Bitcoin and has the wherewithal to do so, then, yes Bitcoin is safe to buy.
Bitcoin is as secure as any currency. Keeping in mind that money is basically an ideas backed by confidence (Once it was backed by solid gold but those days have gone by the wayside) and its value is dependent on how confidence people regard it could be seen that there is more confidence in Bitcoin than there is in the US Dollar.
Is Bitcoin a safe investment?
Let us not forget that Bitcoin was designed as a currency, not an investment. An investment is where one puts value, such as money into something with the expectation of earning interest and or a capital gain. Stocks and shares come to mind here. One does not 'buy' dollars or yen with the expectation that one is going to make a profit from dividends or even a capital gain. In fact, with fait currency one is more likely to lose value over a period of time. (Try checking the value of the dollar against the price of gold or silver for example of a period of years - you can do that on goldprice.org)
So, in reality Bitcoin is not an investment. It is a currency and its prime purpose is to facilitate the exchange of value for goods or services. However, many people will buy Bitcoin with the expectation thast the value against the dollar will increase and therefore their asset will grow. This has happened as we all know resulting in many people becoming very wealthy. There is no reason, however, to expect this to continue and one should only 'play' or speculate with funds that one can easily afford to lose.
It could be said that its current volatility is due to finding its level although it is quite possible that whales (investors with extremely large amounts of Bitcoin) work to manipulate the value of Bitcoin through the process of selling and buying back sudden large quantities.
This article is for information purposes only and is not to be construed as financial information for any purposes such as investment or speculation and it is the responsibility of the reader to perform proper due diligence before acting upon any of the information provided. We recommend that you consult with a licensed, qualified investment advisor before making any investment decisions. The reader is responsible for their own financial decisions and actions.