As now you know what is bitcoin, so, it’s clear that bitcoin is not a commodity. It all started with some big corporate giants who created this concept. Now, the question is What are the Risks of Investing in Bitcoins?
What are the Risks of Investing in Bitcoins?
Let’s say they invested one billion dollar and kept value of bitcoin as $100. And, started projecting bitcoin as the best form of investments and easy currency exchange. Therefore, people followed and started investing in bitcoin. Initially, it was a tough job for them to make people invest in bitcoin. But, slowly and gradually they succeeded. As a result, within just a few months the value of bitcoin increased and touched the high sky i.e. $4500; and, still close to $4300.
It is more like share market. A company comes up with a great idea and starts an IPO with a minimal value of stock; wherein directors of company keep maximum shares and rest are bought by public. They get huge investment which is used to expand business. Slowly and gradually the net-worth of company goes up; and, that’s when investors & share holders make their margin. Similarly, if business goes down, the share holders also bare the loss.
Now, same is the case with bitcoin. As you see, there is a tremendous regular hike in bitcoin price day by day. So, investors are happy. As a result, millions of dollars being invested everyday, hence, the price of bitcoin is going up.
Remember, I took an example in the beginning that corporate giants invested $1 Billion, when they kept bitcoin’s price as $1000? Now, as per the current market value, their holdings are roughly $4.3 Billions. What if, they pull out the entire money???
Chances are very rare, but if at all that happens, the value of bitcoin can go down as low as $1500-$2000. People who have recently invested in bitcoin, can loose 50% of their hard earned money.
Optimistic View towards Investment in Bitcoin:
Let’s think like an optimist. Let’s say they are investing funds in better business where returns are great. Of course, everyone would get benefit out of it. But, the only thing that bothers me is how is it possible that a business is giving 400% returns in just a span of 6-8 months.
As I mentioned in the beginning of this article, that bitcoin is not a commodity. Hence, it cannot hold the value so high. It’s a virtual currency; therefore, at some point of time, price correction will happen. And, that’s when we will have a clear picture of bitcoin’s actual worth. Till then, it’s your call. After all, you own your money.
Financial products carry a high level of risk; and, can result in the loss of all your funds. Therefore, you should never invest money that you cannot afford to lose !!!