Bitcoin, Bitcoin, Bitcoin. Since the end of 2017 and now into 2018, it’s been hard to avoid the mention of the wildly popular cryptocurrency – Bitcoin.
By now we all know it is an electronic currency which can be transferred over the internet from a Bitcoin holder to a buyer’s account without the use of traditional banking methods such as Paypal, visa or EFT. Thus using Bitcoin cuts out the middleman and processing time, but what is its real value and what can you actually purchase with it?
There’s so much hype surrounding Bitcoin, it can be difficult to get a clear picture of its pros and cons and like any investment, purchasing the cryptocurrency is a risk that needs to be approached with caution. If you are considering buying some Bitcoin this year, here are Matrix’s top five reasons why you should think twice.
It’s an extremely volatile market
All cryptocurrencies are volatile and bitcoin is no exception. So what causes the value to bounce around so much?
If Bitcoin is in the news, its price can fluctuate by hundreds of euro in a matter of hours. There is no doubt that positive media coverage is one of the main factors driving the price upwards, but correspondingly negative news can lead to a drastic decline. In 2017 news stories about the threat of hacking, money laundering and regulation sent the value tumbling. We saw highs of $19,850 in mid-December, only for it to fall below $12,000 a couple of days later.
Another factor which contributes to Bitcoins’ volatility is the potential of government intervention. One of the currency’s defining characteristics is that it is decentralized, meaning it isn’t subject to the same regulation as conventional currency. While this is a key attraction for some investors, it is not something governments and regulators are typically comfortable with. Government intervention is inevitable if Bitcoin continues to grow at this rate but what effect this will have on its value is unknown.
A lack of Information
There’s a huge amount of confusion surrounding Bitcoin in general and even the creator remains a mystery. While there are many compelling theories about his or her identity, no one knows exactly who the mysterious figure actually is.
Media reports of self-made Bitcoin millionaires encourage people to speculate in the cryptocurrency themselves and often they are not fully aware of what they are investing in. Investors may think they are entering into a get-rich-quick scheme, but for many this will not be the end result. As economists continue to warn that the current price spike is just a bubble, future buyers will need to be savvier in order to make a profit.
Limited places to spend
Aside from a few places accepting Bitcoin, largely for the publicity, there aren’t many retailers that will accept your cryptocurrency, especially for your day-to-day expenses. What good is having all of that Bitcoin if you can’t spend it?
Wall Street’s biggest banks are growing more comfortable with cryptocurrencies, some even considering creating their own, but this won’t have an impact on the regular consumer for a long time.
Despite the initial flurry of interest from some retailers, Bitcoin payments have not been widely introduced and most of us will never use it to purchase a product or service. As more and more commentators point to the likelihood of a ‘bubble’, opportunities to spend the currency online won’t be expanding anytime soon. With limited places to spend, your Bitcoin will decrease in value and as they say… you can’t take it to the grave with you!
Prone to hacking & illegal activity
Fraud is a significant risk for Bitcoin investors. A major factor holding cryptocurrencies back is ensuring they can be used securely. How do Bitcoin owners protect themselves against theft? Hackers who know what they’re doing can steal millions of euro from peoples e-wallets. For example, almost $64m in Bitcoin was stolen by hackers who broke into Slovenian-based Bitcoin mining marketplace, NiceHash.
While one of the biggest benefits of Bitcoin is its claim that it is private, secure and untraceable, this has also made it very attractive to criminals on the Dark Web. The currency’s reputation was hit hard once news broke that Bitcoin was being used to send money anonymously on drug trafficking website, Silk Road.
When the exposure to hacking and fraudulent scams is combined with the everyday risks such as forgetting your passwords or a virus infecting your computer, investing in Bitcoin can be a risky undertaking.
There is no legal protection
Due to the lack of acceptance of Bitcoin, transactions aren’t regulated by any bank or recognized exchange. These are transacted through e-wallets. If the trading site decides to cheat you and steal away your bitcoins, or if your e-wallet gets robbed, then you have nowhere to go.
As previously mentioned, millions of euro have been stolen in Bitcoin however you cannot file a lawsuit or legal complaint to win your money back. Keep that in mind if you are considering investing in it. The lack of regulation means lack of security. When it’s gone, it’s gone… uh oh!
It’s clear that potential investors should think very carefully before purchasing Bitcoin – don’t assume that the price will keep rising forever, don’t put in more than you can reasonably afford to lose and do your research before parting with your hard-earned traditional currency.
Most important of all, use common sense. The currency’s price has shot up by 750% in a year – this Bitcoin bubble can’t last forever.
What goes up must come down …
Matrix Recruitment Group is one of Ireland’s leading recruitment firms. 20 years in business, with offices in Dublin, Waterford, Carlow, Athlone and Galway. Matrix specialises in a number of job categories including Accountancy, Financial Services, Engineering, Manufacturing, Quality & Laboratory, Supply Chain, HR, Office Support and Sales & Marketing.