Is Bitcoin a safe investment? Here’s what you need to know

Bitcoins have made the headlines lately, mostly for the wrong reasons. The cryptocurrency was lambasted by a banking executive who accused it of being a fraud. China is also planning to halt bitcoin trading in local transactions. Is bitcoin really a fraud? Here’s what you need to know.

What are bitcoins?

A Bitcoin (BTC) is a type of digital currency which people around the world use for online transactions. There is no bank that is allowed to accept bitcoins; in their place is what everyone calls a “wallet.”

The bitcoins are produced via mining. In order for miners to release new coins, they have to solve complicated mathematical problems first. The system is patterned to release more bitcoins as time goes by but a surge in demand prompts hackers to manipulate other users’ computers to produce more bitcoins.

Satoshi Nakamoto is credited as the founder and creator of bitcoins. However, many believe that it is only an alter ego and no one has really seen him and prove his existence. While the public does not who he is, the government has kept an eye on him. The administration of former President Barack Obama feared Satoshi could be used by China or Russia against the U.S. Since then, his real identity remains elusive

Why is it a risky investment?

The bitcoin market is now pegged at $150 billion but it has no regulations. A single bitcoin’s value has reached $3,560 recently. Because of this, it can be used in illicit transactions such as smuggling and drug dealing. The authorities could not track its transfers. The hackers who leaked unaired episodes of Season 7 of hit HBO series “Game of Thrones” even demanded the payment be in the form of bitcoins.

Bitcoins are seen as the future of money. However, bankers remain skeptical. (Source)

Jamie Dimon, JPMorgan Chase & Co. Chief Executive Officer, slams bitcoins and called it a fraud. He also fired a warning for those working under him who engages in bitcoin trading. “I’d fire them in a second. For two reasons: It’s against our rules, and they’re stupid. And both are dangerous.”

As a result of the dressing down from one of the most respected men of Wall Street, bitcoin trading went down by as much as 2.7% but quickly recovered. China has also announced their plan of blocking the use of bitcoins in local transactions in an attempt to control the supply of money in their country.

JPMorgan Chase recently paid the government $13 billion as a settlement for playing its part in the financial crisis that hit the U.S.

Should you invest in bitcoins?

The growing mistrust and doubts on cryptocurrency could be the reasons why it has not reached its full potential. Every type of investment has its risks and rewards. Since not a lot is known about bitcoins, it remains a mystery. The full extent of how it can be used for good and bad is not yet determined.

Investing in cryptocurrencies are not a bad thing although necessary precautions against risks should be considered as well. In the end, what makes bitcoins promising are also the reasons why they are being held back.