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“The risks of investing in Bitcoin”

Bitcoin, the world’s first and most popular cryptocurrency, has generated a lot of buzz in recent years. With its decentralized nature, limited supply, and potential to serve as an alternative to traditional currencies, many investors have been drawn to it as an investment opportunity. However, as with any investment, there are risks involved. In this article, we will explore some of the risks associated with investing in Bitcoin.

Volatility: One of the most significant risks associated with Bitcoin is its volatility. The cryptocurrency is known for its wild price swings, which can occur rapidly and without warning. For example, in December 2017, the price of Bitcoin reached an all-time high of almost $20,000, only to plummet to around $3,000 in just over a year. This kind of volatility can make investing in Bitcoin a risky proposition, especially for those who cannot afford to lose money.

Regulatory risk: Another potential risk associated with Bitcoin is regulatory risk. As Bitcoin is not controlled by any government or financial institution, it exists outside of the traditional financial system. This lack of regulation has led to concerns about money laundering, fraud, and other illegal activities. Governments around the world are beginning to take notice of Bitcoin and other cryptocurrencies, with some imposing restrictions or outright bans on their use. If regulators decide to crack down on Bitcoin, it could result in a significant drop in value.

Hacking and security risks: Bitcoin is stored in digital wallets, which are susceptible to hacking and security breaches. There have been numerous high-profile hacks of Bitcoin exchanges and wallets, resulting in the loss of millions of dollars’ worth of Bitcoin. If an investor’s wallet is compromised, they could lose all of their Bitcoin holdings. This risk is especially high for those who store their Bitcoin on exchanges or other third-party platforms.

Liquidity risk: Bitcoin is not as widely accepted as traditional currencies, meaning that it can be difficult to sell large amounts of Bitcoin quickly. This lack of liquidity can be problematic for investors who need to sell their Bitcoin quickly to access cash. Additionally, the decentralized nature of Bitcoin means that there is no central exchange where buyers and sellers can come together to trade Bitcoin, making it harder to find buyers or sellers for large transactions.

Market risk: Like any investment, Bitcoin is subject to market risk. The value of Bitcoin can be influenced by a variety of factors, including supply and demand, investor sentiment, and global economic conditions. If the market turns against Bitcoin, its value could drop significantly.

Ponzi schemes and scams: Bitcoin has been used as the basis for numerous Ponzi schemes and scams, with fraudsters promising high returns for investing in Bitcoin. These scams can be difficult to spot, and investors can lose their entire investment if they fall victim to them.

In conclusion, investing in Bitcoin can be a high-risk, high-reward proposition. While some investors have made significant profits by investing in Bitcoin, there are numerous risks associated with it, including volatility, regulatory risk, hacking and security risks, liquidity risk, market risk, and the potential for Ponzi schemes and scams. As with any investment, it is important to carefully consider these risks before investing in Bitcoin, and to only invest what you can afford to lose. Investors should also take steps to secure their Bitcoin holdings, such as storing their Bitcoin in a hardware wallet rather than on an exchange or other third-party platform.

Despite the risks, many investors believe that Bitcoin has the potential to be a valuable investment over the long term. As the world becomes increasingly digital and decentralized, Bitcoin and other cryptocurrencies may become more widely accepted as a form of payment, and their value may continue to rise. However, investors should always remember that investing in Bitcoin is not without risk, and they should carefully weigh the potential rewards against the potential risks before making any investment decisions.

Buying bitcoin can seem daunting at first, but with a little research and preparation, the process can be relatively simple. Remember to take your time and choose a reputable exchange and wallet, and be sure to verify your identity before buying. With the right tools and a little bit of knowledge, you can be on your way to owning bitcoin in no time.

Have some spare cash to invest in Bitcoin?

Then check out the coinbase, a well-established crypto-exchange. Coinbase makes it easy to buy and sell bitcoin. Check it out here:

https://coinbase.com/join/gochwv

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My thoughts on Bitcoin reports

Bitcoin investor loses $2m

That is, if the reports in the media are true; it all depends on the real facts. 

An investor it is claimed lost $2m on the Bitcoin he had invested with FTX. We all know that this is a crypto exchange which went bust.

What we do not know is whether the $2m lost in this disaster or whether his original investment into Bitcoin was $100k, $200k, $500k, or $1m.

If his original investment was $500k then that is the amount of his true losses. 

I remember in 2022 when the Bitcoin halving took place, the newspaper report stated that Bitcoin investors lost half of their money. This was only true if an investor had bought Bitcoin during its previous peak. If I had sold my Bitcoin then I would have received more than my original investment. It all depends on when one had bought their Bitcoin.

Leaving all that aside, there are some lessons to be learned here; the main ones being:

1 Investing in Bitcoin in no substitute for your retirement fund

2 Do not invest in Bitcoin if the loss of your money will cause you considerable financial hardship

3 Diversify between different Bitcoin exchanges. That is coinbase, blockchain, and others which are available.

4 Do not invest in Bitcoin if you cannot stomach the thought of losing your money.

It is important to keep in mind that whenever there is a chance for capital gain, there is a chance for capital loss. Investors are betting on the chances that Bitcoin will rise in price. It is just a matter of understanding the risks when investing in Bitcoin.

There is no method of investing which will guarantee that you will not lose or that you will receive an x amount in return. Past performance is no guarantee that whatever happened in previous years will repeat itself in the future.

Have some spare cash to invest in Bitcoin and are prepared to lose it?

Then check out the coinbase, a well-established crypto-exchange. Coinbase makes it easy to buy and sell bitcoin. Check it out here:

https://coinbase.com/join/gochwv

 

Disclaimer: I may receive a small commission if you sign up for coinbase.

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4 Rules for betting on Bitcoin

4 Rules for betting on Bitcoin

It is no secret that bitcoin has proved to be a very popular form of speculation, albeit a very risky one. Its volatility certainly has not turned it’s core supporters off though some it may said are looking to diversify into other crypto coins hoping to get on the ground floor of a get rich quick opportunity. Punters who are looking to get rich in this way must realise and most do that there is the possibility that they could lose their money.

1 Buy Bitcoin with money you can fully afford to lose

Only discretionary spending money should be invested in Bitcoin or other investments which are high risk. There is the chance of your Bitcoin increasing sharply in value but there is also the chance that your Bitcoin will lose it’s value. That is the nature of such investments. Whenever there is the chance of a capital gain there is also the chance of a capital loss.

2 Buy Bitcoin only if you are prepared to lose

If you are not prepared to lose your money then investing in Bitcoin is not for you. It is no secret that Bitcoin’s volatility makes it a speculative investment.

3 Bitcoin is not a substitute for your retirement fund

Investing in Bitcoin should not be done with your retirement savings and neither should you treat your Bitcoin holdings as your retirement fund but rather as an added extra. Call it an extra string to your financial bow.

4 Don’t be greedy

Greed is the downfall of some investors. They see a so-called opportunity offering a good return and place all of their eggs in the one basket by investing most or all of their money in this good thing. Doing this with Bitcoin is only an inviting financial disaster. You need to be sensible and only invest whatever you can afford to lose.

Taking calculated risks with your money is fine just so long as the loss of your money is not going to break you. 

 

If you have some cash to spare which you can afford to lose and are prepared to risk it on Bitcoin then read my article “How to buy Bitcoin” by clicking on the link below:

 

https://robertastewart.com/how-to-buy-bitcoin/

 

www.robertastewart.com

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Crypto-scams on the rise

Crypto-scams on the rise

Written by R. A. Stewart

A newspaper article appearing in the Christchurch press headlined, “Cyber-scams cost Kiwis $3.7m highlighted the dangers posed by those who are investing in online share market, crypto, or NFT platforms. The $3.7m refers to the amount lost to these types of scams in just the first three months of the year.

The sudden rise in popularity of NFT’s (non-fungible tokens) is a contributing factor in the rise of scams.

Cryptocurrency scams are increasing according to the article but not to the same extent as those scams relating to NFTs.

NFTs are unregulated and expensive and payment was difficult to reverse. 

The fear of missing out has created a demand for crypto and NFTs which has resulted in many investors investing in something which promised a great return only for it to be just a scam.

The article gave this great advice which really is applicable to all kinds of investments whether it is online or offline and that is to do your due diligence. 

As far as cryptocurrency goes, due diligence means searching the name of the investment with the words “scam alert”, or searching the FMA warning and alerts page.

Another important thing is to not feel pressured in anything. If you are told to invest within a short time or you will miss out then don’t bother because the promoters of such a scheme are only trying to take advantage of the “Fear of missing out,” mentality in you.

A phishing scam is the most reported scam. It is when you receive an email from someone posing as a trusted site or business in order to gain your personal details. They ask for your log in details and use it to gain access to your accounts. Different strategies may be used and one is when you receive an email asking you to verify your account. When you register for a site you are asked to verify it within 24 hours of joining. If you receive an email asking you to verify your account months after you registered then be wary and do not click on the link provided.

It is also a good idea when registering with a crypto or NFT site to use an email address which is different from your personal one and certainly do not use the same one you would normally use for your banking or online auctions.

As far as banking goes; do not use your main debit card for crypto trading but rather a separate one because of the risks of hacking. Even with all of your own due diligence, there is also the possibility that the crypto exchange website with all of your banking details will get hacked and that is out of your control. It is up to each investor to do their own homework and take responsibility for their own decisions. That way you have only yourself to blame if you lose your money.

ABOUT THIS ARTICLE

Feel free to share this article. You may use this article as content for your website or ebook. Read my other articles on www.robertastewart.com

DISCLAIMER: Please note, this article is not intended as financial advice but rather the opinion and experience of the writer. Caution is advised when investing in cryptocurrency or NFTs.

www.robertastewart.com

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The Risks of Bitcoin

INTRODUCTION

There are risks with bitcoin that investors need to be aware of in order to manage them. They may be out of the control of investors but at least there are steps one can to in order to minimize the risk. The risks will not be eliminated but at least you can mitigate them to a certain extent.

The Risks of Bitcoin that investors need to be aware of

Risk one-The volatility of bitcoin

Everyone knows how volatile bitcoin is and those who invest in this will see the value of this cryptocurrency fluctuate quite dramatically. Unless you can cope with the rises and falls of bitcoin then investing in bitcoin is not for you. There is little to be gained if the loss of your capital is going to cause you to lose sleep. I cannot stress enough the importance of using your discretionary spending money to play the cryptocurrency market. 

What is discretionary spending?

It is money which is spent on travel, eating out, entertainment, hobbies and sports. 

You would never spend the rent money or money which has been set aside for your retirement on entertainment such as a day out at the races so you should not use that money for playing the cryptocurrency market either.

Risk two-Hacking

A company called “Cryptopia ” which was an online bitcoin trading platform held funds invested in Bitcoin. It was hacked into and all those with bitcoin invested with cryptopia lost their money. There were some sad stories concerning the large amount of money lost by some individuals. 

It has to be repeated that you should never play cryptocurrency money with funds you cannot afford to lose or to place too many eggs in the one basket as many of these investors appear to have done.

The other thing I have to add is that the actual amount of money lost by cryptopia investors is likely to be grossly inflated due to the rising price of bitcoin. If someone invested $1,000 in bitcoin and this rose to $10,000 in a few years only for them to lose the lot. It will go on record that this person has lost 10k when in actual fact, it was just 1k they lost.

Risk three-Lost passwords

An Australian man is locked out of his bitcoin wallet because he cannot even remember his password. The website where he has his bitcoin will lock him out of his wallet permanently if he has made ten failed login attempts. He has made eight. He has over 300k in his bitcoin wallet. 

The lesson here is to write down your password and keep it locked away in a safe place. 

The other piece of advice is to diversify your portfolio so that if something goes horribly wrong you will not lose too much in one hit.

Risk four-Government controls

Governments have the ability to ban crypto trading; China has done just that. Several agencies in China have joined forces to ban what they describe as “illegal” cryptocurrency activity. This is not to say other countries will follow suit but it just illustrates a point that governments do have the power to do this.

Risk five-Taxation

Two things in life are certain, death and taxes. You can be sure that at some point the taxman will want a piece of your bitcoin pie. Whether it be in the form of a Capital Gains Tax or the increased value of bitcoin. It should be remembered that if you are being taxed on the Capital Gains of your bitcoin then it may be possible to claim tax back on any capital losses. A good accountant will be able to advise you here.

Whatever form of capital gains you are investing in it should always be remembered that when there is the opportunity for capital gains there is also the possibility of capital loss. Investing in cryptocurrency is risky therefore, it cannot be stressed enough that the money you invest in bitcoin must be money you can afford to lose.

ABOUT THIS ARTICLE

You are welcome to use this article as content for your ebook or website. More articles by R.A.Stewart can be found at www.robertastewart.com

Ready to invest in bitcoin? Check this out:

https://yazing.com/deals/blockfi/robertalan

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ASSESSING RISK VERSUS REWARD

This article is of the opinion of the writer and does not constitute financial advice; if you require advice of a professional contact your financial advisor or bank manager.

Assessing Risk and Reward

Written by R. A. Stewart

Assessing the risk of loss compared to the rewards is a balancing act and requires a bit of insight and knowledge of what you are investing on. This issue has been brought to my attention a couple of times recently. It was only yesterday I received an email from a website which holds bitcoin funds; the email was promoting a special offer. Invest a minimum of $100 US into Ethereum for 4% interest. This was not an offer to purchase Ethereum itself but rather than purchase Cryptocurrency as a means of making Capital Gains you would be investing money for a guaranteed return of 4%. This is a poor return for the risk involved and of course I gave this one a miss but with the low interest rates at present there will be some people who will be tempted if offered this kind of investment.

Finance companies that offer investors higher returns to investors are lending their money to higher risk borrowers; therefore there is a greater risk of losing your money. Prior to several finance companies collapsing in New Zealand during the Global Financial Crisis of 2007/2008, many financial advisors were saying, “The higher interest rates do not reflect the higher risk investors are taking on.” 

Many rejected that advice with disastrous consequences.

Sports betting and horse racing provide perfect examples of risk and reward.

In the Australian Rugby League Melbourne Storm were playing Sydney Roosters. Melbourne has won almost two-thirds of their games since their formation in 1999, therefore if you backed them in every game you would need average odds of $1.50 (1-2) just to break even, yet they were paying $2.20 (5-4). This was over the odds.

In the same weekend, Brisbane Broncos, a team that had lost it’s last five games was favourite against the NZ Warriors. Brisbane were paying $1.60 which was a poor price for an out of form team; they lost.

It is the same with horse racing. If there are equal favourites with one that has won one race in 14 starts and another that has had two starts for one win then which would you prefer? The one that had only been beaten once is the better bet.

You have to do the mathematics and ask yourself this question, “If I backed this horse at all of it’s starts would I be in front with the odds it is paying in today’s race?”

Getting back to investing in the financial markets one has to assess the risk and weigh it up as opposed to the rewards.

One very important point to remember is this; “Whenever there is a possibility of capital gain then there is also the possibility of capital loss.”

Investors need to get used to losing occasionally and get into the habit of taking calculated risks. If you have not had any financial setbacks it means you are not taking risks.

Taking risks is not the same as making foolish financial decisions. Just be sensible with your investing and invest according to your plan and timeframe when you require the money. 

This is some guide;

Short term (with one year) Conservative funds

Medium term (one to five years) Balanced Funds

Long Term (Six to ten years & longer) Growth Funds

Adding another category would be speculative investments.

There is no guarantee what will happen to the markets this decade and in particular post-covid, therefore it pays to diversify your investment portfolio and it is for that reason that some investors are turning to gold as another string to their financial bow but like all types of investments you have to do your research. 

You can learn about investing in gold from the link below:

https://affiliates.goldco.com/l/1VRW1MU2Q/

www.robertastewart.com