How secure are bitcoins?
How safe are bitcoins. Here's a look
Bitcoin gave a whopping return of more than 305% in 2020. Given these extraordinary results the trading in the currency has surged, recently. But before you dabble in the currency you should know how secure is Bitcoin and what risks it carries:
No Underlying Asset
Unlike other digital investments, which have an underlying asset there is no tangible asset to back Bitcoin. Bitcoin mining is done by sepcialised computers and its value is derived by the simple rule of demand and supply. Currently, around 18 million Bitcoins have already been mined out of 21 million that will ever exist.
Origins Unknown
No one knows who is behind the invention of Bitcoin. There is plenty of mystery surrounding its creation. Often Satoshi Nakamoto is referred as Father of Bitcoin but he has always remained anonymous and noone knows who he really is.
No Regulator
After the Supreme Court lifted the RBI ban in March 2020, Bitcoin trading is not illegal in India, but at the same time Bitcoin trading is not recognised in India. There is no regulator or entity to lodge a complaint in case of a fraud or your Bitcoin wallet gets hacked. RBI also has time and again shared a cautionary note about the cryptocurrencies and the risks involved.
Fake Cryptocurrencies
In 2017, many MLM (Multi Level Marketing) players riding on the popularity of Bitcoin and other cryptocurrencies launched their own currencies which was owned and controlled by them. They promised high return of 10-15% every month apart from contribution on adding members in the network. Many of such schemes turned out fake and many investors lost their savings. Therefore, you should be careful of agents selling you fake crypto currencies on the promise of delivering high returns.
Money9 Take: Bitcoins are highly risky and volatile. So, if you still go ahead and decide to deal in Bitcoin, do it at your own risk