Three Questions to Ask Yourself Before Investing in Bitcoins

Bitcoins are a digital currency that’s been the buzz word for over a decade now. However, it is still a mystery for many. Besides the fact that it does not come in a physical form, some countries call it illegal, which adds to its mystery. And that’s the reason why not many people want to invest in it. However, those who have invested in it are minting money. Pun Intended!

Valery Vavilov is the founder of bitcoin mining, and he has so far minted around 800,000 bitcoins, which increases his net worth to something around $500 to $700 million. That’s a lot of money, right? So, why is that more people are not doing it? Why do some countries consider this illegal?

Are you familiar with how bitcoins work, and are you planning on investing in it? Well, if you are not, don’t worry. Here’s all that you need to know about bitcoins and the three questions that you should ask yourself before investing in it!

What Is Bitcoin and How Do I Mint It?

Bitcoin is a cryptocurrency or a digital currency with no physical coin. It has its origin in a blockchain technology where the information of the bitcoins you own is encrypted on “blocks” or ledgers on the internet. The transfer of money between two parties while using bitcoins and blockchain is swift. As the information is store in digital blocks, with high encryption, it is highly secure. Numerous major corporations like Microsoft, Expedia, and Overstock help people use Bitcoins instead of credit cards.

According to the sources, initial plan was to make 21 million bitcoins available for users to mint. However, a human error led to there being fewer than 21 million bitcoins available. Bitcoin minting is available for anyone across the globe, provided. It is a legal tender in the country. Anyone can mint bitcoins and find the details of all their recent transactions as information stored on blocks. This solves the complicated computational puzzle of online transactions and missed storage.

Who Should Invest in Bitcoins?

This is the most important question to ask yourself and your financial advisor before taking the big leap. While the numbers might confuse you and leave you as clueless as you were initially, here’s a simple answer.

Just as in the case of every other investment, bitcoins come with their fair share of disadvantages too. This means you should not invest in them unless you are ready to bear the losses. Investing when you cannot afford to lose will put your financial security at risk.

A few financial analysts believe that cryptocurrencies will soon crash like a pack of cards. Others have made millions and billions within a short frame by investing in bitcoins. The blockchain technology makes it easy, cheap, and safe to transact money all over the world. The risks of uncertainty are prevalent too. So, answering the big question, you should buy, mint, or invest in bitcoins, only if you can bear the risk of losing your money should the market crash.

Is Bitcoin Legal Tender?

Every country and every state has a different rule when it comes to cryptocurrency. As an investor, it is important to understand if the law of your land recognizes cryptocurrency as a legal tender. Besides this, you should also make sure it is an acceptable form of currency in any other nation where you’re trying to make a payment. For instance, countries like Vietnam, Bangladesh, India, Algeria, Macedonia, Nepal, and Bolivia consider cryptocurrency as illegal.

Currently, the US has the highest number of bitcoin users with 2,625 nodes. Closest to that is the numbers from Germany and France, which stands at 2016 and 698 nodes. These three countries thus contribute to more than 50 percent of the operational Bitcoin nodes on the internet. The US considers this as a legal tender and recognizes it as a commodity. This means that capital gains from cryptocurrency you have to report it for tax purposes too.

These are just a few of the many questions you should ask before investing in bitcoins. Talk to your financial advisor, interact with people who are investing in bitcoins already, understand how it fits into your financial plan, and then invest, if it seems right. Remember, just because a certain technology or market is performing well, it need not be the best place for you to put your money. And the reason for that is simple, each one of us has a different financial goal, and an investment plan that aligns with it is what we should pursue. This reduces the risks and increases the gain. So, make sure you take an informed decision.