7 reasons why you should not invest in bitcoins, cryptocurrencies
1. Extreme volatility
Investing in cryptocurrencies involves very high risk, as prices have been extremely volatile. Many experts are sceptical about bitcoin as an investment primarily because there is nothing for them to analyse.
2. Neither commodity, nor currency
The lack of clarity about its origin is another big issue related to bitcoin. In olden days, highly priced metals like gold, silver, etc. were used as currencies. Then came currencies printed by governments (or central banks) and these are called ‘fiat currencies’. Though its proponents claim that cryptocurrency is ‘mined’ using complex mathematical formulae, they are reluctant to call it a commodity. They also claim that it is not controlled by any government and so, it is ‘democratic’. Therefore, cryptocurrencies don’t fall into the ‘currency’ category either.
3. Don’t invest if you don’t understand
Some global bankers and experts have warned investors against investing in cryptocurrencies, because they are of the opinion that it is nothing but a bubble that is just about ready to burst.
4. An unregulated space
Unlike other investment avenues, cryptocurrencies are not regulated by government entities or banks.
5. The issue of legality
One major hurdle in the path of Indian investors who are interested in investing in cryptocurrency, is the confusion about its legal status. While they haven’t been declared illegal, cryptocurrencies are not recognised by the Reserve Bank of India (RBI) or any other authority in India, as a ‘currency’.
6. Ponzi schemes abound
Aside from the operational issues of trading in cryptocurrencies, there is also a high risk of fraud. There is still a good deal of misinformation and lack of clarity regarding bitcoin trading, and fraudsters have taken advantage of this to launch Ponzi schemes, which promise ‘guaranteed high returns’.
7. Prone to illegal activity
Due to the lack of government control, terrorists and extortionists are also utilising the cryptocurrency space to their advantage.
Eulogy made by Hiral Thanawala