Bits of advice on bitcoins and other things
Investing in cryptocurrencies involves very high risk, as prices have been extremely volatile. Many experts are skeptical about bitcoin as an investment primarily because there is nothing for them to analyse. Vivek Belgavi, Partner and Fintech Leader, PwC says, “There isn’t enough of an ecosystem surrounding bitcoins to allow fundamental analysts to study it as […]
Investing in cryptocurrencies involves very high risk, as prices have been extremely volatile. Many experts are skeptical about bitcoin as an investment primarily because there is nothing for them to analyse. Vivek Belgavi, Partner and Fintech Leader, PwC says, “There isn’t enough of an ecosystem surrounding bitcoins to allow fundamental analysts to study it as an investment…”
Bitcoin is 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. “It can be very risky for businesses, industry and people to trade or invest in bitcoins as it is just a formula, not backed by any tangible asset, but by sheer demand,” says S.P. Sharma, Chief Economist, PHD Chamber of Commerce and Industry.
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. Jamie Dimon, CEO, JP Morgan, for instance, has recently expressed his doubts about the value of bitcoins, saying “It’s worse than tulip bulbs. It won’t end well. Someone is going to get killed.”
Unlike other investment avenues, cryptocurrencies are not regulated by government entities or banks. “There is no authority like Sebi that you can approach for grievance redressal,” says Vikram Pandya, Director, Fintech, S.P. Jain School of Global Management. Sharma concurs, “If we buy something with a credit card and get ripped off, we can call the bank and ask to be compensated.
A cryptocurrency (or crypto currency) is a digital asset designed to work as a medium of exchange using cryptography to secure the transactions and to control the creation of additional units of the currency. Cryptocurrencies are classified as a subset of digital currencies and are also classified as a subset of alternative currencies and virtual currencies. Bitcoin, being the most popular of them, was created in 2009.
If you get ripped off in a cryptocurrency transaction, or if your bitcoin wallet is hacked and your money is stolen, it is impossible to get the money back, and there’s virtually no one or authorities to report to, even if you report to security agencies, it’s always almost impossible to track down cryptocriminals.
As I write this, a lot of illicit financial flows are happening between Nigeria and Hong Kong, China, others, even as I would urge the federal government of Nigeria through the CBN to look into it befeore it gets out of hand. What these guys are doing is simply what I call ‘digging a hole to fill a hole’. Initially, some will earn and get paid, but ultimately it will crash and people will lose money. Avoid pyramid schemes with little or tangible products or services to sell. Learn to work hard and earn your money. Good advice is like a mini skirt. It may be short, but covers the vital parts of your body.
Obin wrote in from Biase, Cross River State.