Want to invest in Bitcoin? Here are the things you need to know

Want to invest in Bitcoin? Here are the things you need to know

By Jane Muia / Posted on May 16, 2022 | 12:23 p.m.

KEY POINTS

With everything digitized today, some investors have also relied on digital currencies. Many digital currency enthusiasts believe that these investments could produce a new batch of digital currency millionaires (or billionaires). But those who haven’t yet invested in the digital currency space may be wondering if there are compelling reasons to start now.

Sprout plant and bitcoin, growth of bitcoin crypto currency concept

KEY POINTS TO REMEMBER

Bitcoin is an experimental new currency that is under active development. Each improvement makes Bitcoin more attractive, but also reveals new challenges as Bitcoin adoption grows. You might encounter higher fees, slower confirmations, or even worse issues during these developments.

Gone are the days when people relied solely on their savings for their future security. In today’s world, saving may not be enough to provide financial security. Dormant money kept in your savings bank account may not be used for this purpose. This is for two reasons – first, idle money in your bank account is a waste of opportunity because it can’t earn more money, and second, it doesn’t have the potential to beat inflation.

Investing allocates money across different asset classes with the aim of appreciating capital and achieving better long-term returns. This is why you need to invest your money in the right way giving it a chance to grow and work for you in the future. The type of investment you choose to invest your money is entirely up to you. Factors such as your ability to bear risk, your age, your investment horizon and your financial goals should first be considered before deciding on an investment option.

With everything digitized today, some investors have also relied on digital currencies. Many digital currency enthusiasts believe that these investments could produce a new batch of digital currency millionaires (or billionaires). But those who haven’t yet invested in the digital currency space may be wondering if there are compelling reasons to start now.

The incredible growth of bitcoin (BTC) has caused some investors to rely on it as they see it as uncorrelated to stocks, making it an option as a portfolio diversifier. If you’re determined to put your money in bitcoin, here’s what you need to know.

  1. Bitcoin price is volatile

Bitcoin’s price can rise or fall unpredictably over a short period of time due to its young economy, new nature, and sometimes illiquid markets. Therefore, holding your savings with Bitcoin is not recommended at this stage. Bitcoin should be considered a high-risk asset, and you should never store money that you cannot afford to lose with Bitcoin. If you receive payments with Bitcoin, many service providers can convert them to your local currency.

  1. Bitcoin payments are irreversible

A Bitcoin transaction cannot be undone; it can only be repaid by the person receiving the funds. This means making sure you do business with people and organizations that you know and trust or have an established reputation. For their part, companies must keep track of the payment requests they present to their customers.

READ ALSO : Kenya to import maize from outside EAC as flour prices rise

Bitcoin can detect typos and usually won’t let you send money to an invalid address by mistake, but it’s better to have security checks for added security and redundancy. Other services may exist in the future to provide more choice and protection for businesses and consumers.

  1. Unconfirmed transactions are not secure

Transactions do not start out as irreversible. Instead, they get a confirmation score that indicates how difficult it is to reverse them. Each confirmation takes between a few seconds and 90 minutes, with 10 minutes being the average. If the transaction pays too low fees or is otherwise atypical, getting the first confirmation may take longer.

  1. Taxes and government regulations

Bitcoin is not an official currency. Most jurisdictions still require you to pay income, sales, payroll, and capital gains taxes on anything of value, including bitcoins. Your responsibility is to ensure that you comply with tax obligations and other legal or regulatory mandates issued by your government and/or local municipalities.

  1. Bitcoin’s future is unpredictable

Bitcoin is an experimental new currency that is under active development. Each improvement makes Bitcoin more attractive, but also reveals new challenges as Bitcoin adoption grows. You might encounter higher fees, slower confirmations, or even worse issues during these developments. Prepare for problems and consult a technical expert before making large investments, but keep in mind that no one can predict the future of Bitcoin.

More articles by this author

Comments are closed.