Tuesday, June 28, 2022

What Is Wrong With Cryptocurrency

Is Bitcoin Too Risky For The Average Investor

I LOST HUNDREDS OF DOLLARS investing in the wrong cryptocurrency

Compared to most investments, bitcoin “is a highly volatile, highly risky investment,” James Ledbetter, editor of fintech newsletter FIN and CNBC contributor, tells CNBC Make It. “If you look historically at the price of bitcoin, there have been a number of occasions where it’s really spiked and then comes crashing down really quickly.”

Drawback #: Cybersecurity Issues

As a digital technology, cryptocurrencies will be subject to cybersecurity breaches, and may fall into the hands of hackers. We have already seen evidence of this, with multiple ICOs getting breached and costing investors hundreds of millions of dollars this summer alone . Mitigating this will require continuous upkeep of security infrastructure, but we are already seeing many players dealing with this directly, and using enhanced cybersecurity measures that go beyond those used in the traditional banking industries.

Can Bitcoin Be Easily Converted To Fiat And Transferred

Currently, most mainstream bitcoin transactions are done by converting bitcoin to fiat currency, like the U.S. dollar.

And as of now, that process of transferring bitcoin to other accounts and converting it to different currencies, whether the U.S. dollar or other cryptocurrency, is “clunky” and time consuming, says Ledbetter.

Plus, if you’re using bitcoin for transactions, “you really need to read the fine print there are usually fees associated with those transactions, but some of that will probably ease up a little bit over time,” Ledbetter says.

Along with fees, “sellers do not have the confidence to do large transactions yet in bitcoin,” investor Kevin O’Leary, chairman of O’Shares ETFs, told Pompliano on “The Pomp Podcast” in December. “I’m sure this could change over time, but not today.”

In the future, Pompliano predicts innovation will result in technology that “makes it easier to spend bitcoin with quicker transactions that are cheaper, more efficient, more usable.”

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What Is Wrong With Cryptocurrency Payments

We see something similar in the crypto finance world. Almost every good or service, that you can pay for in crypto, requires a proprietary coin. And these coins meet only on cryptoexchanges. Its like multicolored brushstrokes on the canvas, which seem to be chaotic up close. Great masters could turn this mess into a masterpiece. But what about common folks in ordinary life?

Fund deposit, withdrawal trading everything is subject to fees. If one doesnt have experience in stock trading , it is easy to lose money on the exchange.

What to do in a situation when you need to buy food, clothes, a smartphone and movie tickets? Is it viable to use 4 different cryptocurrencies? Or invest in all the blockchain projects related to these spheres? Again, different colors that can not be mixed.

There is a feeling that nothing can be kept in your hands, everything flows between your fingers. Both a smartphone, and clothes, and movie tickets.

The traditional financial system created plastic cards after trying lots of things. You can consider them as a palette for mixing colors. This is a universal payment tool, which almost does not depend on the users location. It is normal to pay in any country with the help of VISA or MasterCard while traveling in Asia. You can buy yourself anything for a local currency whether its yuan, yen or Hong Kong dollars. The fee will be written off once and the rate will be calculated automatically.

How Does The Industry Approach Regulation

How to trade in cryptocurrency

So far, professional investors say they would actually welcome new regulations as long as they are not too stringent.

Robert Jackson, the former S.E.C. commissioner, argues regulation will widen the appeal of cryptocurrency assets.

“The market will be better off, because assuring investors that they are getting the kind of transparent pricing they are used to in American markets will encourage other investors to consider the possibility of investing in cryptocurrency,” he says.

But rules perceived as too stringent will inevitably spark fights. Lobbyists for the cryptocurrency industry tried to fight off Senate rules, calling the tax crackdown too broad.

Also Check: How Do I Access My Bitcoin Account

Important: Before You Start Trading Cryptocurrencies

To make your crypto experience even more convenient, we have prepared an extremely detailed guide where we take a deep dive into the industrys best cryptocurrency news aggregators, data websites, tools, and portfolio trackers that every crypto trader should be aware of. Therefore, we highly recommend you read our Master Bitcoin in 2021 guide and know more about what unique tools the industry offers. This guide was prepared by a professional crypto data analyst and investor.

Heres the short breakdown of the information youll find in our aforementioned guide:

Coinbase Servers Down As Indias Plan To Ban Cryptocurrency Revealed

On Tuesday night, the news broke that the Central government is looking to ban all private cryptocurrencies through a bill that will be introduced in the Winter Session of Parliament later this month. As per sources of Republic Media Network, only a few companies will be immune to the bill which is reportedly named The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021. It is to be noted that reports about the possible ban have surfaced after PM Narendra Modi expressed his concerns over the growing trend of digital currency, in his address at The Sydney Dialogue on November 18, 2021.

This revelation about the bill created turbulence amongst traders and even owners of crypto trading companies. Following the news, several investors began to panic sell the tokens causing high trading traffic in crypto exchanges. Coinbase, which is one of the biggest exchanges faced high traffic on Tuesday night causing its application server to crash. Traders are now on a panic selling spree, which is causing issues on several platforms like Coinbase.

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Are There Concerns About Cryptocurrency

There are big concerns about digital coins as a source of fraud. They are also entirely unregulated and some are open to market manipulation. Speculators who buy digital coins should be aware they could lose all their money, according to British financial regulators.

While Bitcoin is decentralised, it is highly volatile and has been known to move when popular individuals, such as Tesla chief executive Elon Musk, so much as mention the names of digital coins.

Why You Need A Trading Plan

I Was WRONG About XRP Cryptocurrency (Shocking for SEC vs Ripple)

Heres why a crypto trading strategy is crucial to your success:

  • Its a map. Having and maintaining a trading strategy is akin to having a map. It guides your trades, helping you know when to trade, how, and why to perform a certain trade.
  • Keeps emotions at bay. One of the biggest challenges facing traders is the interference of feelings and emotions. These become an impediment when an assets price starts trending in the opposite direction to a bet. In cryptocurrency, this happens so frequently that it easily leads to an emotional roller coaster. Successful traders have learned to keep trades free of emotions by sticking to their trading plans.
  • Risk management. Having a trading plan effectively forces you to do the research necessary to create one, and part of that research is the risk factor to consider for every trade. Risk identification is the first step toward risk management.

Here are some of the popular strategies used by highly successful traders and investors:

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Tribe Capital To Launch $75m Crypto Fund

Tribe Capital, a venture capital firm with investments in Kraken and FTX among others in the crypto sector, is launching a $75 million crypto fund, sources familiar with the initiative told CoinDesk. San Francisco-based Tribe Capitals fund will focus strictly on the crypto sector, taking long positions in early-stage projects, SAFTs , yield farming, treasury buys and mining. The fund will make 75% of its investments in U.S. projects and 25% internationally.

  • CoinDesk

    Bitcoin is inching closer to an all-time high after hitting $61K on Friday. Analysts and traders anticipate a US bitcoin ETF approval next week, which is fueling the recent price rally. Although technicals show resistance is near.

  • The Wall Street Journal

    The firm is slated to be the first to roll out an exchange-traded fund based on bitcoin futures.

  • As Stakeholders Attempted To Decode The Bill From The Few Details In Hand One Question Emerged Over And Over

      The government on Tuesday pulled the metaphorical — or rather the virtual — rug from under the feet of cryptocurrency investors. In a proposed bill the Centre aims to prohibit all private cryptocurrencies. The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 would allow certain exceptions to promote the underlying technology and its uses. Soon after news of the proposed bill made headlines, a bloodbath of sorts ensued. Panic selling and heightened activity led to the crash of Indias largest cryptocurrency exchange, WazirX.

      As frantic buyers rushed to sell off their cryptocurrencies, stakeholders sought to make sense of the proposed bill. And as they attempted to decode the bill from the few details in hand, one question emerged over and over — what exactly is a private cryptocurrency, when cryptocurrency in essence is all public?

      The difference between private and public cryptocurrency is nuanced for many, and blurry for most.

      Now, all cryptocurrencies, based on blockchain technology, offer some degree of anonymity, although not full privacy. Transactions can be traced, and addresses linked. If the identity linked to the address is revealed then not much privacy remains.

      Also read: Govt to move Bill to ban all private cryptocurrencies check out reactions from the industry

      Bitcoin, Litecoin, Ethereum are examples of public cryptocurrencies while Monero, Zcash, and Dash are private cryptocurrencies.

      WHAT DOES THE GOVERNMENT MEAN?

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      What Do Its Critics Say

      Sceptics claim that bitcoin has no intrinsic value and say it poses a risk for investors, who are not protected by regulators or financial protection schemes if the asset tanks.

      Critics also warn that investors could be exposing themselves to fraud, since cryptocurrencies like bitcoin have been linked to money laundering and black market dealings. There are also concerns about the environmental impact of bitcoin mining, which requires energy-intensive computers to generate coins.

      Who Runs The Code

      Cryptocurrency Education

      Part of what has made EOS stand out among a crowded field is the unique model its developers have created for the management of the blockchain ecosystem. Investors who bought up ERC-20 tokens during the ICO will have their purchased tokens converted to EOS currency on the EOSIO platform once the network is live and active. Those investors holding native EOS tokens are responsible for the management of the entire ecosystem, according to reporting by Coin Telegraph. This process is set to be accomplished via voting for block producers, which will help to maintain the network. At the same time, the project developers intend for the EOSIO network to support decentralized applications, which will also be linked to the native EOS tokens in a proportional manner. The more tokens staked in the application, the more resources available to that app.

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      Why Is The Crypto Market Down

      Chinas crackdown on cryptos comes days after Musks shock announcement.

      Musks decision signifies a sharp u-turn for Tesla who only started accepting Bitcoin as payment for its services in February 2021.

      It came after the electric car company bought $1.5b of Bitcoin shares, which in turn sent the market price of both the crypto and Tesla soaring.

      Yet the impact on the environment of Bitcoin mining – a complicated process of minting new digital tokens – has seen Tesla withdraw this option for customers.

      The billionaire entrepreneur said: We are concerned about rapidly increasing use of fossil fuel for Bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel.

      Musk reaffirmed his belief that cryptocurrency has a promising future but that it cannot come at great cost to the environment, in his Twitter post.

      Musk has been a long-time advocate of cryptocurrencies and the Tesla decision was felt across the market, with other digital tokens going down in price.

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      The Value Depends Largely On Popular Opinion

      Investing in crypto-assets is highly speculative. The market value can fluctuate a lot over short periods of time, and is affected by things like media hype and investor opinion.

      The price of crypto may depend on:

      • its popularity at a given time
      • how easy it is to trade or use it
      • the perceived value of the currency
      • its underlying blockchain technology

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      What Are The Most Common Cryptocurrencies

      • Bitcoin: Bitcoin was the first and is the most commonly traded cryptocurrency to date. The currency was developed by Satoshi Nakamoto in 2009, a mysterious figure who developed its blockchain. Proponents say institutional investors are buying into the coin as a store of value, similar to gold, however critics say the coin is in a bubble and fundamentally worthless.
      • Ethereum: Developed in 2015, ether is the currency token used in the ethereum blockchain, the second most popular and valuable cryptocurrency. Ether has had a turbulent journey. After a major hack in 2016 it split into two currencies. It has proved hugely popular as a launch pad for other cryptocurrencies, with other digital coins using Ethereum’s blockchain to build apps and payments services.
      • Ripple: Ripple is another distributed ledger system that was founded in 2012. Ripple can be used to track more kinds of transactions, not just of the cryptocurrency. The company behind it has worked with banks and financial institutions, including Santander.
      • Litecoin: This currency is most similar in form to bitcoin, but has moved more quickly to develop new innovations, including faster payments and processes to allow many more transactions.

      How Do Cryptocurrencies Work

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      Cryptocurrency works a lot like PayPal or a credit card, except you exchange digital assets for goods and services instead of US dollars. To make a transaction with cryptocurrency, you must exchange currency with a peer using a digital wallet known as a cryptocurrency wallet.

      A digital currency wallet is software that allows you to transfer funds from one account to another. To complete a transaction, you need access to a password, known as a private key. The private key is much like a bank account. You can own multiple keys and own all the funds sent to those keys. Transactions are recorded on a public ledger, which shows the transaction totals without revealing the identities of the parties involved.

      “Cryptocurrency mining is the process required to verify transactions. It involves a massive amount of computing power and complicated algorithms, but those who are successful at solving problems through mining can earn reward coins, tokens, or transaction fees,” Malviya said.

      He explained that when it comes to cryptocurrencies, one of the biggest challenges for investors is not getting caught up in the hype. Cryptocurrencies have emerged as an asset class that provides a chance to invest and earn substantial returns. The asset class has garnered massive popularity in recent years. To start crypto trading, one needs to set up an account. To begin with, an individual can invest as little as Rs 100.

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      How Do People Choose Payment Methods

      What is important for an average person when choosing a method of payment? There are three main requirements easier, cheaper, more reliable. Less relevant, but also significant: speed and privacy.

      Which tool provides the best indicators for these parameters, that will be used by most people. At the moment, cryptocurrencies look more interesting in this aspect than all other methods.

      But if after a while there is another option for simple, reliable and cheap payment for goods and services , buyers will vote for it.

      And the only exception is to consider what other coins cannot provide. For example, anonymity is provided only by a few cryptocurrencies. Those for whom this is important, will not agree to switch to other payment methods and will rely only on them.

      What Is The Problem With Cryptocurrency

      Bitcoin is again inthe news. Some advocates of the cryptocurrency suggest its price is risingbecause bitcoin is challenging golds standing as the one supra-currency, theasset to own when fiat currencies are being debased. Does bitcoin offersomething unique as an emerging store of value, blending some of the benefitsof technology and gold? Chi Lo, senior economist for Greater China, provides his analysis.

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        Virtual Currencies Can Undermine Your Finances

        Bitcoin cant be the digital gold investors are alluding to because it doesnt have the characteristics to make it a good store of value. Gold has intrinsic value and is in finite supply: Theres a fixed amount of it in existence, and it cant simply be manufactured out of thin air. While Bitcoin can be considered finite because there is a limited amount of it, there is no cap on the number of other cryptocurrencies that can be created. This ability to continually reproduce cryptocurrencies will dilute their value over time, which is why theyll never be a place for people to safely store their money.

        The speculative nature of cryptocurrencies also means that their purchasing power is unstable. That means that anyone who buys crypto could find that when they need to buy services, be it the following day or the following year, they have less money than when they started out.

        Theres also great concern over cryptocurrencies in the banking sphere. In 2019, eight of the 10 major U.S. retail banks had dealings with illicit crypto money service businesses. The U.S. Financial Crimes Enforcement Network has since emphasized the importance of anti-money-laundering schemes in relation to cryptocurrencies, but many banks still find themselves unsure of protocols when it comes to virtual currencies. If banks are plagued by such crypto gray areas, it could seriously undermine their stability as financial institutions.

        Risks Of Crypto Investments

        Gold Bug Peter Schiff Says Cryptocurrency Market Signals ...

        THE Financial Conduct Authority has warned people about the risks of investing in cryptocurrencies.

        • Consumer protection: Some investments advertising high returns based on cryptoassets may not be subject to regulation beyond anti-money laundering requirements.
        • Price volatility: Significant price volatility in cryptoassets, combined with the inherent difficulties of valuing cryptoassets reliably, places consumers at a high risk of losses.
        • Product complexity: The complexity of some products and services relating to cryptoassets can make it hard for consumers to understand the risks. There is no guarantee that cryptoassets can be converted back into cash. Converting a cryptoasset back to cash depends on demand and supply existing in the market.
        • Charges and fees: Consumers should consider the impact of fees and charges on their investment which may be more than those for regulated investment products.
        • : Firms may overstate the returns of products or understate the risks involved.

        Plus, there’s no guarantee that the cash will be converted back into physical money.

        Tom Stelzer, investing expert at personal finance comparison site finder.com, said: “While Dogecoins sudden rise has captured the attention of many investors, it remains an extremely risky and volatile investment.

        “Unlike Bitcoin, Dogecoin was initially created as a joke, and has no real underlying value.”

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