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Crypto-Currencies (Risks (The price volatility is phenomenal. Whether this…
Crypto-Currencies
Risks
The price volatility is phenomenal. Whether this is a speculative product or gambling product has not become fully apparent
Trading futures in cryptocurrencies, whether opening long or short positions, is even more speculative than trading traditional futures because of the leverage combined with volatility. This is the case particularly if short positions are opened.
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The number of institutions prepared to accept Bitcoin is limited, although in early 2018 there was a case of a house being purchased with Bitcoin
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Although the Bitcoin blockchain has never been hacked, cyber criminals have stolen millions in terms of value from digital online wallets and also from crypto exchanges trading Bitcoin
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Not held by institutions, meaning a risk of regulation. This is because institutions can only invest in regulated securities and Bitcoin is not one
Disadvantages
As of June 2018, crypto-currencies are unregulated but there has been evidence that some governments wish to introduce some form of control - after all it is the central banks of countries that control their own currencies
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There is the potential to destabilise economies, particularly those of poorer or less stable countries
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If being bought or sold they still have value in terms of hard currencies £ or $ - people still quantify profits or losses in terms of a hard currency
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The loss of a password means loss of access to your Digital wallet. If the price crashes, you then cannot sell nor if the price rises
As an investment
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Some authorities suggest that this will be the next big financial disaster since the dot.com bubble burst in 2000
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Bitcoin
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Technology
Employs technology known as blockchain which is in effect a decentralised digital public ledger that records peer-to-peer transactions
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When the puzzles have been solved and new blocks created, they are added to the public chain and become publicly visible
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Circulation
There are 16.7 million Bitcoins in circulation (many of these are missing or locked in electronic wallets on inaccessible PCs)
Only 21 million Bitcoins have been mined, consequently the supply is finite
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Bitcoin transactions and ownership are effectively private as although the blockchains ledger is public and contains a record of every transaction ever made, owners are identified by digital credentials ('keys') and not by name or other identifying factors
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Advantages
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Where there is instability in more than one country, a universally acceptable currency may be popular not just for individuals but also for governments
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