The latest major craze among digital currency investors is the concept of investing in the concept of “bitcoins”. However, it is not clear if such is the right move to make given the numerous disadvantages that have been pointed out against it. This makes many people wonder if this latest concept of buying into this type of virtual currency is the right move. So, let us find out more about the advantages and disadvantages of investing in “bitcoins” – the virtual currency. The advantages of “bitcoins” over traditional money include the following.
Unlike the conventional form of currency, investing in “bitcoins” does not involve dealing with any commodity or stock. As the name suggests, investing in this virtual currency involves trading it, but this is not like trading in shares. For instance, when you invest in stocks, you buy shares in a company. In such cases, the shares have a physical value. With “bitcoins”, there is no physical commodity involved.
Since there are no commodities or stocks involved, the risks associated with trading in virtual currency are much less. You need not be worried about losing money when the market suddenly falls – just as you would lose money when you invest in shares. This is because you are dealing with an intangible asset. Consequently, this type of investment also offers a better return than the conventional form.
The second advantage is that there are no commissions and charges. As with shares, the investor will have to pay a certain amount of commission (known as “fees”) every time he buys or sells a certain amount of bitcoins. When you consider this fee structure, it becomes clear that it is much more expensive than investing in shares. Also, the investor must also be ready to face legal issues, since the buying and selling of these units can involve illegal transactions.
Since bitcoins are not officially recognized by any government, the investor cannot make any claim on the value of the virtual currency. Unlike stocks, shares, and bonds, an investor cannot claim compensation if he loses his money through investment in bitcoins. This lack of legal protection results in the high cost of this form of investment. Even when the market rises, the value of the unit has no connection to the real-world value.
Finally, investors must take special care with regards to the tax aspect of this investment. If an investor wishes to sell some bitcoins, he must pay capital gains tax to the government on this sale. Also, there are some special rules that govern the ownership of bitcoins. An investor must ensure that he understands the regulations well enough in order to make this type of investment.