Is Bitcoin a scam or a profitable investment?
Bitcoin is one of the many digital currencies, but don’t let the term “coin” fool you, it is not an actual currency like the Canadian dollar, as it is not controlled by any central entity. Bitcoin is a commodity that can be bought and sold using other currencies, similar to buying a piece of silver. The value of bitcoin is constantly changing, just as the value of silver is changing. At this point, one bitcoin is worth tens of thousands of dollars, but it could go down at any time. Bitcoin transactions are stored in a ledger called a blockchain, and the latter is designed in a way that completely obscures the identity of the Bitcoin user. In this article, we will try to answer the question: Is Bitcoin a scam, or is it a profitable investment?
Is bitcoin scam?
There are three primary risks associated with buying and owning bitcoins:
It may decrease in value after purchase
Anyone can access your private key and take your bitcoins
You may lose your private key that allows you to access your bitcoins
The first risk represents the same risks associated with making any type of investment. Whether you are buying stocks, bonds, mutual funds, or indexes, or lending money, there is a possibility that your investment will decline in value or that the other party will not repay you.
Bitcoin is a particularly volatile investment, which means that the price can move quickly up or down. If you buy bitcoin and sell it later when its value is higher, you can make a lot of money. Over the course of the 2020 calendar year, Bitcoin saw a depreciation of $3,800, but it quickly bounced back to touch the $30,000 mark, which clearly represents a profit opportunity for savvy investors.
In recent years, many people have made large investments in Bitcoin but were surprised to see the price drop from nearly $20,000 to less than $3,500 within a short period of time. So if you are planning to invest in bitcoin now, keep this in mind.
Other risks are associated with your private key. Technically, you will never physically own bitcoins, as they are completely digital. However, the private key is what gives you the ability to access your bitcoins, and spend or transfer them. If someone gets hold of your private key, you may have no way of getting your money back.
Some people choose to store their private key themselves instead of using an online wallet. You can do this by writing it down or keeping it on a storage device. This is a safe option, however, there is still the possibility of losing your private key and losing everything you own.
How to protect your bitcoin from scams
The best way to keep your bitcoins away from scams is to store your private key in an offline device or app, or in a non-digital form, such as writing it on a notepad. When your private key is stored somewhere that is not connected to the internet, it is called a cold wallet.
Physical cold wallets can be kept in fireproof safes or other safe places. A safe deposit box at a bank can also be a good option. You can add an extra layer of protection to your cold wallet by encrypting the device, or if you have a written private key, change some numbers so that they can’t be used by others, you can change the first number from 5 to 9 for example.
Some people prefer to keep their Bitcoin in an online digital wallet, especially if they buy and sell the currency frequently or want easy access to their wallet from different devices. Many online cryptocurrency trading platforms will create a wallet for you when you open an account.
Some platforms also keep a lot of bitcoins in their system in cold storage, so a hack wouldn’t necessarily put all of their users’ bitcoins at risk.
Apart from where you store your wallet, the human factor may be the most dangerous factor. Cryptocurrency scams are increasing day by day, scammers may try to convince you to share your private key or account details, or they can simply install a program that infects your devices and enables them to steal this information, so be careful.
How to spot bitcoin scams
Cryptocurrency scams often have similar features, so you can spot them with proper knowledge. Here are some of the most notable features of Bitcoin scams:
Promises of very high or guaranteed returns
It is very important to look at the offer and determine if it is realistic. Earning 1000% of your money in 18 months would be great, but is it realistic? One of the ways scammers attract money is by making false promises of returns. Without any solid strategy and supporting information about the reason for this ICO, the offer is most likely a scam.
Extensive marketing and promotion of offers
Another method used by scammers is aggressive marketing targeting. Full page spreads in newspapers, huge banners on websites, hordes of paid bloggers, all designed to reach as many people as possible in the shortest possible time and raise money quickly.
The legitimate cryptocurrency supply will not need to advertise and expand very quickly, as it will grow and develop naturally.
Team members are anonymous or with a vague name
Just like with any other business or investment, you should be able to easily see who is managing the digital currency and each member of the team. This will enable you to search for them, find out what their background is, check their social media profiles, how old are the accounts, who follows them, how many followers they have etc. It may sound a bit daunting, but it will save you a lot of potential losses.
Check out the white paper
One of the most important parts of an Initial Coin Offering (ICO) is the cryptocurrency whitepaper. It tells you how the cryptocurrency project is designed, how it will grow, how it will make money, and exactly how the offering will work.
If you’re reading a nonsensical white paper, it may be because the founders were trying to confuse their investors. But if there is no white paper in the first place, then it is certainly not worth investing in.
There is no digital currency code
The code is what makes the cryptocurrency work, and most legitimate cryptocurrency teams will make their code “open source,” that is, they publish it publicly, so that anyone can read it, modify it, and verify that it matches what the founders say it is.
If the cryptocurrency team keeps their code a secret, you must be wondering what they are trying to hide. Not every legal and legitimate cryptocurrency has an open source code, but all illegal and fraudulent cryptocurrencies hide their own code.
Unusual packages to invest in
You may get the chance to subscribe and invest a certain amount and then get a daily or weekly return. This return is often not sustainable, and is likely to slow or even stop. There are a lot of scams and offers like this so it is important that you read the papers and understand how they work before you invest in them to avoid scams with your Bitcoin.
Fraudulent trading platforms and brokers
Cryptocurrency trading platforms allow you to buy and sell them, but first you have to do your research, and check the platforms’ reviews before you get involved with one of the platforms. Some will offer excellent deals such as being able to weather fluctuations in exchange rates and using automated techniques to make sure you get the best deal, but you should know that there are many platforms that use these tempting offers to defraud you of your money
Is bitcoin profitable?
Like any investment, profit in cryptocurrencies and bitcoins depends on the price at which you buy and sell the asset. If you sell when its price is higher than what you bought at, you will make money, but if you sell at a price lower than what you bought at, you will lose money.
For example, if you initially invested in bitcoin:
2020 and then you sold it on 31st Dec 2020 you would have made 300% profit
2018 and then you sold it on Dec 31, 2018 you would have made a loss of %
Ways to invest in bitcoin to make a profit
Buying coins on a cryptocurrency exchange is the most popular way to invest in bitcoin and make a profit. But there are other options:
Stocks in Bitcoin-related companies: You can invest in cryptocurrencies or even buy shares in companies that accept Bitcoins as payment.
Bitcoin ETFs: You can invest in bitcoin exchange traded funds. This copies the price of the digital currency, allowing you to buy into the fund without trading the bitcoin itself.
Investing in Blockchain Technology Companies: You can invest in a blockchain network such as Solana technology platform which claims to be the fastest blockchain in the world.
Bitcoin Funds: Many investment companies launch bitcoin funds. Of course it will be volatile, but it may be easier to sell your investment and get your money back than with a direct investment.
Bitcoin options: These are a form of financial derivative that gives you the right to buy or sell bitcoin at a specified price (known as the strike price) prior to the expiration date. Unlike buying digital currency outright, bitcoin options allow you to take a speculative position (up or down) in the future direction of the market price. You can buy a Bitcoin option if you think the market price will go up, if your prediction is correct then you will be able to buy Bitcoin at the predetermined price, but if your prediction is wrong and the price of Bitcoin goes down then you can let the options contract expire and you will only lose the premium you paid to open the deal .