Things to remember before you invest in Bitcoins.

Last Updated at: Mar 10, 2020

Bitcoin, a digital cryptocurrency based on Blockchain is fundamentally a different way of investment and payment system over the Internet. You might have an idea of investing with an imaginary assurance of reaching higher profit but do remember that many go bankrupt if the bitcoin price falls down. So there are certain things you should know before investing in it. These are some five important points to be remembered before investing in Bitcoins.

  1. Bitcoins is unpredictable by basic:

The unpredictability of Bitcoin’s value makes it a remarkably risky investment in widespread. The basic principle behind this volatility over bitcoins is, if more people are enthusiastic to buy Bitcoins, the Bitcoin value will abruptly increase and contrarily if more people show their interest in selling the bitcoins, the prices will decline, thus making the value of Bitcoin fluctuate widely with a varying time period.  Therefore, you should do a proper research before making any investment in it.

                     “Don’t invest more than you can afford to lose.”

  1. Any transactions over bitcoin network cannot be reverted or canceled:

Performing a transaction over the bitcoin network cannot be canceled or reverted. Once you proceed with the transaction, your money will leave your account and further the transition cannot be withdrawn or canceled.

Many traders consider it an avid feature as it eliminates counterparty risk-oriented with the transaction. Therefore, it is very important that you must confirm twice before you make a transaction. In case if you had sent bitcoins to a wrong merchant, the best way to recover the money is by contacting the receiver to refund the amount, but it could be a tedious process too. Thus be cautious while performing any transaction over the bitcoin network as a bitcoin transaction will be included in a block on the longest chain.

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  1. Understanding the Security on Bitcoins:

A good and best investments are all about ensuring the paramount security and the risk-oriented with it. When it comes to Bitcoin investment, As bitcoin’s value has firmly increased, there are high possibilities to face cyber attacks on cryptocurrency exchanges and wallets. As we all know, Bitcoin wallets would use public keys for sending and receiving Bitcoins, It is extremely important for a bitcoin user to keep private keys offline. Its often recommended using a dedicated hardware like Ledger Nano S, Trezor or KeepKey also a dedicated USB stick can be used to store your private key.

Also, make sure that your computer or any hardware is away from the internet just to minimize exposures to potential viruses and attacks and malware. As a thumb rule always do remember that, If you lose the Bitcoins from your Bitcoin wallet, they’re gone permanently. As there’ is no concerned governing authority, there is certainly no way to recover them.

  1. Right area to spend your bitcoins:

If you are in India, and if you want to spend your invested bitcoins, there are various ways where it can be used to buy products and services in India, and the surprising report is that the application areas are apparently growing day by day. You can buy a number of items like furniture and household appliances on overstock with bitcoins. The website has a clear and vivid product catalog and provides a wide area for digital payment such as bitcoins and surprisingly they ships to India.

Apart from these online portal and shopping websites, there are large companies which accepts payment through Bitcoin. Some of the companies are PayPal, Dell, Subway, Microsoft Corporation, Expedia and so on. Adding to these, we can also use bitcoins for donations to charity projects and foundations. Some of the commonly known foundations where you can use bitcoins are Mozilla Foundation and Apache Foundation. You can also bequeath to the Wikimedia Foundation via bitcoins where it is far better to do transaction by using bitcoins than by currency exchanges.

  1. Bitcoin is Anonymous – FALSE!

Out of 1000s of folklore and myths, this stands on top “Bitcoin is Anonymous”. In reality, Bitcoin is pseudonymous in nature. In a Bitcoin network, every transaction involving with a particular address will be stored forever in the blockchain. Thus, It carries your public address as an identifier and your address is even linked to your identity, and all transactions will be linked with respect to you.

Therefore bitcoins aren’t anonymous in fact every transaction you make and your account balance is evident at the Blockchain website. It will carry your public address as an identifier, but its quite easy task to trace the name linked to that public address. Good thing is, its a transparent payment system that promulgates all transaction data online. The only safe viewpoint of Bitcoin is, it is a Crypto-Currency, which determines that all transactions are encrypted and hence cannot be interrupted by any middlemen.

Ready to invest in Bitcoin?

Bitcoin has a lot of possible applications that may find a way in the near future. Liquidity is a major issue with bitcoins, especially if prices crash or if a bitcoin exchange goes bust. It’s important to learn how Bitcoin works before investing any money. Take time to understand Bitcoin about how it basically works, how to ensure security for bitcoins, and also know all possible areas where bitcoins are accepted at this early stages and last but not the least, know the risk factors involved in it.

A lawyer with 14 years' experience, Vikram has worked with several well-known corporate law firms before joining Vakilsearch.