Most of us would have heard about bitcoin and cryptocurrencies. It is all over the news and everyone speaks about the fancy returns provided by this digital coin. It has created its mark in the market. It was not so famous some years back and the value of the coin was not so high.
The popularity has increased the value of the digital coin. But even though the coin has provided huge returns and even though it has been claimed as the favourite investment tool for the GenZ, the major investors and the rich stays away from it.
The famous investor of India Rakesh Jhunjhunwala recently said that he wouldn’t buy bitcoin for even 5 Dollars. Warren Buffet one of the richest people in the world has said that bitcoin and other cryptocurrencies are worthless. He terms it to be a delusion.
Here are some reasons why the rich doesn’t invest in bitcoins.
Depends on Market Demand and Supply
Bitcoin has become a craze worldwide. Not a lot of them know what a bitcoin is or understands the concept of cryptocurrencies. But they would end up investing in it because of the trend and later on would sell it which would cause a huge fluctuation in the price. This makes it difficult to value the coin and to find an accurate value.
Bitcoins are not backed by any assets and hence the price of bitcoins totally depends on the demand and supply. If the demand for bitcoins are increasing the price would increase and if the demand decreases there would be a fall in price. This makes it difficult for investors to make a good investment.
Bitcoin is just a digital coin. It cannot be touched or felt, it is not physically present. It is made up of certain codes and it does not have a real value. The value of bitcoin depends on the people and the market news. If there is a negative news in the market then we will see a fall in prices of the coin and vice-versa.
Bitcoins are highly volatile. Bitcoins can be traded 24 hours a day and since it is open for trading every time there would be huge amount of buying and selling, which would cause a difference of up to 20-30% of the price in a day. It is considered unstable and there are chances that you would lose all your money in a day.
Gambling and not Investing
Bitcoin's main value is derived from its blockchain technology. But now a lot of other cryptocurrencies are using the same technology. Bitcoin has an early mover advantage and that’s why the prices are really high. But bitcoin was actually made to make secure online transactions which is not the situation now. Some exchanges say that it would take around 10 days to complete an order of the bitcoin placed, as there is huge demand for the coin.
Most of them don’t transact using bitcoin because the price keeps fluctuating. When the other person receives the money, the value would be different when compared to the time the coins were sent.
Most of them are not buying the coin for its value, but because of the trend. The rich and investors finds it gambling and not investing.
It is not secure
There are a lot of scams associated with bitcoins. Hackers or Malicious users can get details of your Wallet and take away your coins. There was a recent incident where the twitter accounts of the top individuals Elon musk, Barack Obama and Bill gates were compromised.
The tweet said that they were feeling generous and would double the bitcoins sent to a specific wallet. People who sent the bitcoins lost their coins and it was impossible to trace the digital coins because of the blockchain technology as it keeps it secure. It involves a lot of risk.
There is no central body which regulates and hence if you lose your bitcoins or if someone hacks into your wallet you wouldn’t receive your coins back. Bitcoin’s blockchain technology makes it impossible to track your coins if you lose it. It is highly risky and it cannot be considered as an investment option.
Is Bitcoin a good investment?
Bitcoin is an risky investment that may or may not pay off.
Is it Legal to buy and sell Bitcoin in India?
It is Legal to buy and sell Bitcoin in India.
What are the taxes I should be concerned about Bitcoins?
There is a lack of clarity on the tax front on Bitcoin investment in India.
Other than these there are also a lot of scams related to Cryptocurrencies. The companies promise huge returns and claims that a specific coin is going to beat bitcoin in some years and people tend to invest in it. People invest without proper research and knowledge and just look at the high returns and lose their entire amount.
The above reasons are why the wealthy don’t prefer to invest in bitcoins. Bitcoins have provided huge returns in the recent years but it is a highly risky product and you can never predict the price of bitcoin in future. Buying a bitcoin is equivalent to gambling than investing.
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