Not many experts recommend placing investment funds such as 401 (k) pension plans with bitcoin. Digital currencies are too easy to change. But there is nothing wrong with setting a small amount of money that you allow to be lost or for illegal betting, such as gambling by carrying a few dollars at the casino.
Bitcoin certainly offers an adrenaline rush. In 2017 the biggest cryptocurrency price jumped from less than US $ 1,000 to almost US $ 20,000, then fell to the lowest level of US $ 6,647.33 over the weekend after the South Korean exchange was hacked. On Monday (11/6) yesterday, bitcoin was traded at the level of US $ 6,768.00.
Investment signals remain mixed: Google’s search activity on bitcoin has dropped 75 percent as prices have jumped from the level of US $ 20,000, but large Wall Street companies are making investments that show they expect a cryptocurrency to remain part of the financial landscape.
There are two ways to bet on bitcoin, the “old-fashioned” way, through special exchange exchanges and buying or selling futures contracts.
Here are a few things to consider:
Trade on the Bitcoin Spot Market
New coins are given to “miners” to solve complex mathematical problems. Then the coins are bought and sold in dollars or other currencies in an account called a wallet, stored in a currency exchange such as Coinbase, Bitstamp or Kraken.
Trading in the spot market is very similar to stock trading, with prices governed by supply and demand, and there is no role played by central banks, such as the Federal Reserve. Because bitcoin has not been accepted by many traders, its value depends on the speculators’ views on what other people will pay in the future. For critics, bitcoin is seen as a bubble. While advocates see a large potential for profit.
Most of the more than 100 bitcoin exchanges are only a few years old, and some have fallen victim to fraud, theft, hacking and growing illness, such as trading stops.
Investors are very careful to buy bitcoin on the exchange and then store the bitcoin code from the site or even on a piece of paper – that is what bitcoin initial users, Winklevoss, will do so far to cut their code into pieces and store it in a vault use a system that only they understand to return the actual bitcoin code.
Bitcoin itself is full of risks, even if the trading and storage system is safe.
Unfortunately, bitcoin exchange doesn’t work as efficiently as a stock exchange, said Param Vir Singh, professor of business technology for the Tepper School of Business at Carnegie Mellon University.
“The price of Bitcoin is changing; slow transaction speed; bitcoin trading platforms are illiquid, “he said, noting that, unlike the stock exchange, bitcoin exchanges are generally not well regulated by the government.
Nasdaq has expressed its interest in offering cryptocurrency trading, while the NYSE has expressed its interest in bitcoin ETF trading. NYSE’s parent company, ICE, moves to swap bitcoin and already offers cryptocurrency data feeds.
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