Topic: Bitcoins investing risks - page 2. (Read 1677 times)
about the fraud risk, i'm interested to know this, how can you sell false bitcoin aside from double spending?
When people invest in the market, the first thing that usually comes to mind is, “How much would I make?” whether that’s in terms of bitcoins or percentages. However, the downside is just as important. Risk and return go hand in hand, after all.
The following is a multiple risk that attentive investors should know before doing any transaction.
Regulatory Risk[/b]
Bitcoins are a rival to government currency and may be used for black market transactions or tax evasion. Governments may seek to regulate, restrict or ban the use and sale of Bitcoins. Some governments have already put this into practice.
Security Risk
Bitcoin exchanges are entirely digital and, as with any virtual system, are at risk from hackers, malware and operational glitches. If a thief gains access to a Bitcoin owner's hard drive and steals his private encryption key, he could transfer the stolen Bitcoins to another account. This is particularly problematic once you remember that all Bitcoin transactions are permanent and irreversible.
Insurance Risk
Some investments are insured through the Securities Investor Protection Corporation, like normal bank accounts, which are insured through the Federal Deposit Insurance Corporation up to a certain amount depending on the jurisdiction. Bitcoin exchanges and Bitcoin accounts are not insured by any type of federal or government program.
Fraud Risk
While Bitcoin uses private key encryption to verify owners and register transactions, fraudsters and scammers may attempt to sell false Bitcoins. For instance, in July 2013, the SEC brought legal action against an operator of a Bitcoin-related Ponzi scheme.
Market Risk
Like with any investment, Bitcoin values can fluctuate. Indeed, the value of Bitcoin has seen wild swings in price over its short existence. If fewer people begin to accept Bitcoin as a currency, these digital units may lose value and could become worthless.
Tax Risk
The IRS has already announced that it treats Bitcoin as property for federal tax purposes. As Bitcoin is ineligible to be included in any tax-advantaged retirement accounts, there are no good, legal options to shield investments in Bitcoin from taxation.
The following is a multiple risk that attentive investors should know before doing any transaction.
Regulatory Risk[/b]
Bitcoins are a rival to government currency and may be used for black market transactions or tax evasion. Governments may seek to regulate, restrict or ban the use and sale of Bitcoins. Some governments have already put this into practice.
Security Risk
Bitcoin exchanges are entirely digital and, as with any virtual system, are at risk from hackers, malware and operational glitches. If a thief gains access to a Bitcoin owner's hard drive and steals his private encryption key, he could transfer the stolen Bitcoins to another account. This is particularly problematic once you remember that all Bitcoin transactions are permanent and irreversible.
Insurance Risk
Some investments are insured through the Securities Investor Protection Corporation, like normal bank accounts, which are insured through the Federal Deposit Insurance Corporation up to a certain amount depending on the jurisdiction. Bitcoin exchanges and Bitcoin accounts are not insured by any type of federal or government program.
Fraud Risk
While Bitcoin uses private key encryption to verify owners and register transactions, fraudsters and scammers may attempt to sell false Bitcoins. For instance, in July 2013, the SEC brought legal action against an operator of a Bitcoin-related Ponzi scheme.
Market Risk
Like with any investment, Bitcoin values can fluctuate. Indeed, the value of Bitcoin has seen wild swings in price over its short existence. If fewer people begin to accept Bitcoin as a currency, these digital units may lose value and could become worthless.
Tax Risk
The IRS has already announced that it treats Bitcoin as property for federal tax purposes. As Bitcoin is ineligible to be included in any tax-advantaged retirement accounts, there are no good, legal options to shield investments in Bitcoin from taxation.
Jump to: