Bitcoin Investmnts

Investing In Bitcoin: Pros and Cons

How Bitcoins are created?

Bitcoins are created through a decentralized process called mining(or mining). This is a surveillance process, by which “underage” Internet users verify transactions and ensure network security, using specialized computer equipment. Their computers are put in competition and whoever wins the validation of the transaction receives new Bitcoins in exchange.

Bitcoins are created at a fixed and decreasing rate of production each year. The number of Bitcoins is limited to 21 million units. You should know that currently 80% of Bitcoins have already been issued and are in circulation.

Bitcoin, a risky investment

Keep in mind that Bitcoin is based on an unregulated market, this virtual currency has no official price. This is an IT environment that has its own rules, which may turn out to be unsuitable for people who are not tech-savvy and knowledgeable enough. Given its high volatility, this market is risky.

The risks of a virtual “currency”

Different exchange platforms accessible online allow you to buy/sell Bitcoins against a fiat currency such as the dollar or the euro: it is essential to check the reputation and reliability of these sites. Note that in France, to exercise the activity of buying/selling, and custody of crypto-assets, the digital asset service provider must be registered with the AMF. Do not hesitate to ask your French intermediary if he also has the optional authorization issued by the AMF and which assures the investor that more in-depth verifications have been carried out.

Bitcoin is extremely volatile: the price can go up or down in a very short period of time and is largely unpredictable. In particular, you can lose a lot of money. Due to this high volatility, you are not guaranteed to be able to resell your Bitcoins at the desired time and under satisfactory conditions. Not being a legal tender, you also do not have the guarantees offered by central banks. Likewise, unlike deposits in a bank which are automatically covered by the deposit guarantee fund, you are not protected in the event of bankruptcy of your intermediary.

Moreover, since Bitcoin only works online, your assets are virtual: they are mainly stored in the form of a wallet (electronic safe) and sometimes on physical media such as specific USB keys. It is your responsibility to protect the storage of your Bitcoins, especially in a situation of loss of media or cyber-attack.

Despite many risks, there are still a lot of people owning Bitcoins. Some of them even play in crypto casinos and get real Bitcoin winnings. Such casinos like  and others offer quite attractive conditions for gamblers and the overall process of making deposits and withdrawals is extremely easy. 

Investing in Bitcoin

Investing in Bitcoin: Caution

Many enticing stories are circulating about Bitcoin, but be very careful, especially when faced with any investment proposals that may be made to you. Bitcoin is aimed at informed investors: a minimum of technical and financial appetite is necessary in order to understand the protocol on which it is based and its risks. In addition to those related to virtual currencies, other risks are added: loss of all or part of the invested capital, lack of regulation, lack of detailed information, fraud or swindle …

Online brokers can thus offer you to bet on digital assets such as Bitcoin in the form of CFD(contract for difference,) avoiding the technological complexity associated with this purchase. In this situation, double vigilance is required and it is necessary to carry out, as a first step, the traditional checks before an investment in a classic CFD: proof of the broker’s approval (investment services provider – PSI), understanding of the functioning of financial contracts, knowledge of the market and the underlying of the CFD. Also pay attention to the leverage effects of the CFD which can be all the more dangerous with an asset as volatile as Bitcoin. Bitcoin CFDs are highly risky speculative products with a leverage limit of 2 to be able to be traded to individuals.

Other investment proposals on Bitcoin can be made to you on the internet, such as the purchase of training or “mining” packs or even a “management mandate” on digital assets. Absolute caution.

Faced with these proposals, take the time to reflect and before investing contact AMF Epargne Info Service on 01 53 45 62 00.

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