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Should You Buy Into The Bitcoin Buzz?

Bitcoin%3A+a+new+crypto-currency+on+the+rise.
Bitcoin: a new crypto-currency on the rise.

Bitcoin: a new crypto-currency on the rise.

Courtesy of Fortune

Courtesy of Fortune

Bitcoin: a new crypto-currency on the rise.

Dominic Watson, Eastside Staff

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The bitcoin has recently crashed, after swelling to a worth of about $19,500 on December 17. At 7:00 p.m. on December 22, it was worth $12,140.92, and has since been fluctuating between $12,000-$15,000.

This rapid change in price is caused by Bitcoin’s main appeal, the lack of government regulation and its status as a digital currency.

The principle of currency is based upon the concept of mutual agreement that something has value. Both the US dollar and Bitcoin share this idea.

However, the US dollar has been officially appointed by government as a universal currency. It is a form of fiat money, a physical currency, which means that its value is not determined by public opinions.

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The Bitcoin, on the other hand, derives its value from a general consensus that it has value. This means that its value only comes from its desirability as a secure, digital currency. The government cannot dictate its value, and as a result, its price changes constantly due to its fluctuating perceived value.

Because of the Bitcoin crash, Bitcoin is much cheaper to invest in than it was a few days ago. This raises the titular question, “Should I invest in Bitcoin?”

The first thing that must be addressed are the main risks involved in Bitcoin investments.

The first major risk, of course, is the recent crash that left people without the thousands or millions they poured into Bitcoin.

Public opinion changes quickly, and the second that Bitcoin becomes outdated, investors will leave it for other forms of cryptocurrency. At the moment, Bitcoin is slowly becoming obsolete. One-hundred-fifty organizations are testing Ethereum’s blockchain, which supports smart contracts. Smart contracts provide much needed regulation in the world of digital currency, by helping help enforce negotiation.

The second major risk of Bitcoin investment is the lack of protection consumers have because of its little regulation.

According to the official website for OCABR, “Bitcoins are not FDIC insured. Unlike credit cards, you have no right to reverse the charges if something goes wrong. The South Station kiosk [a Bitcoin terminal in Boston] also has no disclosures, leaving consumers without information about fees or where to go if there is a problem.”

This is bad news for young investors, who are still learning about the world of business. The only way to learn about the intricacies of Bitcoin is to investigate independently, but learning independently leaves young investors open to risks and mistakes that will not be covered by the OCABR.

The third major risk would be the human element involved in Bitcoin.

Every Bitcoin has an encryption that is disabled by a key unique to you. There is no way to retrieve a lost key, so loss of a key means loss of any investments in Bitcoin. There is also the issue of malicious hackers who can use authorized accounts and steal Bitcoin. For example, a Bitcoin mining facility in Russia owned by NiceHash was hacked, compromised by a company computer, leading to the theft of about 4,700 Bitcoins.

Given the current state of Bitcoin, it seems that it is aging poorly. It will certainly be important in shaping the very possible future of a world dominated by digital currency, but the risks that come with it are being addressed by other forms of cryptocurrency, like the aforementioned Ethereum, which is currently priced at $715.41. Investing in a form of digital currency as a young, risk-free investor would be great, but it is too late to invest in the declining Bitcoin.

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Should You Buy Into The Bitcoin Buzz?