Is Cryptocurrencies Safe to Invest In?

Cryptocurrencies such as Bitcoin, Ethereum, Cardano, Dogecoin, etc are digital currencies that are not issued by any government, bank, or company. Instead, cryptocurrencies are created and transferred directly between users through the use of cryptography and a digital ledger called a blockchain on a decentralized network of computers on a peer-to-peer network. The use of the blockchain is the main reason why cryptocurrencies, especially Bitcoin have become so popular; it is an incredibly secure way to transfer money between parties. Payments work peer-to-peer without a central repository or single administrator, which has led the US Treasury to call bitcoin a decentralized virtual currency.

Cryptocurrency will always contain a large element of risk as an investment due to its inherent volatility. Adding cryptocurrency as a portion of your portfolio based on how risk-averse your finances are is certainly a chance worth taking due to the increases we see over time.

The overall trend of cryptocurrencies has been greatly positive. However, when large players make changes it often can make long sweeps in the value.

TESLA vs Bitcoin

Tesla recently made headlines for all the wrong reasons. The company announced that they would no longer be accepting Bitcoin as a form of payment for their cars. The announcement sparked a massive drop in the price of Bitcoin, which sent shockwaves through the cryptocurrency market.

China Bans Crypto

China is one of the most important countries in the world when it comes to Bitcoin. It is the country with the most Bitcoin miners, the biggest Bitcoin exchange, the most Bitcoin transactions, and most Bitcoin users. And, now with the recent announcement that Bitcoin is illegal in China, it seems that Bitcoin’s epic rally is coming to an end. For most Bitcoin owners, this is bad news. But, for short-sellers, it is great news.

The People’s Bank of China (PBoC) has banned financial institutions from handling transactions made with the popular cryptocurrency, bitcoin. The central bank, in a statement on Monday, said that “buying and selling virtual currencies, or accepting them as payment, are illegal”.

The crackdown on cryptocurrencies in China is more of a slog than a total ban. The country has banned ICOs, which stands for Initial Coin Offerings, and has cracked down on Bitcoin exchanges. China has been cutting power to Bitcoin miners and killing off Bitcoin news. But, the country has not banned Bitcoin outright. Some Bitcoin exchanges still operate within China. The government has not banned Bitcoin mining. Miners are still able to make a go of it in the country.

Will the US ban cryptocurrency?

The United States’ stance on cryptocurrency has been a mixed bag. On one hand, the US is home to a thriving cryptocurrency economy. Many of the largest cryptocurrencies by market cap are based in the US, and the US government is currently in the process of creating a legal framework for cryptocurrency. Even so, the US government has been critical of cryptocurrencies, especially the anonymity they provide, which has led to cryptocurrencies being banned in some countries.

My Personal Test

I decided to write this article when I saw the headline that China had banned Bitcoin. I’ve had an interest for quite a long time in Cryptocurrencies and Blockchain technology (expect future articles on these subjects) so I started digging on this a bit. After some digging, it seems this is typical from China to do this as they prep on creating their own cryptocurrency but evidently they have outlawed and reinstated them on a couple of occasions. This may mean they are attempting to “tilt” the market a little instead of an actual ban for their own investment needs.

While writing the article, to which I had no conclusion, I noticed there was a stray $90 USD in my Venmo account which I had no idea about. Venmo, since my last use has added the ability to purchase 4 different cryptocurrencies, Bitcoin, Ethereum, Bitcoin Cash, and Litecoin. So, I put the $90 down on Bitcoin to see what happens. Would the fact that the country with the largest percentage of Bitcoin mining negatively influence it, or was this just hyperbole. Well in 1 week it’s worth $121 USD. Not a bad return for a week’s time. The trend over 30 days seems unimpacted by China’s announcement. The trend is overall positive so investing in cryptocurrency can not be ignored but I still believe caution is prudent as large players like to tip the scales.