Should I Invest in Bitcoin?

Brian Hicks

Written By Brian Hicks

Posted December 27, 2013

Bitcoin’s popularity is rising as more investors and users are growing weary of government-backed currency and fiat money.

casascius bitcoin sidebarWith the onset of Bitcoin’s rising status, you’re starting to see more governments around the world condemning this new form of online currency. Criticisms of Bitcoin include its volatility, its means of exchange in illegal transactions, and the losses investors may incur when Bitcoins are seized or hacked into.

While all of these are legitimate criticisms, they don’t negate the fact that it is a currency that maintains anonymity among users, and it is an alternative form of money that is not government controlled.

The primary gripe authorities have with Bitcoin is that it is out of hands of the state, and this allows individuals to steer clear of monitoring and high taxation. Officials know that investors and users are using virtual monies to skirt around paying taxes, get money out of the country, or conduct secret transactions.

This time around, government condemnation is beginning to translate into action, and Bitcoin investors may be facing a tighter rope in the near future.

The Crackdown

China disallowed its banks from accepting Bitcoin for fear of financial instability and fraud. And more regulations may come as high-rolling Chinese nationals are using Bitcoin to get as much money out of the country as possible.

Under Chinese law, nationals are restricted from withdrawing more than $50,000 from the country. You can expect more Chinese regulations to come if Bitcoin further interferes with the state’s revenue base, but some Chinese officials have signaled positive reception to the alternative currency.

Deputy Governor of the People’s Bank of China Yi Gang has gone on record in saying that even though Bitcoin does not fall in sync with government policy, people should be free to trade or invest in it as they please. And while Bitcoin is primarily an investment vehicle in China, more merchants are accepting it.

Some U.S. officials have also given vocal support for the currency – mostly because this virtual currency has been somewhat of a thorn in China’s side.

We’re getting a lukewarm response from Europe, with Germany refusing to recognize Bitcoin, and the British are dismissing it as something of little worth, but EU regulators are the primary agitators in warning investors.

America is a different story.

Financial regulators in New York are considering issuing Bitcoin licenses for merchants to accept it. And there is a recent case where the Treasury Department is trying to prevent a minter named Mike Caldwell from minting a physical version of Bitcoins on behalf of customers.

According to the government, Caldwell would have to go through a series of regulatory channels to mint coins, and since he mails his physical Bitcoins to customers, the state is accusing him of committing fraud by not truly knowing to whom he is sending the coins.

Because of this warning, Caldwell has ceased taking orders from customers, and this has caused other Bitcoin minters to look at Caldwell’s case. In essence, minted Bitcoins would have to be considered a collector’s item to fall within the law, but the government is trying to put a stop to individuals manufacturing currency of any kind.

Investing in Bitcoin?

When it comes to the issue of whether or not to invest in Bitcoins, it depends on what type of investor you are. If you are willing to ride the waves and try different investment paths, then Bitcoins are the way to go. But if you feel better with traditional and safer investment bets, you may want to hold steady.

So far, Bitcoin investing has attracted younger investors and those within the tech world who are looking to jump on the bandwagon. It is a currency for those who are not afraid of risk, and even those starting out in the investment game with a little money are taking a dive into the currency.

It is also in line with China’s appetite for risk and investment, as the Chinese have investment stakes in projects of all types around the world. Although it may be eating China’s tax base, officials are giving the currency a secret nod for traders and users.

But there is no question that it carries the risk of sudden fluctuations. In one week, the currency went from $1,000 to $600 before skyrocketing to back up to $900 the following week. On the other hand, this offers a chance for new investors to get in while prices are low so they can cash out when the roller coaster rides high again.

Overall, officials around the world are sending mixed messages. On one hand, they demonize Bitcoin, but they also praise it when it suits them politically. Either way, you can expect more regulations to come, and the best time to get in is now.


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