Could and should I invest in Bitcoin? It’s a problematic question a lot of readers are asking us daily. Many present Bitcoin as an electronic currency that will revolutionise the world, but it is also a very volatile financial asset.

Many governments do not recognise it as a currency at all.

Much of the activity surrounding Bitcoin comes from traders who expect to make money from fluctuations in its value. Thus this is a highly speculative investment!

A volatile asset

These fluctuations can be dramatic. In April 2013, the world was surprised when the value of Bitcoins rose from about from $40 to $140 in one month. By the end of the year, Bitcoin’s value had risen to over $1,000.

When there are fluctuations in currency, there is a lot of money to win – and lose.

Exchanges can be complicated, as many of them have proven to be very unreliable, especially in the early days of Bitcoin. After the collapse of Mt Gox, one of last year’s first and largest bitcoin exchanges, things began to improve in the world of commerce.

Coinbase offers a portfolio of online bitcoins and has been one of the first beneficiaries in the Bitcoin world of serious venture capital funding. Coinbase launched its regulated exchange in January 2015, aimed at US users. It is possible to buy bitcoin through many different means such as ou acheter bitcoin paypal

Short selling

During a bitcoin bubble, some people may want to bet on decreasing the bitcoin value. Short sale of a fixed asset involves borrowing the fixed asset at a certain price (200 USD, for example) to sell it to someone else at the same price.

Then, if the value of the asset decreases (say to $50), you can repurchase it at the lowest price and return it to your lender. You obtain a profit on the difference between the initial cost when you borrow the asset and the lower rate when you buy it to pay the lender.

Of course, there is always the danger of the market moving against you, and you risk losing the money you’ve put at stake. All the traders should understand the concepts of leverage and warranties before considering a short sale strategy.

Understanding Risks

Realising that Bitcoin is a volatile asset is vital for a reason. It is a relatively young asset, and even the trading platforms behind it did not mature significantly until the second half of 2014.

Liquidity in the peak currency market is scarce, which means that trading volume is relatively low. When cash is low, volatility is high. Some Bitcoin giants also have significant amounts of cryptocurrency, which means they can move the price relatively easily by trading large quantities in a short period.

All this makes the Bitcoin market relatively risky. Trading in such irrational markets is dangerous because they can act against you for reasons that are difficult to anticipate or even understand.