Trading virtual currencies have become a new way of investing money. There are a lot of them which emerged in the previous decade and Bitcoin is the most popular one. Like any way of investment, virtual trading carries out its risks. But if you are interested in this type of trading, then we are going to explain the necessary things and help you invest your money.
What are virtual currencies?
Digital currencies, or in another way digital money, is the money that doesn’t physically exists. They first appeared in online games and later continued to spread through an online community. Even though they can be used as a legal term of payment, if another party accepts it, they are not legal tender. Considering that value of digital currencies varies all the time, they might not be allowed in many places, nor guaranteed by any bank or government.
How does digital currency work?
Investors can earn or create a virtual currency. For example, people can buy Bitcoins or obtain them through mining. If they are using the mining method, then they need to have computers with a powerful configuration and excellent IT skills. On the other hand, if you are not skied with the mining, you can buy them using one of many exchange platforms. You will be charged with trading fees, based on the trade value. As virtual currencies become more popular, the new ways to buy and sell them have been introduced. So, now investors can buy or sell bitcoins using the individual ATMs. Virtual currencies are stored in e-wallets, and usually, their number on the market is limited.
Do you have any risks?
Like with any type of trading, virtual currencies also have specific risks you should pay attention to. For example, they have fewer safeguards. In most cases, platforms investors use, are not regulated, which means they can be easily hacked. In the past, due to these failures, investors have known to lose significant amounts of money. Even though some countries are improving their security systems, the digital currencies are not recognized as a legal tender.
The value is unstable – this probably one of the most significant issues regarding virtual currencies, and it mostly depends on the popularity of the market. In this case, you will have to risk and choose the digital currency that works the best for you.
Your money can be stolen – we already spoke about this issue, considering that most of the platforms aren’t regulated. When you are trading digital currencies, you can store the money in an e-wallet, which has a private key, similar to a PIN number. But, when you are using virtual currency system, it will provide you an opportunity to remain anonymous, so if your money gets stolen, the chances of getting it back are very slim.
Virtual currencies are also popular with criminals considering that initial coin offer has increased significantly. They are very suitable for money laundering and illegal activities.