2 minute read
Bitcoin
JEHRAN NAIDOO Jehran.Naidoo@africannewsagency. com
Picture: Reuters/Dado Ruvic
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Is it a gamble or an investment?
With the recent hype surrounding the surge in the price of Bitcoin, many first-time investors have stormed their way into the cryptocurrency market
There are about 4000 cryptocurrencies, but Bitcoin accounts for the lion's share, holding more than 50% of the total market capitalisation, according to TradingView.
Ethereum is second with about 12.7% of total market cap, followed by Ripple, which holds a little under 3%.
But how can you be sure whether you are investing or gambling with something as complex as a cryptocurrency?
According to South African actuarial scientist Imran Lorgat, having a thorough understanding of the crypto market and how it works is paramount before committing your money to it.
“Many invest in cryptocurrencies without a solid grasp of the basics. If you are interested in buying Bitcoin, then invest time into researching how it works and the risks associated with owning Bitcoin,” Lorgat said.
Lorgat has spent five years investing in Bitcoin and considers it to be a breakthrough in digital technology and a highly volatile marketplace.
Investopedia describes cryptocurrencies as a form of digital assets based on a network that is distributed across many computers, which uses blockchain technology to store its ledger transactions.
Essentially, Bitcoin has no control or regulation from a central banking system, meaning there are no restrictions or fees that go along with it.
This leaves many newcomers at the mercy of brokers.
Last year, Gauteng-based investment company Mirror Trading International (MTI) pulled off the scam of the year by fleecing investors of more than R8 billion, according to a crypto crime report by international cybercrime organisation Chainalysis. The company operated the scheme under the name BTC Global.
The report estimates that the number of victims scammed out of their money to be in the hundreds of thousands.
The report showed that South Africa ranked fourth in the world in terms of receiving the highest volume of cryptocurrency from illicit addresses.
“MTI presents itself as a passive income source. According to its website, users simply deposit a minimum of US$100 worth of Bitcoin, and MTI promises to grow it using an AI-powered foreign exchange trading software,” the report explained.
The level of economic uncertainty brought on by the outbreak of the Covid-19 pandemic has added another layer of anxiety to those with financial woes, making a highyielding investment all the more compelling for those less clued up.
But every coin has two sides, and the last year-and-a-half has seen the price of Bitcoin rocket to an all-time high when it broke the US$60000 mark in early 2021.
The fact that there will only ever be 21million Bitcoins in circulation makes it a highly sought-after commodity.
But understanding short-term and long-term investment value is a key driver when making a sound investment choice, explained Lorgat.
“The price of Bitcoin over the long term is driven by supply and demand, as well as adoption and technological development of the currency. However, in the short term, the price is driven mainly by hype and emotion.” | African News Agency (ANA)