Is investing money in Bitcoin safe?

Shivam Agarwal
3 min readFeb 22, 2021

Bitcoin is at an all-time high. Elon musk has bought 1.5$ billion worth of bitcoin. Tesla will accept bitcoin. Microsoft is also making plans to accept bitcoin. But where is the problem in bitcoin

While reading the news and seeing the growth of Bitcoin, you will be tempted to push invest button. But bitcoin is not promising as it seems. Before going into deep, understanding of three basic concepts is required

  1. What is money?
  2. What are the problems with currency?
  3. How Bitcoin is solving those problems?

What is money?

Photo by Macau Photo Agency on Unsplash

Let's go back to 6000 BC. If you have 1 Kg of Rice and you need 1Kg of wheat. You have to find a person who is selling wheat in exchange for rice. This was the barter system. The barter system is having a lot of problems. These problems are solved by precious metals. Now you can exchange your product with silver/gold/bronze and buy the desired product with precious metals. But precious metals also have problems. They are limited. This problem is solved by currency. Currency is nothing but a paper that has intrinsic value(The value in the mind of people).

If I simplify money, it is nothing but a medium of exchange that has intrinsic value sometimes in the mind of people only.

Think about a 100$ note in your packet. If the shopkeeper denied taking the paper what will you do?

What are the problems with the currency?

  1. Cost:- Yes printing currency is costly. Printing 100 dollar bills cost around 15 cents. Taxpayers have to pay this cost
  2. Counterfeit:- Bank all over the world are fighting with counterfeit currency. Printing fake currency is very profitable. Remember only 15 cents is required to print a 100$ bill.
  3. Bank error:- Yes banks also make errors. Your money can be sent to another account. Citibank mistake is the latest example
  4. Transaction/Exchange charges:- If you are visiting another country, you have to pay whopping exchange charges.
  5. Theft:- Currency belongs to the person who is holding it. So anyone can steal your money and there is no way to track

How Bitcoin is solving those problems?

Bitcoin:- Bitcoin is a type of cryptocurrency. There are no physical bitcoins, only balances kept on a public ledger that everyone has transparent access to. All bitcoin transactions are verified by a massive amount of computing power.

  1. Cost:- No printing cost is involved for bitcoin.
  2. Counterfeit:- Close to impossible.
  3. Bank error:- As the balance is kept on a public ledger that everyone has transparent access to. There is no chance of bank error.
  4. Transaction/Exchange charges:- Yes there is a transaction fee but it is very minor in comparison to currency.
  5. Theft:- Similar to other digital payment methods bitcoin can be protected with passwords

Bitcoin looks like the future and it seems that it will replace the currency as the currency has replaced the precious metals. But there is a problem

Potential misuse of bitcoin is the greatest fear that is stopping all Central Bank to accept the bitcoin. Terrorist attacks like 9/11 required planning and funding Controlling and monitoring financial transaction works like a deterrent to those attacks. Bitcoin can not be controlled and monitored by the central bank.

Can Central Bank stop Tesla/Microsoft from accepting Bitcoin?

The simple answer is yes. Central power can use stop instituted companies from taking Bitcoin.

What is the future of Bitcoin

Bitcoin the outcome of wonderful technology “Blockchain.” Although, the future of bitcoin is dark due to Central Bank intervention. However, Blockchain has a bright future. Central banks are coming with their own currency. China digital yuan is a cryptocurrency backed by their Central bank.

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Shivam Agarwal

Shivam is an accomplished analytics professional and algo trader, sharing expertise in algo trading, data science, and AI through insightful publications.