Cryptocurrencies: opportunities and risks

Cryptocurrencies offer high-return investment opportunities. This recent rise in Bitcoin prices shows that, however, the risks are no less high and the return is high-risk. How to manage the risks of investing in cryptocurrencies, what is cryptocurrency and how to trade its assets? In fact, cryptocurrencies are legal in Indonesia, so how are they regulated?

Topic Contents Toggle What is cryptocurrency and why

Is it called Cryptocurrency? The process of transferring or exchanging Bitcoins The benefits of cryptocurrencies are: Risks of cryptocurrencies 1. Price fluctuations 2.

Hacked 3. Regulation 4. Fraud Mode Risk Management Tips Diversify Portfolio Diversify Exchange to Exchange Officially Registered What is Cryptocurrency and why is it called Cryptocurrency?

Cryptocurrencies The advantage of Bitcoin and other cryptocurrencies is that they use cryptography and blockchain technology to secure and verify each transaction so that no party can double spend (spending the same digital asset twice). Blockchain technology allows cryptocurrency to be controlled and monitored in a decentralized manner, peer-to-peer, between one computer and another connected computer. This method of monitoring (1) ensures cryptographic security and (2) distinguishes it from regular currencies. In cryptography, this monitoring function is performed by server computers around the world, which are connected to each other, hence the name “blockchain”.

All of these servers record every Bitcoin transaction in a “public ledger” or ledger, which contains a record of Bitcoin mutations. Due to its decentralized nature, Bitcoin cannot be manipulated, for example to double spend (it is used for another use) Everything is recorded on the server, cannot be changed, transparent and recorded in many places. The process of transferring or exchanging Bitcoins This decentralized nature makes the process of transferring or exchanging cryptocurrencies Bitcoins do not need to go through intermediaries, such as banks When a Bitcoin transfer occurs, you only need to update it on the blockchain network and it is very secure.

Each Bitcoin owner will have a private key and a public key. It's like at an ATM, the private key is the ATM PIN and the public key is the bank account number. With this kind of features, cryptocurrency becomes a digital asset that can be used in virtual Internet-based transactions.

Safe, fast and almost zero transportation fees. Individual crypto assets can be traded and transacted globally and 24/7. The exchange rate for each of these assets is determined by the supply and demand of trading market participants.

The benefits of cryptocurrencies are: The payment method can be used

Bitcoins To make payments and send money Transactions between countries are easier and faster with Bitcoin, instead of using credit cards and bank transfers. Fast Without an intermediary in the transaction, the inter-transaction process takes place quickly Transferring between countries takes only a few minutes, unlike bank transfers between countries, which take several days Secure Bitcoin transactions are recorded on the blockchain; A type of ledger that records all transactions that can be examined and viewed. Having a private key and a public key makes Bitcoin ownership secure.

Limited Bitcoin is only produced to 21 million units. This unchanging amount ensures that Bitcoin remains valuable in this way. Like gold, Bitcoin is inherently scarce. The returns are very promising A Bitcoin investment of 1 million IDR in 2013, if it is exchanged now at the end of 2020, its value is equivalent to a new car The value of Bitcoin fluctuates, but the trend since the beginning of the value of Bitcoin is increasing.

For simplicity, imagine investing in cryptocurrencies like investing in gold - they are limited in number, have many benefits, and slowly increase in price. Cryptocurrency Risks Obviously, the risks of this tool are not small. On each exchange at the bottom of the website, it says “Disclaimer: Trading crypto assets has high opportunities and risks.

Be sure to use careful consideration in making your asset buying and selling decisions. The exchange does not force users to conduct buy and sell transactions, and all purchase and sale decisions of your digital money assets are your own and not influenced by any party.” 1.

Price Fluctuations The phenomenon of an increase in the Bitcoin exchange rate occurring very quickly shows that the price of Bitcoin can also fall quickly. High risk return is a feature of cryptocurrencies. Bitcoin price fluctuations can be very extreme. The rise, and of course the fall, were unusually steep.

2. Hacked The blockchain system is very secure and transparent. The peer-to-peer mechanism makes the blockchain control process very powerful.

However, what is particularly vulnerable is that there are many cases of exchange hacking, especially in 2019. You can check on the Internet cases of robbery of exchange operations in different countries. In fact, until there is a site that specifically records all instances of cryptocurrency hacks. You can see below that every year there are cases of cryptocurrency hacks.

And the break-in happened not only in small exchanges, but in large exchanges. Exchanges whose transaction value is already worth millions of dollars per day can also be vulnerable to hacker attacks and experience not so small losses. This robbery, which aims to seize digital assets, is carried out not only by third parties but also by insiders.

3. Regulation The regulations regarding cryptocurrencies are still quite new. Although this regulation provides strong legitimacy for cryptocurrency trading, it also makes a number of provisions that can pose risks to customers. One of them is the requirement that an exchange can be registered as a “de facto trader of crypto assets,” after which a maximum period of one year applies to become a “de facto trader of crypto assets.”

CoFTRA may reject applications after one year, and if rejected, registered status will be revoked and the member's crypto assets must be returned or transferred to another exchange. The process of closing an exchange after one year of registration may cause difficulties for clients because he has to take care of the movement of assets and ensure that the closed exchange fulfills its obligations. Although the risks of cryptocurrency are not small, this instrument is still an attractive alternative instrument promising very attractive returns.

4. Fraud situation The risks of fraud in investing in Bitcoin and cryptocurrencies are not fabricated. There are quite a few cases of fraud in the name of Bitcoin. This happens because the popularity of Bitcoin is increasing.

This is a new tool. OJK's Investment Alert Task Force said many irresponsible parties have profited from Bitcoin's popularity. The situation is that people offer investments with high returns without the risk of deceiving others.

The task force has stopped several fraudulent situations under the guise of investing in cryptocurrencies. One example in 2015 was a fraud case carried out by a US citizen named Trendon Shavers. He founded a Bitcoin exchange company called Bitcoin Savings.

Shaver was later convicted of defrauding him out of a $150 million Ponzi scheme. Risk Management Tips The way to deal with these risks is to: Diversify the portfolio This has become a standard that you should not put all your money in one instrument, especially one that carries very high risks. Exchange Diversification Buying and selling crypto assets is not on one exchange, but on several exchanges to ensure that if there is a problem, there are still other exchanges.

Know well about cryptocurrencies, especially about how they work and the risks that may arise. By understanding them well, we can gauge whether this tool is... Read also: The most reliable digital currency trading platforms in the world for an officially registered exchange. Use an exchange that already has a registered mark from CoNTRA. It is clear that the listed companies are companies and have sufficient capital and have been carefully selected. Cryptocurrencies offer a very attractive investment alternative that can be a tool for portfolio diversification, with the promise of high returns.

However, it should be understood that the risks are not small either. Therefore, before getting into crypto assets and cryptocurrencies, such as Bitcoin, it is necessary to carefully study how they work, their risks and their mitigation. #Cryptocurrency #Cryptocurrency risks