Are you thinking of investing in Bitcoins? If so, there are some important truths about this cryptocurrency that you should ideally know. In spite of being highly volatile this crypto coin has been luring investors with promises of high returns. No surprises then why the cryptocurrency exchanges are overwhelmed with members and are struggling to meet user demands. Bitcoin’s market cap has also been on the rise and this makes Bitcoin a worthwhile investment.

Things to know before you invest in Bitcoins:

1. To start with, no one can be sure about the origin of this crypto asset. It was allegedly created in 2008 by either an individual or group of people going by a pseudonym Satoshi Nakamoto. He had reportedly published Bitcoin’s proof of concept in a crypto mail list before handing the project to some other developers. Unlock the secrets of Cryptocurrency and learn all about Blockchain and Exchanges by visiting coinformant.com.

2. Bitcoin became popular because it allows for confidential transfer of money where no personal identity data needs to be submitted. Every Bitcoin transaction is logged in using a Bitcoin address; if the latter gets leaked or exposed, all his transactions will become public. On the other hand, the trade is also on the rise due to invention of automated trading bots like bitcoin era which help even the beginners to trade like a pro.

3. Bitcoin is held as a currency but it does not work the way regular fiat currencies work. It is a decentralized digital currency that intends to topple conventional currencies in the long run. So, when you invest Bitcoins you are basically investing in a currency. But it will not trade like currencies. Fiat currencies are government sponsored and issued, and move with inflation. Bitcoin is neither issued nor controlled by governments or banks; there is a finite supply of Bitcoins and no more than 21 million Bitcoins can be mined. This is why Bitcoin is traded like a commodity not a currency, just like gold or oil or when you purchase copper bars.

4. Bitcoin is decentralized unlike currencies like the Japanese Yen or USD. It is not controlled by any government or entity. So, Bitcoins cannot be captured or devalued by central authorities. On the other hand, in the absence of any control, there is no rule limiting its access or use. This is why Bitcoins were used for illicit activities.

5. Those investing in Bitcoins have limited options. The US Securities and Exchange Commission or SEC for instance is very cautious about crypto investments. It has repeatedly delayed applications for Bitcoin exchange-traded funds because of lack of security and market liquidity. Now investors have to either buy the coin directly from exchanges like Coinbase or brokers and Bitcoin ATMs.

6. Before investing in Bitcoins you need to analyze how much money you can afford to lose. This is because Bitcoin price swings are dramatic and the chances of incurring heavy losses are huge. Prices are based on market speculation making the investment highly risky.

7. When you invest in Bitcoins you must have a plan in place to minimize your risks. So, you should ideally diversify your portfolio by investing in other coins too, apart from the Bitcoin.  Besides, you have to remember that Bitcoin private keys are irreplaceable; so, if you misplace these, you may lose all you had. Since exchanges cannot be wholly relied upon for safety, you need to have wallets to store the coins.