What to Know About Bitcoin
First introduced in 2009, Bitcoin is a payment system used to transact peer-to-peer business. It was designed to be an alternative to ordinary currency. The bitcoin currency can be purchased or sold at designated physical locations or online. Because bitcoins can be traded for the national currency we currently use at fluctuating exchange rates, they are often subject to wide price swings and offer a number of risks of which you must be aware.
Common risks associated with bitcoins include the following:
- No legal tender – Companies and individuals alike have the ability to accept or reject bitcoins as payment based on their own discretion. If nobody is willing to accept bitcoins, they become worthless in value.
- Subject to theft or fraud – Bitcoin transactions can be fraudulent if someone is posing as a trader or intermediary. They may require you to send money for the bitcoin and then take the money without providing the service.
- Susceptible to hacks – The platforms used to buy and sell bitcoins, as well as digital wallets, can be hacked resulting in a loss of money for the user.
- Irreversible payments – Transactions made using bitcoin cannot be reversed. It is the sole discretion of the establishment or business if they decide to provide a refund for a purchase.
- No safeguards – Bitcoins are not issued by the government or banks. This means they don’t provide guarantees of safety.
- Anonymity – Bitcoins can be used anonymously, opening the door for illegal transactions. This kind of abuse can be used for money laundering or drug dealing.
Many have flocked to the use of bitcoin trading due to the possibility of a quick profit. It’s important to recognize the real risks of losing money.
FINRA recently released an Investor Alert warning the public about Bitcoin and urging investors to use caution when dealing with bitcoins. If you have used bitcoins and lost money due to fraudulent activity, contact Meyer Wilson for your free case evaluation with our securities fraud lawyers to determine if you have a claim.