Bit what? The consumer center South Tyrol (VZS) informs: What you should know about bitcoin and cryptocurrency.
The Bitcoin price started the week badly, with a minus of 7%.
At the beginning of September the price was still over € 44,000, it is currently hovering around € 36,000, with a loss of € 8,000, a minus of over 18% in 3 weeks.
Analysts assume that there are various reasons for this:
Regulatory initiatives by the American authorities, similar projects in Europe and the negative impact of the energy consumption of Bitcoin (according to the University of Cambridge, Bitcoin currently use around 101 TWh per year, which is just below the electricity demand of the Netherlands per year).
“These price fluctuations clearly show that Bitcoin as a financial investment should be given the predicate” highly speculative “, explains VZS managing director Gunde Bauhofer.
“You can only invest your money in Bitcoin if you can deal with the fact that the money can fizzle out practically“ overnight ”. Cautious investors with clear savings and investment goals should carefully weigh up whether (and how much!) They invest in Krpytogeld. “
But what are these coins anyway? How do I get Bitcoin? The consumer center South Tyrol has summarized the most important information about Bitcoin in a short information sheet.
What is a Bitcoin?
The word Bitcoin is made up of “bit” and “coin”. Coin stands for coin in English, and “bit” refers to the smallest unit of information that a computer can process.
Commonly, Bitcoin is a type of digital money, and is also known as crypto money or cryptocurrency.
“Crypto” in turn comes from cryptography, which is used to describe encryption. However, before we can define Bitcoin more precisely, we first have to explain another concept that is inextricably linked to Bitcoin.
As the English name suggests, the blockchain is a chain of information blocks.
According to their inventors, information that is stored in the blockchain (more precisely in the distributed public ledger) is forgery-proof and can be clearly assigned chronologically.
This is because each block contains a reference to the previous block. The information in the chain is encrypted using cryptography, with the connection between the chain links being protected against forgery (exchange of chain links) using cryptography. The transactions in the above-mentioned public journal are also protected against forgery by means of cryptography; the journal itself (content and sequence) are not encrypted.
In contrast to the issue of new banknotes by a central bank, new Bitcoin units are created through the computer-based solution of cryptographic tasks, known as mining, although the maximum amount is limited to 21 million Bitcoins. Much of it has already been created.
How do I get it and how do I spend it?
Bitcoins are usually managed through an electronic wallet, an electronic purse. It is important to clarify in advance which costs will be incurred for which wallet. The payments also run through this wallet. Alternatively, local bitcoin software can be used.
To date, the wallets have not been uniformly regulated, even if attempts are being made in Europe to regulate the technologies. Commercial wallets are therefore subject to regulations, depending on the country, such as recording the identity of their customers or reporting suspected cases, and the standards planned in the EU to combat money laundering and terrorist financing are likely to multiply these requirements (this applies to self-hosted wallets not).
What can you use Bitcoin for?
There are a whole range of services and goods that can be purchased with Bitcoin – from password manager programs that rely on absolute anonymity to pizza vending machines, Bitcoins are accepted.
Bitcoin is criticized again and again because – due to its anonymity – it is used for criminal purposes, e.g. for paying ransom (be it for kidnappings or for the blocking of data by ransomware).
How Much Are Bitcoin Worth?
The price of Bitcoin is defined solely by supply and demand, and comes about through a mechanism similar to an exchange. Since no central or central bank guarantees for the crypto money, the price fluctuates considerably. The term “crypto currency” is therefore misleading – behind currencies are states, central banks or central banks, behind crypto money there are information chain blocks. A look at the course of the last few months shows how much the price can fluctuate:
This way of setting the course makes the Bitcoin course extremely susceptible to external influences; For example, a Twitter post from Tesla boss Musk with the announcement that Tesla would no longer accept payments in Bitcoin was sufficient to cause the price to collapse by 15%.
Bitcoin as an investment
This susceptibility to fluctuations is also the reason why Bitcoin deserves the title “highly speculative” as an investment: an investment in Bitcoin can only be considered if one can do without the respective capital. For cautious investors with specific savings and investment goals, the motto is “hands off”. Bitcoin as a means of payment, acquired shortly before the issue date, on the other hand, has a manageable (and thus in most cases also manageable) risk.
The others: Doge-Coin & Co.
Bitcoin is not the only crypto money, there are several of them, such as Ether, Ripple or Doge-Coin, which are available on various trading platforms. The Italian stock exchange supervisory authority Consob issued a warning against the “Binance” platform in July 2021 because, according to Consob, all amounts invested could be lost. This warning can be extended to all crypto assets, regardless of the trading platform.
Attention, free riders!
In addition to the actually existing cryptocurrency, there were and are also pyramid systems marketed as cryptocurrency, which gives even more cause for caution. The most sensational among these systems was certainly “OneCoin”, which, according to various public prosecutors, made over 4 billion US dollars disappear worldwide (the system was also active in South Tyrol). Investigations are underway against the top of the system in 20 countries. In Italy, the antitrust authorities identified the system as an illegal pyramid scheme and imposed a fine of 2.6 million euros.
Problematic for the environment?
Bitcoin in particular comes under criticism again and again because an enormous amount of energy is required to mine it. Since this often takes place in countries in which electricity is primarily obtained from non-renewable raw materials, the emissions generated have a correspondingly large impact on the climate. A Bitcoin transaction consumed an average of 1,200 kWh of electrical energy in May 2021; on the other hand, a transfer with a credit card requires an average of around 1.5 watt hours (0.0014863 kWh).
Bitcoin and Taxes
The tax on the value of financial assets abroad (imposta sul valore delle attività finanziarie detenute all’estero “Ivafe”) is generally not due for bitcoins and crypto currencies. According to the revenue agency, however, all digital investments must be declared in the “RW” section of the tax return. The equivalent value in euros (calculable on the respective platforms) must be specified in the RW field.
(Source: Il Sole 24 Ore from September 6th, 2021)
Don’t let the technical buzzwords and promised profit margins chase you down – crypto money is a highly speculative investment product.
Due to the extreme price fluctuations, the entire invested capital can evaporate practically overnight. On the other hand, crypot money as a means of payment, bought at short notice and then spent again, has manageable risks.
The European Union is currently working on a uniform regulation of the various crypto funds, wallets and platforms as well as on the introduction of a “digital euro”, which will serve as a – regulated – replacement for coins.
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