The amount of people that actually know about cryptocurrency is a very small percentage. Most of those that do buy bitcoin, but if they buy any they normally do some sort of research and make a decision based on that to purchase some. Sometimes the reasons are purely just because they have fomo and want to try and get rich quick, which is bad, but that happens with everything where there is the possibility of making money, from the stock market, housing market to cryptocurrency.
When you have large amounts of people buying something just because they want to get rich quick, it can add to the instability, and yes, cryptocurrencies are unstable. The thing is though, the more people that have cryptocurrencies like bitcoin, the more stable it becomes. There are more and more people using, holding and trading bitcoin in more and more places. It is not like the old days when there was only a handful of exchanges and traders, and the price was easily influenced by one person or small groups of people. Crypto traders can trade in more places 24hours a day, the market never sleeps and does not follow office hours. The market is more of a free market, compared to traditional ones that have an opening and closing time, and are shut for weekends, and controlled by corporations. People say that a year in cryptocurrency is like 5 years in the traditional markets. Things move fast, and that is the future, traditional markets will adapt as they are now obsolete.
Security of Bitcoin is major concern
The South Africans know another major problem with bitcoin is that its current and future security are causes for concern. South Africans people say that Bitcoin payments are not sufficiently safe, referring to the numerous scams. The possibility of an attack on the actual networks is handle the bitcoin. But there is more to worry about than cyberattacks.
Bitcoin and cryptocurrencies that have a proof of work blockchain are far more secure than any legacy banking system. Bitcoin has never, and will likely never be 'hacked', there are too many levels of security and cryptography and the power needed to 'break' the system and gain access to a wallet balance is unfathomable for most people. Its not bitcoin that will get hacked, it might be an exchange, but more likely the user who will get hacked.
Already people have their email and bank accounts hacked because they do not follow basic security procedures. If you don't secure your wallet, or follow basic security procedures and have a decent password, you are asking for trouble. This is for cryptocurrency AND even normal online banking and websites where you might have accounts. The point is that bitcoin is orders of magnitude more secure than any banking system today. There are scams in bitcoin, just like there are scams with fiat currency, the only difference is the method of payment. Every day people scam and steal from each other with Rand using the traditional systems we have, this happens in bitcoin too, its just harder to do, and happens far less than scams in Dollar or even Rand currency. The difference is that if someone is scammed in bitcoin it will make the news....if it happens in fiat currency, nobody gives a shiaat, its not newsworthy. If you have bitcoin you are responsible for your funds, and just knowing that makes you more careful than you are with your bank cards and accounts. People are far more secure from day one with their bitcoin, than they ever were with their traditional bank accounts. Bitcoin actually makes you think about your security, and by default you become safer about how you handle all your money, including Rand.
You should use a bitcoin exchange responsibly, have a secure password, and have 2Facotor Authentication turned on. The same goes for your mobile phone, make sure you have a pin code enabled to access it, and again for your email, make sure you have 2Factor authentication turned on.
It is more likely that YOU will get hacked, than any exchange or even bitcoin ever getting hacked. This happens on a daily basis with regular banking and identity theft and credit card fraud.
Most South African people don't understand it
South African people really have no clue what bitcoin is. South Africans have the misunderstanding about bitcoin and complete lack of understanding could yield terrible consequences.
Not every South African people are able to understand the essence of the new financial instrument. It happens, when South African people have disbelief regarding something they try to fill the knowledge gaps with conjectures.
Yes, most people don't understand what bitcoin is, the majority of new people to bitcoin have it because they want to hopefully make some money when the price goes up. Once they have it and use it, they can see the advantages of it. As more people get bitcoin, the percentage of people using it does go up with that. So while most dont actually use it, its usage is growing with the growth in new users. There are misunderstandings about bitcoin too because people are exposed to seminars and meetings where presenters explain bitcoin, and follow up with signing people to a pyramid scheme or similar, telling people they are 'joining' bitcoin. These schemes are ages old, and the only difference is they use bitcoin as a method of payment.
Most people who have a basic technical understanding of bitcoin, have even less of an understanding of how the traditional banking system works behind the scenes, because it is not necessary to know the intricacies of it. The average person does not need to understand how a bitcoin transaction works behind the scenes, any more than they need to know how an email message send works behind the scenes.
The thing is, bitcoin is easy to use, and you don't need to understand everything about it in order to buy, sell, send or receive bitcoin. Just like you don't need to know about the TCPIP, or SMTP if you want to use the web or email.
Bitcoin only exists on computers
South Africans know Bitcoin is the only exit on the computer. This may wide-ranging understandable but as a form of money, bitcoin strength is the most imperceptible stuff in history. The securities or paper money can be presented to a central bank with the hopes of someone will exchange them. South Africans know that there is no such possibility with bitcoin.
Most money only exists on computer, it is only a very tiny percentage that exists in physical form, and even that is getting phased out. When last did you pay your rent with cash, or even buy some clothing at the store with cash? Most people use their credit / debit card, or EFT or similar system to pay for things. Notes and coin payments in the physical world are getting less and less....the rise of mobile payment system will phase that out even further.
How much money do you have in your bank account? I'll tell you, you have nothing. You have an I.O.U from the bank that is all. With a regular bank account you have given the bank an unsecured load of your money for extremely low interest.
Yes bitcoin is digital, but the invention of bitcoin is that it is something digital that cannot be duplicated. You can copy a digital picture, file, song etc, but you cannot make a digital copy of a bitcoin. That is the invention of bitcoin, and that is why its first use-case is as 'money'. If you send a digital picture to me on the internet, I have it, and you STILL have it. If you send bitcoin to me on the internet, you dont have it anymore, and I do. That is the main invention of bitcoin and cryptocurrencies.
Existing only on computers is why it works so well. It can be everywhere all at once, because it lives on the internet. The way things are going, physical money will be phased out completely in the next few years. The biggest expenses banks have, is to store, secure and manage their physical stores of money, staff, buildings etc, everything physical, which they are phasing out.
If you want Rand for your bitcoin, simply exchange it and withdraw the rand to your bank....you dont go to a bank with bitcoin, they dont 'do' bitcoin.
The issue of legality
One major hurdle in the path of South Africans investors who are interested in investing in bitcoin is the confusion about its legal status. Even though they haven’t been declared illegal. Bitcoin is not recognized by any other authority in South Africa. As a currency when it issued a press release cautioning users, holders and traders of virtual currencies, including bitcoins, about the potential financial, operational, legal, customer protection and security related risks. The regulator has further stated that it has not issued licenses to companies for trading in any virtual or digital currencies. that the South African user, holder, investor, trader, etc. dealing with virtual or digital currencies will be doing so at their own risk.
Bitcoin is not illegal in South Africa. It is not legal tender, as legal tender is only issued by a central authority, and the Reserve bank is not exactly mining bitcoin. The South African Revenue Service said transactions or speculation in Bitcoin are subject to the general principles of South African tax law and are taxed respectively. This applies to income generated from trading cryptocurrency. When exchanging Bitcoin for rand, the same taxes apply as any other disposable assets which may cause capital gain or could qualify as income for active traders. All assets are treated fairly in terms of tax. The SARB have been working very closely with bitcoin companies in South Africa over the last few years so that they can understand things better.
You can read their position on virtual currencies that they published in 2014 here: https://www.resbank.co.za/RegulationAndSupervision/NationalPaymentSystem(NPS)/Legal/Documents/Position%20Paper/Virtual%20Currencies%20Position%20Paper%20%20Final_02of2014.pdf
The main point is that you use at your own risk, and its NOT illegal.
Neither commodity nor currency
Another big issue of South African people related to bitcoin is that
they have lack of clarity about its origin. Bitcoin is mined using complex mathematical formulae and the South African don’t understand it. They also claim that bitcoin is not controlled by any government and so, it is democratic. Therefore, bitcoin doesn't fall into the currency category either. It can be very risky for businesses, industry, and people to invest in bitcoins. bitcoin is not backed by any physical asset, but by pure demand.
There is zero lack of clarity of the origins of bitcoin. It was discussed on forums before it was released in 2008, and then released as software in 2009 by a user with the handle 'Satoshi Nakamoto'.
Bitcoin is an open source project with over 500 developers working on it from around the globe, about 50 of which are full time active participants. Anyone can review the code, add to it, and suggest changes. Your participation and submissions are scrutinized by other members and if there are suggestions for changes, issues with your code etc, they are put forward. Other developers will also look at your code and add to it, even work with you to further your changes to the bitcoin code or protocol. When everyone is happy with your work, it will get suggested for inclusion into the main bitcoin code, and after there is consensus with a majority of people wanting and approving your changes and coding, it will be added to the main bitcoin code on the next update. This is a 100% transparent and fair system. There are multiple mathematical 'formulas' that bitcoin is using. All of the mathematical parts of bitcoin are decades old formulas and systems invented by other people. These tried and tested, formulas were then just combined in a unique way to create bitcoin. The technology is not new, its been around for years, it was just never put into that specific order or combination.
Since the bitcoin code is open source, it is probably the most scrutinized and looked at open source software the world has ever seen. It is attacked from every angle 24hours a day, by people looking for a flaw, after all, the bounty for finding a bug would be that you can take all the bitcoin ever made....a nice prize don't you think? The bitcoin software is probably the most secure software ever made, with no central point of failure, and it gets stronger with every block mined, every 10 minutes.
Again, since it is open source, there is no way the creator has any control over it. Even if the creator of bitcoin wanted to take all the bitcoin, or make changes etc, they would have to go through the same process. Nobody has full control to do what they want without consensus by the community.
Bitcoin cant really be pigeonholed into a one category. It falls into the category of currency because people will accept it as a method of payment. It also falls into the category of commodity, and that is how most people have been using it.....this is why people liken it to a digital version of gold....which is a commodity, but was also used as a currency for thousands of years.
As a business, there is zero reason NOT to accept bitcoin. You can accept bitcoin and have it converted to Rand and then put into your bank account for a 2% instantly. This is cheaper than a credit card transaction for most merchants, and unlike a credit card, there will never be any charge backs, and fraudulent transactions. If you have a business it is a no-brainer to add bitcoin as an alternative method of payment, it costs you nothing to do.
Yes, investing in bitcoins is risky, we all know this, the price is volatile, and you can lose money as easily as you can make money from bitcoin gaining value. Bitcoin gets its value based on supply and demand, and because it is actually useful to many people in many ways.
If you invest in bitcoin, or ANYTHING, you should learn as much as you can about it before you do so. Dont invest in something you know nothing about. If you learn about bitcoin and how it works, you will realize how amazing and revolutionary it is. Each and every person who learns about bitcoin and understands it properly, becomes a convert, and an enthusiastic user. It is usually only people who don't understand bitcoin who think it is something dodgy.
Bitcoin is not dodgy, but like anything, the possibility of someone using it for bad things is there...just like the currency most used for crime around the world is the US dollar....but that does not make the dollar bad, its the person using it in a bad way.
The mania we are having right now is fueling the massive increases in price, so most people buying bitcoin are doing so right now in order to hopefully make some money as it increases in value. Be sensible with your investments, and not reckless. Only buy bitcoin with money you can afford to be without for at least a year or two. If you are wanting to use it as an investment, buy small amounts regularly over time as opposed to throwing large sums of money in one go.
The price is extremely volatile, but if you zoom out, you will see its volatile in an upward trajectory...if you are treating it like an investment, make sure you have a price where you will sell to stop further losses if it is tanking, and then just ride out any volatility. We are still in a very bullish market, the trend is up...when that trend changes its time to consider other options than just holding.