With its new all-time high, Bitcoin is again in the news. The whole cryptocurrency market has begun to trend up. It looks that Bitcoin prices are going to soar high by the end of 2021. New people who wish to join cryptocurrency trading will face a different environment different from other investments. Yes, Bitcoin investing differs from other assets. Various factors make it risky and unique for newcomers. The unique situations of the crypto world can blindside anyone who is not familiar with the inner working of Bitcoins. So, let us dive into the risks associated with Bitcoin trading in this article.
Risk of Bitcoin Investing
Trading and investing in Bitcoin needs knowledge of Bitcoin and technical skills. Moreover, investors and traders should be aware of the risk associated with this newly emerging industry to become successful.
The Bitcoin world is full of scams. It is because transactions can’t be taken back. Moreover, since Bitcoins are available globally, fraudsters using cryptocurrency have access to many victims with a worldwide reach. It makes scams in the Bitcoin world more profitable and lucrative than in other industries. Lack of security in the Bitcoin world generates a risk for investors. Although systems are built to handle such issues, security still is a problem. There are also some fake platforms in the auto trading platform category. So if you are choosing a Bitcoin robot then you should check its legitimacy and choose a secured & authentic platform like Bitcoin Revolution. You can also check out Bitcoin Revolution Reviews by experts to know more about the legitimacy of the platform.
2. Price Volatility & Fluctuating Market
Bitcoin prices change continuously. The crypto market, or more specifically, the Bitcoin market, moves back and forth constantly. Even with such growth and success, Bitcoin is still quite volatile. With such a fluctuating market, it is hard to find whether you will get a return on investment or not. So, keep an eye on the Bitcoin market always. Make small but long-term beneficial investments.
At present, the Bitcoin world is not regulated to operate. Even the government does not give a clear stand on cryptocurrency. What makes it more enticing is that Bitcoin is not taxed. But, this can result in concerns if Bitcoins stand as a competitor for the government currency. So, the risk is linked with investing in Bitcoin. It can be punishable also if a country declares it to be illegal. No one can tell the condition of the bitcoin market after a few years.
4. Limited Use
Even after experiencing such a high appreciation in its value and becoming known, only some companies and stores accept Bitcoin as a currency. Some of these online stores include Newegg, Overstock, and more. Most companies and stores don’t take bitcoin as they believe that it is not a legitimate way.
5. No Record of all Crypto Wallets
It is one of the main risks associated with Bitcoin investing. With any financial system, if you enter an incorrect account number, the bank’s server will identify the error, and your transaction will fail. The bank even displays the person’s name linked with the account. It gives you a chance to cancel your transaction in case of incorrect details.
However, with blockchain, no such record is there. At most, a wallet exchange can tell you the wallet address that belongs to the network. It verifies whether a bitcoin wallet is valid or not. It will not inform who is the wallet owner or whether or not it belongs to anybody. Yes, you can send Bitcoins to a wallet without an owner, and your Bitcoins may get lost forever. This, together with the reality that transactions can’t be reversed, make investing in Bitcoins a risky affair.
6. Technology Reliance
Bitcoin has a high reliance on technology. Bitcoins are mined, exchanged through smart wallets, mined digitally, and kept using different systems. So, without technology, Bitcoin is nothing. Since bitcoin is based on technology completely, Bitcoin owners are much more vulnerable to system shutdowns, online frauds, and cyber threats.
7. Currency-Conversion Risks
Certain policies or interruptions related to the withdrawal or deposit of fiat currencies out or in the trading platforms can impact the ability to convert.
8. Taxation of Digital Currencies
When it comes to investing in digital currencies, there is a lot of uncertainty about taxation. In some jurisdictions, Bitcoins are considered assets, while in others, they are considered currency. So, value-added or sales taxes can be applied to sales or purchases of digital currencies. So, investors should take tax advice based on their specific jurisdiction regularly.
9. Currency Or Investment Opportunity
Just like stock investing, Bitcoin investing also attracts people. But with constant fluctuations, zero physical collaterals, and no regulations, Bitcoin investors can lose everything they invest. Although Bitcoins can pay off, you should approach them with caution.
10. Hard Forks
Exclusive to the blockchain, hard forks are changes to a network that isn’t compatible backward. A network splits into two after experiencing a fork, and its computer power gets divided permanently between the miners. Blockchain becomes vulnerable following a split. It is the exact time criminals try to steal money from this network as it becomes less secure. They are known as 51% attacks as well. Dishonest miners take full control of over half the network and steal funds or double-spend coins.
Although bitcoin investing is a profitable venture, it comes with various risks and dangers. You should be aware of those risks before entering the crypto market or risk losing a vital portion of your investment.