Despite its growing popularity, Bitcoin is still a relatively new form of currency, and its volatility can be a cause for concern says Fred Auzenne.
In this article, we’ll take a look at 15 risks associated with investing in Bitcoin.
1. Volatility:
The value of Bitcoin can be extremely volatile and has seen some dramatic price fluctuations in the past. For example, after hitting an all-time high of $1,216 in December 2013, the price of Bitcoin plummeted to just $152 in January 2015.
2. Lack of regulation:
Bitcoin is not currently regulated by any government or financial institution. This means that there are no guarantees around its value, security, or legitimacy.
3. Risk of theft:
As with any digital currency, there is always the risk of theft. Bitcoins can be stolen by hackers who gain access to your computer or cryptocurrency wallet, or by thieves who steal them from exchanges or online wallets.
4. Risk of losing your investment:
If you lose your Bitcoin password or your cryptocurrency wallet is hacked, you could lose all your money invested in Bitcoin.
5. Risk of fraud:
Since Bitcoin is not regulated by any government or financial institution, it is open to fraud says Fred Auzenne. Some people have been famous to scam others by falsely claiming to invest in Bitcoin or by setting up fake Bitcoin exchanges.
6. Risk of price manipulation:
Bitcoin prices can be easily manipulate by large investors or groups of investors. In fact, a study by the University of Texas found that up to 44% of the increase in Bitcoin’s price in 2013 was due to price manipulation.
7. Risk of bubbles:
Bitcoin has been associate with several speculative bubbles, such as the one that occurr in 2013 when its price surge from $13 to over $1,000 in just a few months. When these bubbles burst, investors can lose a lot of money.
8. Risks associated with using Bitcoin:
Bitcoin is still a relatively new technology and not all merchants or service providers accept it. This means that you may not be able to use it to buy everything you want. In addition, there have been several cases of Bitcoin theft, so you need to be careful about how you store your cryptocurrency.
9. Risk of lost opportunity:
Since the value of Bitcoin can swing so dramatically, you run the risk of losing out on potential profits if you sell too soon or buy too late.
10. No insurance:
Unlike traditional currencies, Bitcoin is not back by any government or financial institution. This means that if your Bitcoin is stole or you loose it, you will not be able to file a claim with anyone to recover your losses.
11. Limited supply:
The total number of Bitcoins that will ever be created is 21 million explains Fred Auzenne. This means that once all the Bitcoins have been mine (which is expect to happen in around 2140), there will be no more Bitcoin available for purchase.
12. Difficulty in obtaining Bitcoin:
It can be difficult to obtain Bitcoin, as most exchanges only deal in a limited number of cryptocurrencies. In addition, you may need to go through a lengthy verification process before you can start buying Bitcoin.
13. Risks associated with mining:
Mining Bitcoin can be risky, as it requires investing in expensive hardware and software. If you’re not careful, you could end up losing money on electricity and hardware costs.
14. Competition from other cryptocurrencies:
Bitcoin is not the only cryptocurrency on the market. Other currencies, such as Litecoin and Ethereum, are also competing for market share. This means that the value of Bitcoin could drop if these other currencies become more popular.
15. Government regulation:
The popularity of Bitcoin has led to increasing scrutiny from governments and financial institutions. There is a risk that Bitcoin could be regulated or banned altogether by governments in the future says Fred Auzenne.
Conclusion:
Overall, there are a number of risks associate with investing in Bitcoin. While its value, security, and legitimacy are all up for debate, it is important to be aware of the potential risks before you decide to invest. Always remember that there are no guarantees when it comes to digital currency!
