Bitcoin and other cryptocurrencies are said to be the future of trading. They are being accepted across different parts of the world and are increasing in popularity. Nevertheless, they come with some serious risks that are worth taking a look at. Here are a few such risks you need to consider before investing in Bitcoin or any other cryptocurrency:
Underdeveloped Technology
It has just been about 10 years since Bitcoin came into existence. The technology developed is still young. Although efforts are being made, it will take a while for the technology to develop into something solid and secure that will provide the necessary protection to your investments.
Limited Use
Although Bitcoin has been highly successful as a cryptocurrency, there are many companies that don’t recognize it as a viable form of currency. As of now, a few online stores such as Monoprix, Newegg, and Overstock accept cryptocurrencies for exchange. A few travel companies such as Air Lituanica, AirBaltic, and CheapAir.com allow people to travel using their Bitcoins. However, for Bitcoin to be recognized as a legitimate exchange, it is going to take a lot of time and development.
No Physical Collateral
Unlike bonds, mutual funds, gold, or real estate, Bitcoin doesn’t have any physical collateral to back it up. These coins are mined digitally and are exchanged using smart wallets. It relies totally on technology. Therefore, Bitcoin owners are always susceptible to things like online frauds, cyber threats, virus attacks, and computer crashes.
Bitcoin exchanges are very likely to be hacked, despite the protection that they get from smart wallets. Moreover, it could be very difficult to retrieve your coins, if you ever forget or misplace the key for your smart wallet. In addition to this, there are a lot of fake exchanges that make things very complicated. The lack of security still remains a big issue for people who want to invest in Bitcoins.
Lack Of Regulations
There are no major regulations when it comes to operating the Bitcoin market. It is going to take some time for the government to take a clear stance on cryptocurrency. The lack of taxes do make Bitcoin trading an enticing investment opportunity. But there is no saying what kind of state the Bitcoin market would be in, a few years from now.
Market Volatility
The prices of Bitcoins are changing constantly. The market is highly volatile and unpredictable. It is necessary to keep a vigilant eye on the Bitcoin market if investors wish to avoid massive losses. You can check out our Money Management section to get a feel of the Bitcoin market.
Many people have benefited from Bitcoin investing. Nevertheless, with more and more people entering into the bitcoin market, nothing can stop a bubble economy from being created. Once the bubble bursts, bitcoin will be of no use and all those people who are holding on to their cryptocurrencies will find no way to unload their losses.
Bitcoin investing might not work for everyone. Considering its unpredictable future, it is always better to consult a professional who will look into your situation and offer you some sane advice on this.
