Risks of investing in Bitcoin

In Summary

• Bitcoin is known to have a very volatile nature, the price value of cryptocurrencies can go through huge changes in very short periods of time.

• Remember that these cryptocurrencies are decentralized meaning that they are not regulated by any governments or banks.

Representations of the Ripple, bitcoin, etherum and Litecoin virtual currencies are seen on a PC motherboard in this illustration picture, February 14, 2018.
Representations of the Ripple, bitcoin, etherum and Litecoin virtual currencies are seen on a PC motherboard in this illustration picture, February 14, 2018.
Image: REUTERS

Many people are not aware of the fact that Bitcoin was not designed for investment opportunities.

However, in the last few years, cryptocurrencies have experienced rapid growth, so many speculative investors were drawn towards these digital assets.

Traders and investors don't buy Bitcoin in order to use it as a payment method or a medium of exchange, but they buy it with the hope that its price value will increase.

They try to sell it when the price increases in order to make profits. But remember just because Bitcoin offers many opportunities to the investors and traders to make money, it doesn’t mean that investing in these digital assets isn't risky.

Bitcoin carries several inherent risks because no one can guarantee if the price value of a cryptocurrency is going to increase or crash. Bitcoin was the first cryptocurrency but it was still introduced only in 2009.

A lot of investors believe that Bitcoin is not reliable given that there isn’t a long term track record or history of reliability.

Bitcoin only exists in digital form and most people are not ready to invest in it as the concept of virtual currency is still fragile.

People may be more ready to invest in the regular traditional fiat currencies. As cryptocurrencies are getting more popular day by day, Bitcoins are becoming less experimental.

The infancy stage of cryptocurrencies might be over and it is now time for a development phase.

Bitcoin could continue to grow in the coming years and offer investors and traders more opportunities to make profits than ever before.

Security risks

The majority of people who own or use Bitcoin did not have to mine the cryptocurrency. Bitcoin mining is a very complex and time-consuming process that most traders and investors are not interested in.

Instead, they choose to buy and sell the cryptocurrency on reputable Bitcoin Exchanges online. These exchange platforms could suffer at the hands of hackers, scammers, malware or operational glitches.

Bitcoins can only be stored in a digital wallet and are protected by a private access key.  If a hacker or a scammer can access your digital wallet you might lose all of your stored cryptocurrency.

We would suggest that you look for a paper wallet as they are the safest digital wallets for Bitcoin. Moreover, do not share any private information with anyone in order to keep your digital assets safe.

Bitcoin market risks

There is a market risk attached with almost every kind of investment, the crypto market is no different.

Bitcoin is known to have a very volatile nature, the price value of cryptocurrencies can go through huge changes in very short periods of time.

If you look at the price history of Bitcoin, you will see many wild swings over its short existence. Any of the cryptocurrencies, including Bitcoin, could become worthless if people stop trading or accepting Bitcoin as a payment method.

Bitcoin is doing much better than the other hundreds of other cryptocurrencies that have come into existence after the introduction of Bitcoin in 2009.

This is because many people promote using Bitcoin as an acceptable payment method, many online businesses and merchants have started accepting payments in crypto.

Bitcoin offers a lot of advantages to the users over traditional fiat currencies and many people believe that Bitcoin is the future of money.

How to deal with these risks?

Even though investing or trading Bitcoin carries a lot of risks, many people still manage to make a lot of profits. Remember that these cryptocurrencies are decentralized meaning that they are not regulated by any governments or banks.

Moreover, these digital assets can be used as a shielding investment from taxation. In legal terms, there is no better option. Moreover, trading Bitcoin includes buying and selling much more frequently.

Traders try to take advantage of small price movements and it is crucial to execute the trades at the right time. However, spending so much of your time, every day, in front of a screen is not an easy task.

You could invest with an automated trading platform or a trading robot, such as Bitcoin Code. With the help of automated trading, your trades will be performed automatically.

The trading robot will take into account many underlying factors of the crypto market before buying and selling Bitcoin. This way you can take advantage of every money-making opportunity that comes up in the market, even when you are sleeping.

Conclusion

Bitcoin is improving day by day and the experts and analysts believe that it will continue to grow. It is worth noting that the price value of Bitcoin right now is more $50,000.

Moreover, the blockchain network of Bitcoin is well protected and heavily peered making it a very good investment opportunity. However, it wouldn’t be wrong to say that in the crypto world high risk and high reward are correlated.