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The Main Risks Of Investing In Bitcoin

In modern society today, virtual currencies are rapidly gaining popularity. ATMs for transactions in virtual currencies are appearing in Western countries, digital money can be bought and sold on the Internet and many serious financial analytics companies have started tracking digital currency fluctuations and investment forecasts.

Like any other means of payment, Bitcoin, even without being a secured currency, is integrated into the existing economy. So, like everyone, carries certain risks. So far, the future of virtual currency seems promising. However, unexpected drops in the rate make even the most seasoned investors be wary.

Warren Buffett (Warren Buffett) once said that he did not share the general enthusiasm for Bitcoin. In his opinion, this is a “mirage, a soap bubble,” and Buffett decisively does not understand either the essence of this cryptocurrency or the causes of the hype around it. Since a person whose whole life was closely connected with economics and finance, will not begin to talk in vain, it is necessary, at a minimum, to study all the risks associated with working with cryptocurrency.

Experimental phase risk

It should be noted that the concept of cryptocurrencies itself is innovative - there are no historical data and experience that allow you to assess how much you can trust it. Bitcoin, like other cryptocurrencies, is still under development. Thus, something completely unexpected could happen to it, which invariably happens at the development stage not only with economic objects but also with experimental technologies. However, being the most actively used cryptocurrency, it is less “experimental” than other counterparts. In addition, relative to traditional assets, its level can be assessed as high because this asset is not intended for conservative investors.

Technology Risks

The technological component always develops very quickly, and often even uncontrollably. Any user knows that Bitcoin already exists - and continues to appear almost daily - a huge number of competitors. Despite the advantage due to brand awareness and large venture capital injections, there is a real technological risk to other cryptocurrencies in the form of the potential appearance of a more advanced cryptocurrency. Investors may simply not notice the moment when their virtual assets lose their real value.

Price variability

Bitcoin cost fluctuations are completely unpredictable in the short term, which only adds to the riskiness of this asset. Financial analysts can more or less accurately predict the value of real currencies or stock quotes based on data from the outside world. But to predict exactly how much Bitcoin will cost tomorrow is almost impossible. Factors causing the variability of the value of cryptocurrency are the large volumes of exchange trading, the integration of Bitcoin with various companies, legislative initiatives of regulatory bodies and many other, sometimes disregarded phenomena. To invest in blockchain technology, you should meet with blockchain companies to hire blockchain developers.

Consumer Protection

The unpleasant fact - Bitcoin does not provide any consumer protection. A perfect transaction cannot be undone. All that remains after a failed transaction is to try to convince the recipient of funds to return them voluntarily. This is due to the fact that there is no intermediary guarantor, as is the case with bank cards. Bitcoin transactions are similar to regular cash transactions, in which there are only 2 parties. However, the property of the irreversibility of transactions in itself has little effect on the risks of investing in Bitcoin as an asset. However, the investor must also be aware of this danger.

Theft or loss through negligence

If the attacker gains access to the investor’s private secret key, he can steal the entire contents of the digital wallet. Among Bitcoin users, there are cases when, due to their own ignorance or unfortunate coincidence, they lost access to secret keys - and consequently, to their own Bitcoin wallets. In addition, the hard disk of the computer on which the cryptocurrency details is stored may break down in a trivial way, and the awkward movement will result in the deletion of the key file. To invest in blockchain technology, you should meet with blockchain companies to hire blockchain developers.

Currency regulation

Depending on the country, there are a variety of approaches to regulating Bitcoin. The absence of a well-thought-out unified system for regulating cryptocurrencies only increases the uncertainty factor regarding their future. Government agencies in many countries are concerned about using Bitcoin for speculation, money laundering, drug trafficking, and other illegal financial transactions. At the same time, with the growth of the popularity of cryptocurrencies, state structures are beginning to actively come up with various legislative initiatives that in one way or another regulate the turnover of Bitcoin and other similar currencies.

Virtual Currency Frauds

A risk is normal for owners financial assets. Potential investors should be wary if someone promises them guaranteed high profitability; offers to buy Bitcoin, when no one laid out offers to sell them; when buying or selling is surprisingly “good,” or unknown persons attempt to create a false sense of urgency of investment, leaving no time for calm thought. This risk is associated with both real currency transactions and exchange trading.

Summing up

Investing in Bitcoin today is a very risky undertaking. There is no guarantee of minimum profitability or, at least, break-even investments. All investors who are going to work with cryptocurrency today must understand what the currency is about and have a clear plan of action for all sorts of scenarios. In addition, an inexperienced investor should invest only the amounts that he is willing to lose without serious consequences. To invest in blockchain technology, you should meet with blockchain companies to hire blockchain developers.

Post by Urvish Macwan, Marketing Manager at Hyperlink InfoSystem, listed as one of the top app development companies by leading research platform.

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Comments: (2)

Melvin Haskins
Melvin Haskins - Haston International Limited - 20 June, 2019, 08:17Be the first to give this comment the thumbs up 0 likes

Like all investments there are risks. The answer is not to put all of your eggs in one basket. You need a balanced portfolio. If Bitcoin is of significant interest to you, make sure that you invest no more than 20-25% of your total savings into it and follow the advice here.

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 20 June, 2019, 13:27Be the first to give this comment the thumbs up 0 likes

Re. "The unpleasant fact - Bitcoin does not provide any consumer protection", ditto A2A payment methods like Zelle (USA), FPS (UK), UPI / NEFT (India). They have intermediaries but are as irrepudiatable as cash and BTC which happen directly between two parties. Card payments are repudiatable because they're designed to be repudiatable. Not because they are processed through intermediaries.