Bitcoin has been in the news a lot lately. The value of this cryptocurrency has skyrocketed in recent months, and many people are wondering if now is a good time to invest. While there is no doubt that Bitcoin is an interesting investment opportunity, several risks are also associated with it.
If you want to trade with minimal risks, you must choose Crypto Genius. In this blog post, we will look at the risks associated with investing in Bitcoin.
Let’s take a look at these risks.
- Technology Reliance
As of July 2013, the market cap for all cryptocurrencies is over $1 billion. This number is in flux daily and has doubled every month globally in terms of real dollars. This means that people are buying Bitcoins at a high rate, and it also means that there’s money to be made and lost in this space.
The technology behind Bitcoin is impressively cool, but it’s very new and unproven when compared with traditional currency systems. The Blockchain (the “ledger” where every transaction using Bitcoins worldwide is stored) just celebrated its fifth year online, launching on January 3, 2009.
- Block Withholding
Mining, whether with CPUs, GPUs or specialized mining hardware (ASICs), is the only way to mine bitcoins and confirm transactions on the bitcoin network. This process works because the probability of solving the next block is extremely low for each participant; therefore, it’s also extremely unlikely that two miners will solve a consecutive block in rapid succession.
This way, instead of racing always to be the fastest miner (which would require coordinating hundreds or thousands of people right from the start), all miners have to do their part by making just one successful attempt every 10 minutes or so.
- Limited Use
Bitcoin is a volatile commodity, with its price rising to around $3000 in 2017, up from just above $1000 at the start of the year. As a result, investors have been clamoring for ways to get involved in Bitcoin without having to buy the coin itself. However, users must understand that Bitcoin derivatives are still very young.
No futures contracts have yet been released by mainstream exchanges like CBOE or CME Group (the traditional market for derivatives contracts). Upstart trading platform LedgerX recently became one of the first companies to offer these sorts of options, though they’re exclusively available through institutional investors.
- Security Issues
The biggest security issue with Bitcoin is that if someone hacks your account, there’s no way to get it back because all transactions are irreversible by design. The second-biggest risk associated with Bitcoin is losing your “private key”, which could happen through an accident or theft.
And even though this would be unlikely to happen given the small number of users currently using Bitcoin accounts for less than two percent of all e-commerce transactions, hackers can exploit this potential vulnerability.
The Bottom Line
Investing in bitcoin is a bad idea if you’re hoping for steady, guaranteed returns. The currency is entirely digital, and it’s not regulated by any government or financial institution – meaning that your money could disappear at any moment.
Additionally, the price of bitcoins has been incredibly volatile lately. To know all the risks associated with bitcoin, you must go through the points as mentioned above.
OTS News on Social Media