Out of all the 19000 cryptocurrencies that circulate in the trade market, Bitcoin stands out to be the most profitable one among all. It is nowadays compared with gold as a backing currency too as it is believed to have the potential to back investors from the financial crisis. But, as the crypto scams is highly volatile, it involves some risks. These risks are very threatening for the new investors who don’t have much knowledge and experience in dealing with this much volatility. So, it is always better to know the risks that can happen with your bitcoin investment before you start.
- Risk of losing all the money invested: The main risk in any kind of investment is the risk of losing money that you have invested. Bitcoin investments have got similar type of risks. Your risk management factor becomes really hard if you invest all your life savings at a time into bitcoin. The causes of this can be volatility, improper timing, and inappropriate strategy.
- Volatility: Bitcoin’s volatility is unbelievably high. If you follow its price graph from the beginning till now, you will just see huge swings. Bitcoin’s value was less than a dollar during the first few years. After that, it reached its all-time high peak at over $65,000 in 2021. Again in 2022, it dropped to near $23,000 as in August. It was an average dive but, if you notice closely, bitcoin’s price fluctuates in a day also and even in an hour. So, it is really hard to predict whether it will give you a return or not.
- Improper timing: Another vital factor is improper timing. If you are not an expert in investment especially investing in a highly volatile asset, then determining the correct timing to invest and withdraw is very hard for you. Most of the new investors lose their money because of this problem. Thus, one has to take note of small to big movements in the tech charts of the trade market. Upon noticing a high rise in Bitcoin prices, one can immediately get their hands on these digital assets. However, after noticing further improvement, you can easily sell away all the cryptocurrencies.
- Inappropriate strategy: A strategy is important for any kind of investment. As bitcoin investment is vulnerable, a strong strategy is very much needed to follow. Similarly, you might need to shift between strategies if there is a need because the market is ever-changing. If you don’t have adequate knowledge about different strategies, handling the investment becomes hard for you.
- Bitcoin exchange hacking: Another big risk can be online hacking. Irrespective of the fact that bitcoin claims to be a safe and secure network, you can’t deny the truth that online frauds can happen at any time because technologies are improving always and the scammers also have the access to use new technologies. So, any time your bitcoin exchange can be hacked and you can lose your holdings if they are not secured with a private key and bitcoin wallet. However, for a secure exchange, you can visit http://bitcoin-code.app/.
- Cyberattack on the crypto wallet: Your crypto wallets are not also safe if you are using a cold wallet. Cold wallets save the data available in your account in an offline mode which no hacker can get access to if they do not have proper credentials.
- No regulation of government: According to some experts no government regulations on the network is another risk for its users. As there is no authority or central controlling point, users have facilities to use the network freely and fraud people can use it for any improper transactions.
- Uncertain future: Irrespective of how much the world is around cryptocurrency, this is true that its future is uncertain. Yes, experts are hopeful that bitcoin has a bright future but, its volatility, limited use, and most importantly limited supply indicate its uncertainty in the future. So, it is better to keep in mind if you are thinking to be completely dependent on that cryptocurrency.
- Loss of private key: Your private key is the only thing with which you can access your bitcoin holdings that are saved in the Blockchain node. People keep their private keys in bitcoin wallets but, if the wallets are hacked or damaged (in the case of hardware wallets) your private key is lost and you can never get the bitcoins back.
Bitcoin investment involves these risks. But, if you want to do a fruitful investment in this market, you have to learn bitcoin trading. With proper training, you can be a good investor and make a profit from this cryptocurrency.