Top 4 Risks When Investing in Bitcoin
It seems like there’s no end to Bitcoin’s success since it started earning considerable amounts of profit in 2016. Most investors have been all smiles since first making their investments, especially those of whom stuck around for the long haul. Long-term investments are seeing truly astounding pay-offs and returns. However, will bitcoin always be this profitable? What will happen if it loses its thunder like most companies inevitably do over time? What are the greatest risks to be faced by those who have invested in bitcoin?
1. Blockchain is getting old quick
Bitcoin’s blockchain technology used to be more popular because it had no competition. Now, however, after making a disappointing upgrade following the division of bitcoin into bitcoin and bitcoin cash, it has been quickly losing leverage in the market.
150 companies have instead been testing Ethereum’s new blockchain, due to the fact it supports small contracts that allow for some degree of accountability to remain in the modern business world. If bitcoin’s blockchain fails to provide interesting updates that keep users happy and interested, this could lead to the demise of bitcoin.
2. Merchants rejecting bitcoin
Companies first started supporting bitcoin by allowing it as a payment method in 2014. Coming to terms with the advances in technology and the future of currency was necessary for many businesses that wanted to provide options for bitcoin-carrying customers. This is not to say that companies have always been happy about their investments in bitcoin.
The digital currency has suffered three separate losses in profit within the time span of five months, and who knows how many more losses are yet to come. The lack of stability that this gives companies who are receiving it as payment for their goods and services is causing them to worry. Of course, every investment suffers and not every day will be a profitable one. However, a minimum of 29% of losses were suffered each of these three times bitcoin declined. This is a sign that bitcoin is not only lacking in stability, but may be likely to dangerously sink any day now.
3. Regulation biting bitcoin on the butt
The regulation of bitcoin allowed consumers and investors in the cryptocurrency to trust it as well as take it more seriously. Regulation was not easy for bitcoin to achieve. As the first cryptocurrency to hit the market, everyone was hesitant about whether it could actually work as a currency. However, as of 2017, Japan has officially labelled bitcoin as a currency just as trusted as fiat currency, both seen as legal options for payment throughout the country. Nasdaq has helped in regulating bitcoin as well, acquiring bitcoin futures in late 2017.
The regulation of bitcoin has not always benefited the digital currency, however, causing both China and South Korea to remove ICOs from their respective countries, China banning cryptocurrency exchanges within its borders as well.
Bitcoin, as well as every other cryptocurrency on the market, is constantly at risk of becoming hacked by some of he world’s most smartest hackers. When Mt. Gox had 70% of bitcoin’s trading volume about four years ago, hackers decided to work their magic. Mt. Gox suffered a $850,000 loss worth of bitcoin. For two long years, this hack affected the status of bitcoin, declining 80% in value as a result of the event. Now bitcoin has recovered its stance, but a second hack to the largest exchange storing bitcoin, today known as Bitfinex, may have an even more fatal effect on the digital currency.