The monetary exchanges find digital currencies as the future of the economic and financial sector. If there is a global currency for online goods trading, it can be less complicated and eliminates the barriers to international trading. Bitcoin is the most used cryptocurrency for trading. However, there are certain hurdles associated with using them. As many people are starting to use Bitcoins, it is necessary to understand these risks.’
Bitcoin’s price keeps on changing frequently. Its value can rise and fall instantly. Therefore, the market is unpredictable and there is no guarantee that you will get decent returns from it. So, you have to closely observe the market to avoid losses. Small investments will be ideal for long-term investments.
Cryptocurrency makes use of technology for transactions and therefore, investments are prone to cyberattacks. If hacking takes place, you cannot get your investment back. Cyberattacks on exchanges and mining processes have caused several investors to suffer losses.
Several fraudulent activities are happening around the crypto market. As Bitcoins are becoming highly popular, and therefore many fraud exchanges are emerging. Therefore, investors have to be very careful while choosing exchanges for investing.
- Lack of regulation
There is no regulation for cryptocurrency currently. Most governments across the world have not come up with a strong stand on cryptocurrencies as the market is relatively new. As many countries do not tax this investment, it is attractive for many people. But there can be no legal support.
- Reliability on technology
Bitcoin is highly reliant on technology. There are various digital systems to mine, store, and trade cryptocurrencies. It does not have a physical form to back up the currency. So the investors are highly vulnerable to cyber threats and frauds.
- Block Withholding
When a bitcoin exchange transaction happens online, a new block is created. A mining pool can make use of computational power to create these blocks, but they hide it from genuine investors to reap benefits.
- Limited use
Bitcoin has become highly popular recently. Several companies have started accepting cryptocurrencies like Bitcoins as a payment option. But many companies do not consider them so and are totally against Bitcoins.
- Financial loss
When more and more people come towards Bitcoin, it will create a bubble economy. It is said that Bitcoins will become useless when this bubble bursts. Thus, your investment will go worthless, which can be painful.
- No guarantee on investments
Bitcoins can be a good online currency, but several buyers are purchasing bitcoins as a form of investment like stocks. But, as the market is volatile and there is no physical collateral or regulation for bitcoin, there is a chance to lose everything.
- Technology is young
Cryptocurrency is a young technology even now. Bitcoin emerged just a decade ago and it has to still evolve to become strong. With many major changes happening in the market, the future of Bitcoins cannot be predicted. There is a chance that Bitcoin may turn out to be worthless in the future. Therefore, caution and research are needed to approach this technology.