Why Bitcoin is a High-Risk Investment

Are you wondering whether Bitcoin is a risky investment? Here’s what makes Bitcoin a high-risk investment with potentially good returns.  

Bitcoin is rapidly gaining popularity in the contemporary world. In western countries, ATMs that allow people to transact with this digital currency are increasing daily. The number of retail stores that take Bitcoin payments is also growing. Also, major institutions are investing in this digital asset.

Today, you can seamlessly buy Bitcoin on a online trading platforms, to know more about the bitcoin trading you can visit https://trustpedia.io/ . Perhaps, these developments are the reason for Bitcoin’s price spectacular surge, with its increasing adoption in the mainstream industries boosting its popularity. However, Bitcoin remains a high-risk investment. Here’s why.

High Volatility

Bitcoin is worth what other people want to pay to own it. Consequently, Bitcoin’s price fluctuates wildly and at an unpredictable rate. Investment experts and financial analysts can’t predict Bitcoin’s value accurately. That’s because even factors outside the crypto market affect Bitcoin’s price.

Essentially, it’s almost impossible to predict Bitcoin’s price in the next 24 hours. Some of the causes of Bitcoin volatility include:

• Public announcements
• Media focus and reports
• Actions of people with extensive Bitcoin holdings or whales

Large trade volumes, Bitcoin’s integration with other companies, and regulatory bodies’ legislation can also influence Bitcoin’s price. Therefore, people should understand Bitcoin’s volatility and implication before investing it because it increases the risk of losing money.

Uncertain Regulations

Bitcoin is currently under- or un-regulated. Some governments are looking for ways to control or regulate this digital currency. However, Bitcoin’s regulation could affect its future use and development. For instance, China has outlawed Bitcoin. On the other hand, El Salvador has embraced Bitcoin as a legal tender. Regulators treat Bitcoin as property or commodity in Canada and the US. In Russia, Japan, and the European Union, Bitcoin is a currency.

Ideally, the current status of Bitcoin is unknown in some countries. People are unsure whether their governments will eventually recognize and accept Bitcoin or outlaw it. Consequently, investing in Bitcoin now means you’re risking money in a venture with an unknown outcome. And this makes Bitcoin a risky investment in most countries.

Bitcoin Can Lose Demand

There’s no guarantee that people will always want to purchase or own Bitcoin. Bitcoin is a relatively new technology or product. Consequently, this digital currency is yet to achieve widespread acceptance. Its usage and demand depend on its underlying technology. And this technology is yet to earn the trust of large risk-averse investors and institutions.

Currently, real-time infrastructure and technology are lagging with people raising issues with Bitcoin. For instance, some trading platforms and digital wallets have been unable to handle high transaction volumes at some time.

What’s more, Bitcoin doesn’t have a globally acceptable use, which adds to its volatility. If several governments pass legislation outlawing Bitcoin, its demand will decrease. And this will lower its value, which could cause significant losses to those who invest in it.

Cyber Security Risks

Some hackers have infiltrated crypto exchanges, getting away with tokens of account holders. Thus, you could lose the money you invest in Bitcoin if hackers break into the cryptocurrency exchange that you use and steal your Bitcoins.

Also, you can lose your digital wallet keys, meaning you can’t access or spend the tokens in it. Additionally, something can damage the cold wallet you use to store your Bitcoins. Ideally, you must be careful when choosing and using crypto exchanges and wallets to ensure that nobody can steal your Bitcoins.

Closing Thoughts

Bitcoin is undoubtedly a high-risk investment. However, some people have made good returns from their Bitcoin investments. Perhaps, the essential thing to do is understand the involved risks before investing in this digital currency. That way, you will avoid them and enhance the chances of reaping big from your crypto investment.