DANGERS OF BITCOIN INVESTMENTS

The perception of digital currency is still new compared to our traditional currency. Unlike our traditional track history bitcoin has no long term history of integrity.  Yes, like every other digital currency it is still evolving. Although, Bitcoin has spent eight years in the marketplace, it is becoming less experimental each day. However, it has the highest return on investment but also the highest risk possible.

For anybody to invest in bitcoins there is need to understand the different kinds of investment risk that are possible.

INSURANCE DANGER

Bitcoin accounts and exchange are not insured by any kind of insurance company or programs by government agency which is dissimilar to normal bank account that are insured up to a particular amount depending on the jurisdiction.

MARKET DANGER

Similar to any other currency and investment, bitcoin values can fluctuate.  The value of bitcoin has shown a wild fluctuation in price in its existence from 2009-2017 which is just a short period.  Indeed, there is already high competition in the cryptocurrency marketplace and if less people accept Bitcoin as a legal tender, it may lose value.

REGULATORY DANGER

Bitcoins are a challenge to a countries currency and may be used in the black market transaction, illegal acts, money laundering or tax evasion. As a result, some governments seek to ban, restrict or regulate the use of bitcoin. For instance, the Chinese government has banned the sales of bitcoin within its country. Other governments are coming up with different rules concerning the use of bitcoin. Like the USA New York State Department of Financial Services that has setup a regulation that requires all companies and individuals using bitcoin to sell, store, buy or transfer to record its identity and have a compliance officer to check its capital reserves.

SECURITY DANGER

All bitcoin transactions are permanent and cannot be changed. therefore, anybody carrying out transaction with bitcoin should have it at the back of their minds that a mistake is irreversible except the person receiving the bitcoin refunds them back the money.

Bitcoin transactions are digital; they run a virtual system and can be hacked by malwares and they also run the risk of operational glitches and malware.  If a hacker should gain access to a bitcoin owner’s computer hard drive and steals his encryption key, he could steal bitcoin from the owner’s bitcoin wallet.

During a hacking incident that took place 2014 in Japan, at a bitcoin exchange company called Mt.Gox, millions of dollars, worth thousands of bitcoins were stolen forcing the company to shutdown making people lose money.