A Bitcoin-based investment has a lot of advantages. There are so many pioneers of Bitcoin and other cryptocurrency investments in the industry. While a Bitcoin-based investment is not a bad idea, it’s important that you understand the Risks attached to bitcoin investments before you dive in.
Top 4 Risks Attached to Bitcoin Investments
1. The Risk Of Volatility
This is pretty much the biggest problem with a Bitcoin-based investment. Just like every other cryptocurrency, Bitcoin is extremely volatile. What this means is that the price of Bitcoin is unstable. The price of Bitcoin is not regulated by anybody which contributes to its instability. Some analysts believe that it’s only a matter of time till the price of Bitcoin falls permanently from a bubble burst.
2. Bitcoin is Difficult to Define
What asset class does Bitcoin fall into? Is it a commodity or a currency? Those at the forefront of mining Bitcoin say it’s not a currency as it isn’t regulated by any central body. The IRS treat Bitcoin as a commodity while the Commodities Future Trading Commission treats Bitcoin as a currency. It’s difficult to know where it falls.
3. It’s Unregulated
While the fact that Bitcoin and other cryptocurrencies are unregulated might appear like a blessing, it can also be a curse. There is no central authority regulating Bitcoins. If you get ripped off, you’ll have no fixed body to cry to. Nobody regulates the price of Bitcoins.
4. Its Legal Status is Unclear
Whether or not Bitcoin is legal is still not certain. Even if Bitcoin hasn’t been declared illegal in major markets, it has been facing hurdles from different agencies in different parts of the world. Some agencies in authority would prefer if Bitcoins are declared illegal.
Before you start a Bitcoin-based business, it is important that you consider the risks and weigh the benefits. Many in the cryptoverse believe that Bitcoin and other cryptocurrencies are the future. Only time will tell.
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