5 Threats To Be Aware Of If You’re Investing Money In Bitcoin

Did you know, as per a recent research conducted by energy tariff comparison service PowerCompare.co.uk the amount of electricity used this year for mining bitcoins is greater than the annual usage of individual 160 countries? Why is that?

As you may know, there are a limited number of bitcoins that can be mined and that number is roughly around 21 million and out of that only 4.5 million are left. 1.58×10?8 is the roughly the probability the of mining a single block which contains 25 bitcoins. Now with a decreasing number of bitcoins, this process becomes more and more complex. It is that complex and is draining a huge amount of electricity just for the sake of mining a virtual currency.

It is also estimated that the bitcoin designer, Satoshi Nakamoto has around 1 million Bitcoins out of 21 million. If he invests the bitcoins in business someday, the economies in many countries could go upside down.

Not many understand this virtual currency and that makes it even more dangerous. It is not like the share market whose value is dependent on different marker factors. It is an uncalculated risk to take.

Here are some of the threats it poses 

1. High volatility

Threats That Bitcoin Exposes Its Investors To
© Finlaw Blog

Bitcoin’s rise and fall have remained unpredictable till now and unlike any other good currency, it is highly volatile. What could anyone expect from a privately created electronic currency, proliferating from $1,000 to above $19k this year? Its value has shown a fall of more than 15 % in a single day which directly shows the potential loss it can cause to an investor.

2. Government regulations

Threats That Bitcoin Exposes Its Investors To
© Linkedin/IDC Asia/Pacific

This is what the Bitcoin regulation status looks like in Asia Pacific region.

The sudden increase in the number of bitcoin users in India is now demanding a regulatory system to be in order. The Income Tax Department has decided to send notices to 4-5 lakh High Networth Investors(HNIs) for suspected tax evasion. Till now, India has taken a neutral stand on this virtual currency. In simpler words, it could encourage the flow of black money in the country.

Also, if the government declares it illegal to deal in bitcoins then the potential loss to investors would be immeasurable.

3. Competition

Threats That Bitcoin Exposes Its Investors To
© TechnoMag

Do you know Ethereum, Litecoin, Ripple, Dash are all cryptocurrencies like Bitcoin? Now, what if one day these currencies start offering faster transactions, complete anonymity, storage space and other improvements over Bitcoin? The value of Bitcoin may fall sharply, causing huge losses all across the globe.

Seeing the recent trend, that scenario does not seem like a far-fetched reality. Recently, one of the co-founders of Bitcoin.com just sold all of his bitcoins due to increasing transaction fees and time is taken to complete a single transaction. According to Emil Oldenburg, the CTO, and co-founder of bitcoin.com, bitcoin has no future.

4. Security of services/products

Threats That Bitcoin Exposes Its Investors To
© SME Tech

Bitcoin needs wallets, exchanges, payment processors, etc for a transaction to be completed and not all of these services have perfect security. In case your funds are stolen, all you can do is to hope your service provider will be kind enough to refund you the money.

Recently $64m in cryptocurrency, bitcoin were stolen in a sophisticated hack. Who will bear the loss? Investors only. Seems like this particular digital currency is not such a safe wallet to keep your money in.

5. No safety mechanisms

Threats That Bitcoin Exposes Its Investors To
© Bitcoin Exchange Guide

Imagine a scenario where you lose the key to your bitcoin wallet, what then? If you are dealing in higher quantities of bitcoins then after losing your key, your funds will be gone along with it. No one manages the security other than you. There’s no support to contact, no way to change the password, and no way you can verify your identity to get your account back.

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