Bitcoin risks that investors need to be aware of
Risk one- Bitcoin volatility
Everyone knows how volatile Bitcoin is and those who invest in it will see the value of this cryptocurrency fluctuate dramatically. If you can’t cope with the rise and fall of Bitcoin, then investing in Bitcoin is not for you. There is no profit if you lose sleep due to loss of your capital. I can’t stress enough the importance of using your discretionary spending money to play in the cryptocurrency market.
What is discretionary expenditure?
This means money spent on travel, eating out, recreation, hobbies and sports.
You should never spend rent or money set aside for your leisure activities such as a day off at a race so you should not use that money to play cryptocurrency market.
Risk two-hacking
A company called “Cryptopia” which was an online bitcoin trading platform raised funds to invest in bitcoin. It was hacked and those who invested in Bitcoin with Cryptopia lost their money. There were some sad stories about some people losing huge sums of money. Person
It must be said again and again that your cryptocurrency money should never play with funds that you cannot lose or put too many eggs in a basket as many of these investors have done.
The other thing I need to add is that the actual amount of money lost by cryptocurrency investors due to the rising value of Bitcoin is likely to swell drastically. If someone invests $ 1,000 in Bitcoin and it reaches $ 10,000 in a few years just to lose a lot for them. It will go on record that this person lost 10k when in fact, they lost only 1k.
Risk of losing three passwords
An Australian man has been locked out of his Bitcoin wallet because he can’t even remember his password. The website that contains his bitcoin will permanently lock him out of his wallet if he has made ten failed login attempts. He did eight. He has more than 300k in his bitcoin wallet.
The lesson here is to write down your password and keep it locked in a safe place.
The other part of the advice is to diversify your portfolio so that you don’t lose too much in one hit if something goes terribly wrong.
Risk four-government control
The government has the power to ban crypto trading; China has done just that. Several Chinese agencies have joined forces to ban what is described as “illegal” cryptocurrency activity. This is not to say that other countries will follow suit, but it only points to the point that governments have the power to do so.
Risk five-tax
Two things are certain in life, death and taxes. You can be sure that at some point the taxpayer will want a portion of your bitcoin pie. Be it in the form of capital gains tax or increased value of bitcoin. It should be noted that if your Bitcoin capital gains are taxed, it may be possible to claim a tax refund on any capital loss. A good accountant will be able to advise you here.
Whatever form of capital gain you are investing in, always keep in mind that when there is a chance of capital gain, there is also the possibility of capital loss. Investing in cryptocurrency is risky so, it cannot be stressed enough that the money you invest in Bitcoin must be money that you can lose.