Bitcoins are digital assets, which help provide a medium of exchange where management and creation of bitcoins are done using Cryptography and not by depending on any central authorities or banking institutions. Although bitcoins were not developed as common equity share investments many speculative investors showed interest in the digital currency after its value appreciated swiftly. This resulted in numerous purchases of bitcoins for its investment value.
Compared to traditional investment methods, bitcoins do not have a history of credibility or long-standing track record to support it. Is it a scam or not, in other words, if investing in bitcoins it’s better to understand these investments risks:
As rivalries to the government currencies, bitcoins might be used for illegal transactions, money laundering, evasion of tax, black market trading, etc. This has resulted in certain countries issuing a ban for digital currency transactions.
But due to the decentralized aspect of bitcoins, regulatory risks hold no effect in countries where it is not legally banned.
Due to the virtual aspect of bitcoins, digital transactions hold risks due to malware, hackers, and operational glitches. Targeting bitcoin exchanges by hackers can result in gaining access to various bitcoin accounts as well as digital wallets. Newcomers, who are unaware of the security pits and risks involved in the lucrative yet complicated cryptocurrency world, tend to become easier preys of cyberthieves.
Not to worry, even these can be evaded with upcoming software like ‘Chainalysis’ that specializes in solving and tracking down cryptocurrency crimes.
Just like any other normal investment values, bitcoin values also tend to fluctuate. Cryptocurrency tends to have huge swings in price irrespective of its short existence.
In the digital market, there appears to be immense competition, yet Bitcoin has a great lead over various other emerging digital currencies.
Bitcoins are not included in any tax benefit retirement schemes or accounts, hence legal protection for investments from taxation are not available.
These risks do not hinder one from investing in the evolving digital currency.
Normally investments and bank accounts are insured by various insurance corporations that operate in various countries. Whereas Bitcoin accounts and bitcoin exchanges are not insured by any centralized bank or any type of government authority.
Good news! This has been curbed too by the introduction of ‘Mitsui Sumitomo Insurance’ that provides coverage for the bitcoin exchanges against the risks of cyber-attacks.
Hence being aware of the risks associated with, help steer clear while trading successfully with bitcoins.