The Risks of Bitcoin

Bitcoin Risks that investors need to be aware of

A risk-The change in bitcoin

Everyone knows how fast bitcoin is and its investors will see the value of this cryptocurrency fluctuate dramatically. Unless you can handle the rise and fall of bitcoin then investing in bitcoin is not for you. There is little to gain if the loss of your capital can cause you to lose sleep. I can’t stress enough the importance of using your discretionary spending money to play the cryptocurrency market.

What is discretionary spending?

It’s money spent on travel, eating out, entertainment, recreation and sport.

You should never spend rent money or money set aside for your retirement on entertainment like a day out races so you don’t use that money for playing the cryptocurrency market.

Risk Two-Hacking

A company called “Cryptopia” which is an online bitcoin trading platform that holds funds invested in Bitcoin. It was hacked and everyone with bitcoin who invested in cryptopia lost their money. There are some sad stories about the huge amount of money that some individuals have lost.

It should be repeated that you should never play cryptocurrency money with funds you can’t afford to lose or put too many eggs in a basket like most of these investors do.

Another thing I need to add is that the actual amount of money lost by cryptopia investors is likely to go up significantly due to the rise in the price of bitcoin. If someone invests $ 1,000 in bitcoin and it goes up to $ 10,000 in a few years they just lose the lot. It goes on record that this guy lost 10k when in fact, only 1k was lost.

Risk three-Lost passwords

An Australian man has been locked in his bitcoin wallet because he can’t remember his password. The website where he has his bitcoin will lock him from his wallet permanently if he makes ten failed login attempts. He made eight. He has over 300k in his bitcoin wallet.

The lesson here is to write down your password and keep it in a safe place.

Another piece of advice is to diversify your portfolio so that if something bad happens you don’t lose a hit.

Risk four Government controls

Governments have the capacity to ban crypto trading; That’s exactly what China is doing. Several Chinese agencies have joined forces to ban what they describe as “illegal” cryptocurrency activity. It does not say that other countries will follow it but it only illustrates a point that governments have the power to do so.

Risk five-Taxation

Two things in life are certain, death and taxes. You can be sure that at some point the taxpayer wants a piece of your bitcoin pie. Whether it’s in the form of a Capital Gains Tax or the increase in the value of bitcoin. It should be noted that if you are taxed at Capital Gains on your bitcoin then it may be possible to claim tax on any capital Gains. A good accountant can advise you here.

Whatever form of capital gains you invest in it should always be remembered that if there is an opportunity for capital gains there is also a possibility of capital loss. Investing in cryptocurrency is risky so, it’s not stressful enough that the money you invest in bitcoin should be money you can lose.