Risks of Bitcoin

Bitcoin Risks that investors need to know

One risk is the volatility of bitcoin

Everyone knows how volatile bitcoin is, and investors will see the value of this cryptocurrency change dramatically. If you can’t cope with the rise and fall of bitcoin, investing in bitcoin is not for you. If losing your capital causes you to lose sleep, you have very little to gain. I can’t emphasize enough the importance of using your arbitrary spending money to play in the cryptocurrency market.

What are discretionary costs?

It is money spent on travel, food, entertainment, hobbies and sports.

You will never spend your rent or retirement money on entertainment for a day in competitions, so you should not use that money to play in the cryptocurrency market.

Two-Hacking Risk

A company called Cryptopia, an online bitcoin trading platform, kept the money invested in Bitcoin, which was broken and all those who invested in bitcoin lost their money.

It should be noted that you should not play cryptocurrency with funds that you can never lose, or you will not be able to place many eggs in one basket.

Another thing I have to add is that the actual amount of money lost by cryptocurrency investors will be greatly inflated due to the rising price of bitcoin. If someone has invested $ 1,000 in bitcoin and it has risen to $ 10,000 in a few years, just to lose the lot. This person will go to the record of losing 10k, but in fact they lost only 1k.

Risk three-Lost password

An Australian man was locked out of his bitcoin wallet because he could not even remember his password. The website where he has bitcoin will permanently block his wallet if he makes ten unsuccessful login attempts. He did eight. He has more than 300,000 in his bitcoin wallet.

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

Another tip is to diversify your portfolio so that if something goes terribly wrong, you don’t lose much in one go.

Risk four-Government control

Governments have the ability to ban crypto trading; That’s exactly what China did. Several Chinese agencies have joined forces to ban “illegal” cryptocurrency activities. This does not mean that other countries will do the same, but it does show that governments have the authority to do so.

Risk Five-Tax

Two things are certain in life, death and taxes. You can be sure that one day the tax officer will ask for a piece of your bitcoin paste. Whether in the form of the Capital Gains Tax or the rising value of bitcoin. Keep in mind that if you are taxed on Bitcoin’s Capital gains, then it may be possible to claim a tax refund for any capital loss. A good accountant can advise you here.

No matter what form of capital investment you invest in, you must always remember that when there is an opportunity to earn capital, there is a possibility of capital loss. Investing in cryptocurrency is risky, so it’s not enough to emphasize that the money you invest in bitcoin should be the money you can lose.