Bitcoin risks that investors should be aware of
The only risk is bitcoin volatility
Everyone knows how unstable bitcoin is, and those who invest in it will see that the value of this cryptocurrency fluctuates quite sharply. If you can’t handle the rise and fall of bitcoin, then investing in bitcoin is not for you. There is little you can gain if losing your capital will cause you to lose sleep. I can’t stress the importance of using your discretionary spending money to play in the cryptocurrency market.
What are discretionary costs?
This is money spent on travel, food, entertainment, hobbies and sports.
You will never spend money on rent or money that has been set aside for your retirement on entertainment such as a day of racing, so you should also not use that money to play in the cryptocurrency market.
Risk two – Hacking
A company called Cryptopia, which was a platform for online bitcoin trading, contained funds invested in bitcoin. It was hacked, and everyone who had bitcoin invested in cryptocurrency lost their money. There have been some sad stories about the large amount of money lost by some individuals.
Again, you should never play cryptocurrency on funds you can’t afford to lose, or put too many eggs in one basket, as many of these investors seem to have done.
Another thing I should add is that the actual amount of money lost by crypto investors is likely to be greatly inflated due to rising bitcoin prices. If someone invested $ 1,000 in bitcoin, and in a few years it grew to $ 10,000, just to make him lose the lot. It will be recorded that this man lost 10 thousand, but in fact he lost only 1 thousand.
Risk Three-Lost Passwords
The Australian has a blocked bitcoin wallet because he can’t even remember his password. The website where he has bitcoin will forever lock him out of his wallet if he makes ten unsuccessful attempts to log in. He made eight. He has more than 300,000 bitcoin wallets.
The lesson 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 wrong, you don’t lose too much in one go.
Risk four government controls
Governments have the ability to ban cryptocurrencies; China has done just that. Several agencies in China have joined forces to ban what they describe as “illegal” cryptocurrency activities. This does not mean that other countries will follow suit, but it simply illustrates that governments do have the right to do so.
Risk five – taxation
Two things in life are certain, death and taxes. You can be sure that at some point the tax will want a piece of your bitcoin pie. Be it in the form of a capital gains tax or an increase in the value of bitcoin. Keep in mind that if you are subject to capital gains tax on your bitcoin, you will be able to claim a tax refund on any capital losses. Here you will be able to advise a good accountant.
Regardless of the form of capital growth in which you invest, you must always remember that if there is a possibility of capital growth, there is a possibility of capital loss. Investing in cryptocurrency is risky, so it should not be emphasized that the money you invest in bitcoin should be money that you can afford to lose.