Since Bitcoin hit the market in 2009, it hasn’t looked back. Even if you’re remotely interested in cryptocurrencies, you must have heard about Bitcoin. It is currently the top, most-popular cryptocurrency. People who invested early in Bitcoin have earned massive profits in a significantly lesser timeframe. Whether you evaluate this cryptocurrency based on market capitalization, popularity, growth, demand, etc., it will consistently rank at the top of the list. But does it indicate your investment is 100% safe? Should you buy Bitcoin in India based on only the positives? Well, certainly not.
Investment in Bitcoin doesn’t guarantee a positive return, especially after the recent crash. Similar to other cryptocurrencies, investment in Bitcoin is also risky and highly volatile. If you were contemplating adding Bitcoin to your portfolio, make sure you’re aware of the following risks associated with Bitcoin investment.
- It Can Lose Relevance in the Coming Decade
If you keep a watch on all the latest developments in the tech and cryptocurrency space, you would know that Mark Zuckerburg is going all out with his Metaverse initiative. He believes everyone will be on Metaverse in 8 to 10 years. While investors see considerable opportunities in the NFT and virtual real estate, Bitcoin owners don’t see themselves in a very promising position.
Since Ethereum powers NFT, Cardano executes smart contracts using Proof-of-Stake (PoS); where is the need for Bitcoin in the whole scenario? Moreover, with companies like Walmart, Meta, and more developing their own stablecoins to use as a store of value, Bitcoin’s position seems endangered. Some predict that by the time a significant population starts using the Metaverse, Bitcoin can become irrelevant or a thing of the past since it has no place in the Metaverse.
- Bitcoin Scams Can Strip You Off Your Investments
According to a report published by CNBC, hackers stole approximately $14 billion worth of cryptocurrency in 2021 alone. It is a stark increase from the 2020 levels. Unfortunately, these figures aren’t on the lower end this year. It is believed that the biggest crypto scam took away 650,000 Bitcoins worth millions from investors in 2014, and they haven’t received it back since.
Since hackers and scammers keep coming up with sophisticated phishing scams and hacking attempts, your current Bitcoin investment isn’t safe either. Just one hacking event can take away all your investment. If you want to reduce its chances, you can always rely on some popular cold storage wallets.
- Bitcoin Doesn’t Have an Asymmetric Risk Profile
Whether you’re looking for ways on how to buy Dogecoin or Bitcoin, you have to pay equal emphasis on its risk profile. Most investors prefer investing in cryptocurrency with an asymmetric risk profile, i.e., a profile wherein the potential rewards or profits outweigh the risk. The problem with Bitcoin is its risk is incalculable. While other investment options like stocks, real estate, etc., give too many data points to help calculate the risk, it isn’t the case with Bitcoin.
It can be said that Bitcoin is upheld majorly due to the huge demand. But can you accurately determine what will be its demand at a particular time in the future? Well, no one can. It is where the uncertainty creeps in. Bitcoin remains the one with the highest risk and volatility compared to other investment options.
- Bad Press Can Cause Further Dips
Most investors know that online chatters influence cryptocurrency’s prices. The more positive news distributed for a particular cryptocurrency, the higher its price will be. Unfortunately, Bitcoin has been subjected to much negative press over the past months, and we can witness the same even today.
Some experts have even called Bitcoin a sham. Whenever influential personalities and popular media outlets shared negative views of Bitcoin, its price dropped. If the trend continues in the future, you can experience more dips leading to losses.
- Possibility of Regulation Imposition Can Negatively Affect Bitcoin
What made Bitcoin so famous was its concept of decentralization. Currently, no government worldwide controls or influences its prices. It all depends on the market. But seeing the growing influence of cryptocurrencies, governments are considering launching definite laws to regulations to impose control over the sector.
India, China, and Russia have tried imposing regulations and even bans in the past years, but those steps weren’t 100% successful. But governments are not considering creating a framework for the entire sector. If that happens, Bitcoin may lose most of its value overnight.
Investment with Caution is the Best Way Forward
You can only evaluate whether a cryptocurrency will give you potential profits in the future if you’re aware of both the positives and negatives. Since investors don’t talk much about the risks associated with Bitcoin investment, many beginners lose money. But now that you’re aware of all the risks, make your investment decision wisely.
