Are you waiting to jump on the bitcoin bandwagon?
It’s risky business, to say the least! Central banks of various countries like Germany, France, Singapore, South Korea, Russia and Australia have warned citizens of the potential risks associated with investing in digital currencies.
The bitcoin has rallied from under USD 1,000 at the beginning of 2017 to over USD 20,000 by the beginning of 2018. That’s a massive surge of more than 1,000 percent. At this rate, the bitcoin seems unstoppable. But experts warn that this bubble could burst, and those looking to invest in bitcoin and other cryptocurrencies should do so at their own risk.
So if you’re considering investing in bitcoin, here are four reasons you should rethink your decision:
Not backed by a real asset
Experts question the intrinsic value of bitcoin and other virtual currencies, reasoning that there is no real asset to back them up. And without a tangible asset in place, the bitcoin trade is governed by sheer demand.
Regulators can shut it down
Changes in the regulatory environment of a country can decide the fate of cryptocurrencies. Central banks and governments may choose to promote, discourage or even ban trade in such currencies.
Among the countries that have implemented a ban on the use of bitcoin and other digital countries are Iceland, Vietnam, Bangladesh, Ecuador, Bolivia, Nepal and Morocco. Most recently, South Korea has also proposed a ban on all cryptocurrency exchange trading.
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Cyber-attacks pose a risk
Digital hacks, online scams and thefts, all pose a considerable risk when dealing with virtual currencies. And a large-scale hack has the potential to destabilize the market.
There have been some high profile hacks in the past, notably the hacking of Mt. Gox, a major bitcoin exchange in 2014 and the subsequent hacking of Bitfinex, another bitcoin exchange in 2016.
The bubble could burst, anytime
Digital currencies offer a convenient and efficient mode of electronic payment, but unfortunately, the speculative investment in such currencies has got nothing to do with that.
The bitcoin’s meteoric rise has drawn in speculative investors and that’s where things get risky. Considering how steep the surge in the price of bitcoin has been, it looks like the risk of the bubble bursting is starting to outweigh its merits.