If you’re reading this article it means you have read about the rapid rise of Bitcoins. But as IT experts, we want to educate our readers on the risks involved with the world’s largest cryptocurrency.
1. High Volatility
The price of Bitcoin has a high volatility. Typical 30-day volatility is around 40 percent and a 90-day volatility is close to 70 percent. These swings in value are hard to stomach for many people. Although the cryptocurrency has an uptrend, it’s still risky.
So, what exactly does this mean? good currencies have low volatility and owning unstable currency or accepting it as a form of payment can be scene as to risky, for the average individual.
2. Government Regulations
If the government decides to declare owning Bitcoin illegal, you may find yourself in trouble as the government stance on cryptocurrencies is not clear. Bitcoin is tax free, putting it in direct competition with government issued and regulated currencies. Any regulation of Bitcoin by a third party, can quickly make this currency less attractive.
Competitive cryptocurrencies could send Bitcoin into history. Offering faster transactions, complete anonymity, storage space and other improvements could lead to lower market share for Bitcoin. If we consider the high quality of emerging cryptocurrencies, this scenario seems pretty plausible.
4. Security of services/ products
In order to use Bitcoin, you need wallets, exchanges, payment processors, etc. Not all of these services have perfect security. And if your funds are stolen, all you can do is to hope your service provider will be kind enough to give you a refund.
It only takes the reference of the Mt Gox scandal- where thousands of users were left without their funds after a big hacking attack robbing more than $450 million.
5. No Safety Mechanisms
Bitcoin has no safety mechanisms. Typically, you’ll get a private key or a combination of words which protect your wallet. If you lose your key, your funds will be gone with it. There’s no support to contact, no way to change the password, and no way you could verify your identity to get your account back. When it’s gone – it’s gone, there’s nothing anyone can do.
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