Bitcoin is the only cryptocurrency that is known to provide massive returns to its users. In the past few years, bitcoin’s price reached the sky, and it has become the attraction of investors and traders. Most people are swayed by unrealistic returns of bitcoin investment and forget about negative factors and, most importantly, the volatility of the bitcoin market. Let us learn the reasons why one must avoid investing in cryptocurrencies like bitcoin. If you still want to trade bitcoin, download trading software that is genuine and reliable.
Speculative growth
Like if investors buy stocks of a renowned company. The growth or returns on your investments are directly proportional to the growth, expansion, earnings, and turnover of your company. It is similar in the case of investment in currencies or cryptocurrencies. Behind all investment products, there is a particular mechanism on which the growth or return on your money depends. In bitcoin, the value of bitcoin completely depends on the supply and demand of it in the financial market. Speculation, demand, and supply are the major factors that influence the price of Bitcoin.
The supply of bitcoin is limited as there are only 21 million bitcoins that could ever exist and is a major factor that drives the price of bitcoin. Along with supply and demand, many other factors affect the price of bitcoin. Volatility is the major factor that scares people to invest or trade bitcoin.
If crypto exchange got hacked or scammed, you’d lose all your funds.
Like mutual funds are regulated by central authorities and RBI regulates the banks, there is no central authority that controls or governs Bitcoin. Bitcoin exchanges are marketplaces online that allow users to buy or sell bitcoins using fiat currencies. Not all people are aware of genuine bitcoin exchanges, and due to bitcoin being a trend, there have been many fake exchanges that have been developed.
By mistake, if you make investments in a fake bitcoin exchange, you will lose all your money. No individual or central authority can help you in recovering your money. Also, each exchange has different average prices of Bitcoin and other cryptocurrencies. It would help if you learned about the average price of bitcoin at times of buying and selling bitcoin.
The best way to find out whether a crypto exchange is legal and genuine or not, you must contact the exchange and learn whether they ask for personal details or not and require user verification. A genuine crypto exchange will complete all the KYC and AML norms, proving the authenticity of the crypto exchange.
Allowance or payment issues
Even after more than a decade of Bitcoin, it is not largely accepted by people or merchants across the world. People worldwide are using bitcoin as a store of value and not as a medium of exchange. While some of the merchants have started accepting Bitcoin payments and MasterCard, PayPal, and other mediums, bitcoin has entered the mainstream. Not all countries regulate bitcoin as a legal tender, and Reserve Bank warns the citizens of India to invest or trade bitcoin at their own risk.
The allowance of Bitcoin cannot be implemented realistically because of time-taking transactions and volatile markets. Even to complete transactions, the bitcoin users have to wait hours to get the transaction verified, restricting people from using or accepting it as a medium of exchange.
Ponzi Schemes
The crypto enthusiasts seek opportunities to invest in bitcoin, which may make them fall into the trap of platforms or services or some Ponzi schemes that promise them fixed and guaranteed returns. In the case of bitcoin, there is nothing like fixed returns because its market is highly volatile. The Bitcoin mining concept was the first concept introduced by Satoshi Nakamoto and promised that it would provide fixed returns in the form of block rewards.
Undoubtedly, mining is a great concept and contributes a lot to the bitcoin community but not a profitable concept in today’s time. Earlier, there were not many requirements for the mining process, but now the process has become quite expensive and complex. Bitcoin is a completely decentralized and anonymous currency that even allows people to misuse it using bad elements. This may cause risk to traders and investors, and it is recommended to bitcoin users choose a reliable wallet to store their funds and use security measures to avoid risks.