The rapid development of Bitcoin has attracted the attention of speculators. In 2019-2020, 300% growth slowly reached a record high (68,000) in November.
According to James Frankenfield, this is exactly why many view Bitcoin as an investment medium and view it as a medium of exchange. However, due to the lack of guaranteed value and its digital nature, the use of Bitcoin is associated with various risks. We have dealt with these risks in a more general way, and in this blog we will try to define more specifically the various dangers in order to be able to use this platform more peacefully.
The idea of a digital currency is much newer than other similar money coups, so it is not surprising that decentralized financial processes have attracted the attention of institutions such as FINRA, SEC & CFPB (among many others).
One of the biggest disadvantages of Bitcoin is its advantages: lots of trades are a substitute for high risk and at the same time a high reward. You will not easily find such contrast elsewhere.
Bitcoin was created to compete with government agencies in this area, conducting separate transactions that sometimes resulted in money laundering, tax evasion, or other illegal activities. It is therefore not surprising that countries like China are trying to regulate or ban it.
For example, in 2015, the New York Department of Finance introduced regulations for transactions in excess of $ 10,000, which provide for the storage of the identity data of all participants.
Bitcoin was mainly seen as a means of temporary shorting, although in view of Zuckerbergs future plans, cryptocurrency seems to be more promising.
Most Bitcoin users do not earn coins by mining; They sell and buy these and other coins through various crypto-platforms
Because crypto-transactions are digital, hackers and viruses are allowed to commit various types of fraud. If someone interested in these activities has access to your computer hard drive, they can steal your personal encryption code and transfer the coins to another account. This can be avoided if your device (which has coins) is not connected to the Internet.
Hackers are also trying to attack Bitcoin exchange platforms themselves. For example, in 2014 in Japan Mt. Gox was deactivated because millions of coins were stolen.
This is a particularly big risk given that all transactions are permanent. As in the case of cash, if the money is not returned to you directly you do not have the opportunity to contact a legal entity or the police about it. Therefore, the choice of the platform itself is of great importance.
Danger of insurance
Some investments are insured with SIPC, while banks are usually FDIC insured to some degree (with jurisdiction). Additionally, in the case of banks, bail outs are frequent so you are quite safe in this regard, especially in some countries.
Bitcoin has no similar federal or state program privileges. You are responsible for your own insurance. It is important to be mentally prepared to face similar problems. Most Bitcoin users do not need strict regulations, which in itself entails more risks, less security, benefits, insurance, convenience.
Risk of fraud
Although Bitcoin uses personally encrypted code to verify the identity of the owner and to record transactions, fraudsters and scammers still manage to sell counterfeit coins. There have been both Ponzi scheme situations as well as market manipulation, etc.
Always check with the company that offers Coins. Can you identify them, do they have long-term plans, do they allow you to sell, how volatile are their prices, do they have a fundamental understanding of this space, and so on?
In 2013, Bitcoin fell by 61% in one day, and in 2014 by 80%. Such falls may be encountered in the future, no one can rule it out, but due to long-term investment, the frequency should be reduced.
The danger of "Bubble" is always felt in this area, but now, given Metas plans, perhaps the most promising and at the same time promising future lies in cryptocurrency.
Developments can be interesting and profitable for many. And for us - its important for our customers to get the information they need to make better decisions.