The risks of Bitcoin that investors need to know
A risk — the volatility of Bitcoin
Everyone knows how volatile bitcoin is, and those who invest in it will see a significant change in the value of this cryptocurrency. Unless you have to deal with the ups and downs of Bitcoin, investing in bitcoin is not for you. There is little profit if you lose your capital if it causes you to lose sleep. I can’t stress enough the importance of using your discretionary spending money to play in the cryptocurrency market.
What is discretionary spending?
It is money spent on travel, food, entertainment, hobbies and sports.
You should never spend money on rent or retirement money for entertainment, such as spending a day at races, so you should not use that money to play in the cryptocurrency market.
A company called Cryptopia, an online bitcoin trading platform, had funds invested in Bitcoin. They hacked and lost all their bitcoin-invested cryptocurrencies. There were some sad stories about the large amount of money some lost. individuals.
It should be noted that you should never play cryptocurrency with funds you can’t lose or put too many eggs in one basket as many of these investors seem to have done.
Another thing I need to add is that the actual amount of money lost by crypto investors is likely to be dramatically inflated as a result of the rise in the price of bitcoin. If someone had invested $ 1,000 in bitcoin and this would have gone up to $ 10,000 in just a few years, they would have lost a lot. This person will be recorded as losing 10k when in fact 1k is lost.
Risk three-lost passwords
An Australian man stays out of his bitcoin wallet because he can’t remember his password. The website with its bitcoin will block it out of its wallet forever if it failed ten login attempts. He has done eight. He has more than 300k in his bitcoin wallet.
The lesson here is to enter your password and store it in a safe place.
Another tip is to diversify your wallet so that if something goes wrong you don’t lose too much in one fell swoop.
Risk four-Government controls
Governments have the power to ban the trading of cryptocurrencies; That’s what China has done. Several Chinese agencies have joined forces to ban cryptocurrency activity that they describe as “illegal”. This does not mean that other countries will follow suit, but it does show a point where governments have the power to do so.
Two things are certain in life, death and taxes. Be sure that at some point the taxpayer will want a piece of your bitcoin cake. Whether in the form of a Capital Gains Tax or an increase in the value of bitcoin. It is important to remember that if you are taxing your bitcoin’s capital gains, you may be liable to return capital gains taxes. A good accountant will advise you here.
Whatever capital gains you are investing in, it should be noted that there is also a loss of capital when there is a chance of capital gains. Investing in cryptocurrencies is risky, so it’s not enough to stress that there is a lot of money you can afford to lose the money you invest in bitcoin.