We know that cryptocurrency networks do not rely on any financial institutions or government authorities to handle their usual transactions or determine the value of digital currencies. Cryptocurrency has seen considerable growth in the past years, and with growth comes challenges. Before you invest in Bitcoins, you must assess everything that you are being exposed to. Here are the top 10 opposite side of investing in Bitcoin:
8. Taxation of Digital Currencies
There is an uncertainty on the tax treatment when you wish to invest in digital currency. In certain jurisdictions, Bitcoin may be considered an asset while money in the others. Investors may require specific tax advice regularly based on their home jurisdiction.
Any policies or interruptions can hugely impact the ability to convert by certain investors in the deposit/withdrawal of currency. This results in many currency conversion risks on the trading platforms.
6. Regulations Preventing/Restricting Trading of Digital Currencies
The legal status of digital currency faces a significant amount of inconsistencies among the regulators. These regulators wish to protect their bitcoins against the criminals and other terrorist organizations.
5. Loss of Confidence in Digital Currencies
Digital currency is a part of the rapidly involving industry that possesses several digital assets. This currency is used on a very small scale in the retail and e-commerce platforms. Hence, the online platforms have gained substantial trading activities from people profiting from long and short term holding of digital currencies. In most cases, cryptocurrency is not backed up by huge banks or any international organizations. So, the amount of the cryptocurrency stringently determines the value of these bitcoins in the market. A loss of confidence may sometimes cause a collapse of trading activities.
4. Related to Trading Platforms
A trading platform is quintessentially unnecessary to exchange/trade bitcoins, but these platforms allow people to convert currency into cryptocurrency. Online and digital currency trading platforms are usually unregulated and provide no or limited transparency. This results in increased fraudulent activities and security breaches.
3. Associated with Peer-to-Peer Transactions
Peer-to-peer transactions are one of how transactions using digital currency can take place on the online platform. We have seen that many markets bring counterparties together without any intermediary services without any regulation. In this case, there are many risks between the parties involved in the transaction.
When you trade platforms and access third-party service providers, you expose yourself to malicious activities. If these people gain control of consensus nodes of the bitcoin network or any similar means of alteration, then a Blockchain can be altered.
1. Loss/ Destruction of Private Key
Bitcoins are usually stored in a digital wallet and can be controlled by a public/private key. If the private key is compromised, you cannot access the bitcoins held in the wallet, which will eventually be lost. If this private key is acquired by someone else, they will have access to the bitcoins.