As it is a truth with business and trading of any kind, along with profit comes risk in every trade. While the cryptocurrency market is taking the world into a frenzy, before you delve into the new hike waves, it is smart to evaluate and understand the related risks. The cryptocurrency market which recently in Nov 2021 exhibited tremendous growth with a market value of $3 trillion, had a sudden plunge of around 50% in the very next year, in 2022. Even the most valuable digital coin in the crypto market, BTC or Bitcoin, with a market cap of $600 million, dropped by 28% in 2022. Hence you can easily understand that although Bitcoin is a difefent form of investment than the earlier ones, it is still risky if you do not know about the market fluctuations properly. If you are interested in bitcoin trading Check this app to learn more about bitcoin mining.
Call of Risk
To manage the extreme inflation in riskier assets and Federal Reserve as well as many other financial institutions are planning to hike the interest rates on riskier assets, like cryptocurrency. However, looking from an eagle’s eye, which plans from a tremendous distance on its prey, cryptocurrency investment too could be highly profitable over the long term. In addition, Blockchain also uses a very complex set of mathematical problems in dealing with Bitcoin, and this can be a problem in the long run. Not everyone is accustomed to the use of Blockchain and complex mathematical calculations.
The Threat of Major Regulation
On the other hand, Overstock, Starbucks, Microsoft, and many mid-scale and small-scale companies are accepting digital currency to keep up with the pace of the new-age currency revolution. But amidst all the doubts and acceptances, a major threat is being evoked with regulations being embanked upon by many countries and governments on cryptocurrency trading. For instance, China, the second-largest economy in the world has effectively banned cryptocurrency mining and trading for all citizens of China. Whereas countries like India, with one of the largest populations of 1.4 billion, and fast-growing economies, have imposed a 30% tax on crypto transactions. However, administrative regulations are not immutable and can be effectively amended over time.
Volatility of Cryptocurrency
It’s true for every digital currency whether Bitcoins or any other altcoins. These digital currencies rise and drop in their market value depending on multiple factors. Availability, demand, transaction rate, mining, etc many factors constantly influence Bitcoin market value. The graphical representation of fluctuations in market value could be surprising and awful. For example in 2017, on December 17, Bitcoin’s value was $20,000 which within a time-lapse of 7 days, fell dramatically to $14,626 on 24th December. By November 6, 2018, one Bitcoin was worth the value of $6,461.01. Short investment for the long term are often found to be profitable, and also eliminates the risk of being slapped by market fluctuations.
Altogether, cryptocurrencies being solely dependent on digital technology remains on the edge of cyberattack threats and hacking risks. Moreover, since it’s a completely decentralized currency system, if your bitcoins are hacked and lost, there is no way to track or get them back. More often exchanges keep in the bull’s eye by hackers, and therefore according to many reports most cryptocurrency missing or losses happen from exchanges or while mining. Besides that, these cryptocurrency exchanges or wallets are accessible through a dedicated key or password, which if you forget is rarely possible to retrieve your digital coins ever. The volatility rate is comaparatively still high on a larger scale if you see the overall economic condition of the global market.
Bitcoin is still one of the most popular cryptos that you find in the market:
Bitcoin is undoubtedly still the unbeatable digital currency with the highest market valuation and demand. But despite that, there are many countries and companies which still do not consider cryptocurrency payments. However, it is indeed true that Bitcoins are making steps ahead as the new monetary exchange with companies like Starbucks, Newegg, Overstock, and Monoprix, accepting and recognizing cryptocurrency exchanges. Revolutionary announcements from international flight operators like Air Lituanica, CheapAir.com, and AirBaltic have enabled travelers to use cryptocurrency to avail of flight tickets.