The Risks of BTC
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The Risks of BTC that investors need to be aware of
Risk one-The volatility of BTC
Everyone knows how volatile BTC is and those who invest in this will see the value of this cryptocurrency fluctuate quite dramatically. Unless you can cope with the rises and falls of BTC then investing in BTC is not for you. There is little to be gained if the loss of your capital is going to cause you to lose sleep. I cannot stress enough the importance of using your discretionary spending money to play the cryptocurrency market.
What is discretionary spending?
It is money which is spent on travel, eating out, entertainment, hobbies and sports.
You would never spend the rent money or money which has been set aside for your retirement on entertainment such as a day out at the races so you should not use that money for playing the cryptocurrency market either.
Risk two-Hacking
A company called “Cryptopia ” which was an online BTC trading platform held funds invested in BTC. It was hacked into and all those with BTC invested with cryptopia lost their money. There were some sad stories concerning the large amount of money lost by some individuals.
It has to be repeated that you should never play cryptocurrency money with funds you cannot afford to lose or to place too many eggs in the one basket as many of these investors appear to have done.
The other thing I have to add is that the actual amount of money lost by cryptopia investors is likely to be grossly inflated due to the rising price of BTC. If someone invested $1,000 in BTC and this rose to $10,000 in a few years only for them to lose the lot. It will go on record that this person has lost 10k when in actual fact, it was just 1k they lost.
Risk three-Lost passwords
An Australian man is locked out of his BTC wallet because he cannot even remember his password. The website where he has his BTC will lock him out of his wallet permanently if he has made ten failed login attempts. He has made eight. He has over 300k in his BTC wallet.
The lesson here is to write down your password and keep it locked away in a safe place.
The other piece of advice is to diversify your portfolio so that if something goes horribly wrong you will not lose too much in one hit.
Risk four-Government controls
Governments have the ability to ban crypto trading; China has done just that. Several agencies in China have joined forces to ban what they describe as “illegal” cryptocurrency activity. This is not to say other countries will follow suit but it just illustrates a point that governments do have the power to do this.
Risk five-Taxation
Two things in life are certain, death and taxes. You can be sure that at some point the taxman will want a piece of your BTC pie. Whether it be in the form of a Capital Gains Tax or the increased value of BTC. It should be remembered that if you are being taxed on the Capital Gains of your BTC then it may be possible to claim tax back on any capital losses. A good accountant will be able to advise you here.
Whatever form of capital gains you are investing in it should always be remembered that when there is the opportunity for capital gains there is also the possibility of capital loss. Investing in cryptocurrency is risky therefore, it cannot be stressed enough that the money you invest in BTC must be money you can afford to lose.
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