I would be lying if I said I don’t worry about the risks of investing in Bitcoin. Even though I am willing to lose the money I invested in Bitcoin (BTC), I still have sleepless nights thinking about my Bitcoin and my other cryptocurrency investment.
So, this post is a collection of the risks of investing in Bitcoin. And these risks are based on my personal experience of owning Bitcoin since 2017.
Aside from that, I will be sharing how I dealt with these risks.
Table of Contents
- 5 risks of investing in Bitcoin
- Final thoughts
[Disclaimer: I am not a certified financial planner. My sharing is purely based on my own research and personal experience. To make the best financial decision that suits your own needs, you must conduct your own research and seek the advice of a certified financial planner if necessary]
5 risks of investing in Bitcoin
Below are my 5 major risks of investing in Bitcoin.
Some of these risks really bother me. If not managed properly, it does affect the quality of life of those around me, including my loved ones.
I shared further below:
1. Bitcoin price is extremely volatile
Can you see from the above Bitcoin price chart?
- In mid-March 2020, the Bitcoin price plummet dramatically from RM33,733 to about RM20,000 per BTC the next day.
- Then Bitcoin price rose to about RM25,000 per BTC within 8 hours.
Bitcoin’s volatility is among the major risks of investing in Bitcoin.
That is why I only put in money I am willing to lose. With the hope for a minimal impact when Bitcoin prices plunge.
Still, I feel impatiently anxious when the Bitcoin price spiked crazily or starts collapsing.
Due to the extremely volatile Bitcoin price, it is common to miss the best buying or selling opportunities.
Therefore, I tried my very best to minimize the risk from Bitcoin volatility by:
- setting up Bitcoin price alerts in my Luno Malaysia account so that I am well aware when Bitcoin prices plummet or soar.
- getting ready to make a profit or own a little bit more of Bitcoin when Bitcoin starts rallying, based on my Bitcoin investment strategy.
When I don’t have the patience to play the waiting game with Bitcoin, I buy Bitcoin in a very small fraction. Such as, instead of buying RM1,000 in one go, I would separate my purchase into four transactions of RM250 each.
2. The risks of not knowing what is ahead
Although Bitcoin is about 14 years old now, it is still considered a new thing. And it is still developing.
Investing in something new can be truly rewarding. Such as owning Microsoft stock bought in the 1990s. Or, it can be a real nightmare when the new thing becomes nothing. Like many of the altcoins.
As for Bitcoin, these are the risks of not knowing what is ahead that sometimes bother me:
1. New regulations
One of the uniqueness of Bitcoin is it is decentralized. This means Bitcoin is not controlled by a person or a group or an entity.
But, we all still live in a world controlled by others such as rules and regulations set up by the authority. Anytime, the authority can establish or change the regulations related to Bitcoin and/or its technology. Such as not allowing Bitcoin trading or transaction.
When this happened, I might have had difficulties converting my Bitcoin into hard cash.
But in a positive way, some of the rules and regulations can be a good thing to protect Bitcoin holders. Such as to minimize fraud when trading or transacting Bitcoin.
2. A new altcoin with better value
From time to time, new coins emerge. Some of these new coins are trying to beat Bitcoin in terms of its transaction speeds, transaction cost, or other value.
As of the time of writing, Bitcoin is still unbeaten.
What if one day, a new coin similar to Bitcoin’s value but much more efficient emerges?
That is why I am looking into owning cryptocurrency other than Bitcoin. And also, to be aware of things going on in the crypto space.
3. The risk of bitcoin becoming worthless
I was surprised when I first read that Bitcoin can become worthless.
But later I realized I am rather grateful for knowing this. True enough. Similar to all other currencies, Bitcoin can fail as well.
All I can do is just invest the amount I am willing to lose. If Bitcoin becomes worthless and I am too late to cash out, I shall treat it as a failed investment.
After all, other than playing my part by adopting and sharing about Bitcoin, there’s nothing else I can do about Bitcoin’s future.
4. Losing Bitcoin to theft
Another risk of investing in Bitcoin is losing Bitcoin to theft, such as:
- through hackers who steal private keys from just anywhere (Bitcoin exchange, Bitcoin wallet).
- through theft acted as buyers on Bitcoin exchanges.
- by accessing Bitcoin owners’ digital devices.
- through Ponzi schemes claiming to use Bitcoin as an investment.
As Bitcoin’s value rise, so does the risk of losing it to theft. And as a Bitcoin owner, I am well aware of the importance of safeguarding my Bitcoin investment.
5. Losing access to my bitcoin wallet
Unlike other types of investment where I can have a hard copy proving the ownership, Bitcoin ownership is digital. Everything is done digitally, via emails, apps, software wallets and hardware wallets.
This means if I fail to gain access to my Bitcoin wallets, I am losing my Bitcoin.
So, I need to know how to protect my Bitcoin wallets. And at the same time to have back-ups of my Bitcoin wallets.
Owning Bitcoin can be risky. That is why I only invest the amount I am willing to part with.
Although it can’t eliminate my worries, it makes me feel better knowing that this investment is high risk and high return. And focus on the positive part of owning Bitcoin.
Featured Image by Mohamed Hassan from Pixabay
All screenshots were taken by the author