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Bitcoin coin dissolving into pixels as sign of the risks investing in Bitcoin

The Risks of Investing in Bitcoin (and how to manage them)

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

[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

Bitcoin price chart showing Bitcoin drastic price movement in March 2020 as an example of the risks of investing in Bitcoin.
Bitcoin Price Chart from CoinGecko

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.

Final thoughts

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.

Lastly, if you want to start investing in Bitcoin, consider registering for a Luno Malaysia account and receive RM75 in Bitcoin rewards through my Luno referral code <PAWHVW>.

Image Credits

Featured Image by Mohamed Hassan from Pixabay
All screenshots were taken by the author

4 thoughts on “The Risks of Investing in Bitcoin (and how to manage them)”

  1. Thanks for sharing your experiences on Bitcoin. I am thinking of investing bitcoin too. May I know If I invested $380 in it and if the value goes down, can I say I only risk losing only $380? Will it be a situation that the company may ask me to top up my cash if the value goes down. I want to make sure that I am comfortable to lose the amount I can afford. Thanks much. Kenneth.

    1. Hi Kenneth, Thank you for your comment.
      Firstly, there are many different ways of investing in Bitcoin. From my experience, I bought my Bitcoin from Luno and Remitano, then I store them in my crypto wallet. Let’s say Bitcoin price is now $15,000 for 1 Bitcoin. And you decided to buy $380, you will have about 0.025 unit of Bitcoin in your crypto wallet. If Bitcoin price goes down to $1500 for 1 Bitcoin, you will still have your 0.025 unit of Bitcoin in your crypto wallet. And if you decided to sell your Bitcoin, you will only receive about $38. Similarly, if the Bitcoin price goes up to $30,000 for 1 Bitcoin, and you sell the 0.025 unit of Bitcoin in your crypto wallet, you will receive about $760.
      For other different types of Bitcoin investment, please do necessary due diligence before jumping in.
      Secondly, please remember not to expose your personal details such as your mobile number on the internet without understanding the consequences. Hope the above helps.

  2. Hello – My daughter and her husband invested in bitcoin about 3 1/2
    weeks ago. On paper, it all looked great – making $20,000 after a 15% commission. But my kids have to put in about $9,000 for a $2,000 investment. Now they’ve been asked for their bank statements. They are beside themselves!! All of their savings has gone into this. Is there any way to recoup their original investment? Thank you for your time.

    1. Hi Ed,
      Apologise for the late reply.
      I am not quite sure the type of Bitcoin investment that your daughter and her husband invested in.
      Bitcoin is a unique investment with high volatility. There are possibilities to make good returns, similarly, there are risks of losing the value when Bitcoin price drops.
      Personally, I only invest the amount I am willing to lose. Also, I’ll take time to understand the details of the investment before jumping in.
      This is to avoid falling into Bitcoin scams.
      As for your kids, perhaps they can consider seeking assistance from the local authority.
      Hope this helps.

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