Cryptocurrencies are the future of monetary transactions. Among all the digital coins, Bitcoin is the most popular digital currency and has the highest market capitalization. Looking at the prospects of global trade where people purchase the product and services globally while paying in the digital currency is certainly an attractive proposition. Given the decentralized nature of Bitcoin, investors can make their decisions without any regulatory and federal interference, which is another big positive for Bitcoin.
Bitcoin Investment Challenges
However, investing in Bitcoin comes with its own share of issues and problems. The most prominent issue is the price volatility of Bitcoin. The valuation of Bitcoin is at the sole discretion of demand and supply, which in turn get influenced by the Crypto Whales, a term used to define persons/organizations having large quantities of Bitcoin. Now given the fact that these crypto whales in the system have a considerable influence on the price of Bitcoin, the investment in Bitcoin for small investors is not without risk.
Several reports are indicating how crypto whales wield their authority to dictate the market prices of Bitcoin, which means fair play for investors might not be a reality all the time. An estimate suggests that around 20% of crypto whales have a significant impact on the Bitcoin prices, and these influencers tweak demand and supply relation to get prices of Bitcoin move in a specific direction. According to their business interest, the modification in the supply or demand will ultimately decide whether Bitcoin will move up the price ladder or will climb down the price charts. It makes the investment in Bitcoin quite risky as there is no clear-cut pattern which can possibly accurately predict the price curve of Bitcoin.
Decentralization Issue
Another critical issue with the Bitcoin investment is its wholly decentralized nature. On the one hand, it is the strength of the digital coin while on the other; this also poses challenges for small investors. Decentralization essentially means there is no regulatory mechanism that currently regulates Bitcoin and other digital currencies. This unregulated nature of Bitcoin makes small investors vulnerable to frauds, thefts, and various kinds of cybercrimes. In case of any forgery or hacking, it is almost impossible to recover the money back as it’s tough to trace the people involved in online crimes. This absence of clearly defined rules and regulations is not a very good thing, especially for small investors.
Conclusion
In sum, despite growing in popularity and scale of adoption, Bitcoin investment comes with a specific set of challenges. One needs to be careful about these challenges, and only after due diligence, take a plunge into Bitcoin investment. It might be an excellent strategy to start with small investments in Bitcoin to learn intricacies of the investment process. It is also an excellent option to talk to experts and take advice from veterans in the crypto field to chart the investment strategy.