Investment firms and corporations across the globe use cryptocurrencies. Bitcoin is conducive to international trade, but investors need to understand the risks associated with bitcoin trading.
Unlike stocks, bonds, and real estate, bitcoin investors rely on the value of bitcoin increasing relative to the value of the United States dollar. Bitcoin has not existed for as long as stocks, and investors need to understand that data analysts do not possess enough information regarding bitcoin to accurately predict its behavior as a cryptocurrency.
Investors can lose money from bitcoin, but they can also educate themselves about the inherent risks associated with bitcoin while improving their investment strategies.
High Volatility
Bitcoin and cryptocurrencies are highly volatile. Therefore, investors should not purchase bitcoin if they cannot afford to lose their entire investment. Beginning investors should only invest in bitcoin if they are financially stable enough to lose money. High volatility means that investors cannot rely on the strategies they use when buying blue-chip stocks.
Fraudulent Transactions
New bitcoin investors can also lose money if they invest in fraudulent transactions. Scam artists and criminals offer coins with no inherent value to the purchaser to induce them to engage in cryptocurrency scams. Suspicious behavior and unusual incentives are red flags signaling that investors need to perform more intensive research before trading.
Fees
Fees associated with selling and trading bitcoin often leave investors with no return on investment. Every investor should read all paragraphs in the contracts associated with their bitcoin transactions. Additional fees and costs can accumulate to the point that investors will lose money and time.
Hasty Investment
Investors can also lose money from bitcoin if they rush into the market out of fear of being left behind by other communities of investors. Each investor in bitcoin should develop an investment strategy with clear goals before making their initial purchases. Seasoned investors with sustainable portfolios should analyze the bitcoin market before choosing an investment strategy.
Cybercriminals and Theft
Investors must also protect their usernames, log-in details, and passwords associated with hot wallets. Criminals will send fraudulent emails to investors requesting personal login information. After obtaining this information, the criminals will withdraw all the coins in the wallet. Prospective investors should be prepared to secure their account information against potential bitcoin scams.
Fake Social Media Accounts
Criminals create fraudulent social media accounts to acquire usernames and login details associated with wallets and bitcoin accounts. Perpetrators may use images and names of celebrities when creating fraudulent accounts. Oftentimes the criminals will request coins or funds from unsuspecting investors. Every individual interested in bitcoin should be wary of criminals claiming to be celebrities or funding sources.
Investors Don’t Have to Lose Money From Bitcoin
If Investors educate themselves about the bitcoin market while protecting themselves from online criminals, they will have a good start toward making a profit with bitcoin. However, if investors are not aware of the pitfalls listed above then they will likely lose their initial investment.
Cryptocurrencies are developing rapidly, and investors will have to focus on monitoring the market reasonably and consistently. Avoiding bitcoin scams should be a major priority for investors.
