Bitcoin is often referred to as a defensive asset. However, it is difficult to be sure that savings in cryptocurrency will retain their value. The price of BTC can more than double dramatically at any moment. For example, on March 12-13, it fell over 50% within a day, to a low of $3,800.
In addition to this, bitcoin can sharply rise in price or fall in price due to any news, even indirectly related to the coin itself. This happened in November last year.
Chinese President Xi Jinping said that blockchain (not bitcoin or cryptocurrency) is one of the key technologies for the development of the country. Within a day after that, the price of the main digital coin increased from $7,000 to $10,000.
2. High withdrawal fees
One of the advantages of bitcoin is the ability to transfer large amounts for a low fee. But this applies to transactions within the system.
If an investor wants to cash out, he will have to pay a commission for the withdrawal of assets to counterparties, for example, exchanges or exchangers. On this, you can lose from 2-5% or more of the transaction amount.
The more capital that the user is going to exchange for traditional money, the higher the probability that the exchanger simply does not have such volumes of funds.
Some analysts predict a multiple increase in the price of bitcoin in the future and suggest investing in it with long-term goals.
However, such a contribution may be illegal in the future, for example, if the government prohibits the ownership of cryptocurrency and transactions with it. In this case, the user runs the risk of losing all or part of his capital on the fact that cashing out digital coins will become much more expensive and more difficult.
Bitcoin is used not only for investment or cheap transfers. Users can also use cryptocurrencies to acquire prohibited substances or launder criminal proceeds. But even if an ordinary user does not use cryptocurrencies for criminal purposes, he can still suffer.
For example, if he buys “dirty cryptocurrency” from an exchanger or “from hands” from another person. In this case, the funds may be frozen. But this can be avoided by checking transactions using special services.
5. Difficult to use system
Bitcoin is a decentralized system that does not have a single control link. Because of this, BTC holders are not protected from mistakes.
For example, if an investor forgets the password from his digital wallet or loses access to it, it will not be possible to return the cryptocurrency, it is simply impossible.
The irretrievable loss of funds will also occur if the user sends them to an erroneous address: it is impossible to cancel a transaction in the blockchain. In this case, one can only hope that the recipient will return them on his own.
One of the drivers of the growth in the value of bitcoin is its recognition in society: the greater the demand, the greater the price.
However, the spread of digital money is slowing down due to the controversial reputation. It is not uncommon for BTC and other cryptocurrencies to be used in criminal schemes, such as money laundering, the purchase of illegal substances, or pyramid schemes. This causes negative associations and forces the government to take prohibitive measures.
7. Lack of protection
We already wrote that decentralization is a plus. But there is also a minus, because, in this regard, bitcoin and other coins do not have clear legislative regulation.
This limits the possibility of users in the matter of judicial protection, for example, if they have suffered at the hands of fraudsters.
Now there is no exact understanding of how the value of digital assets is determined, their legal status is missing. Also, there are no instructions on how law enforcement agencies can track the stolen cryptocurrency, withdraw it, etc.
Cryptocurrency is a digital currency that has no physical expression. Cryptocurrency can be mined using powerful computing technology – this process is called mining.
Digital money can be used in different ways: transfer from account to account, use it as a means of payment or store savings.
Cryptocurrency has many differences from the usual money, but the main thing is that digital money, in principle, does without banks.
Cryptocurrency works on blockchain technology. A blockchain is a “chain of blocks” of transactions on a specific ledger.
The records of each block of this chain are encrypted, and the slightest change in one block changes the entire chain. This data is stored on millions of computers at the same time, so it is almost impossible to replace block entries on all of these computers.
All transactions are available to everyone in unencrypted form, that is, it is clear who sent to whom and how much. But the wallet owners themselves and their contents cannot be identified.
Unless the owners themselves want it. Blockchain technology makes the use of cryptocurrencies secure and anonymous. It is also decentralized, because it is managed by the users themselves.