The value of cryptocurrency is growing day by day within a decade. No matter how volatile this digital currency market is to people, they are not stopping investing in Bitcoin or other cryptocurrencies. However, you should always think twice before investing in Bitcoin in 2021. And the reasons are given as follows.
1. You Might Have a Little Understanding about Digital Currencies
Usually, beginners in the Bitcoin industry have a little knowledge about the entire procedure. From the investment to the transaction process and storage process, everything is not easygoing for the first-timers.
Research has shown that only 55% of American investors know what cryptocurrency is all about. And the rest of the investors have no clue what it is all about. And experts say, you shouldn’t invest or start a business deal with which you have no idea.
2. Crypto Market is Less Straight Forward
Dealing with the crypto market is somewhat less straightforward for users or investors. Holding, storing, or mining Bitcoin or cryptocurrency is getting out of the natural process for an extended period. It has become challenging, competitive, and hard to predict. People invest hours of hours in the digital currency market, but they are not getting any significant returns.
3. Most People Think Cryptocurrency is a Short-term Investment
When it comes to investing money, people always find cryptocurrency or Bitcoin as a short-term investment. And it leads them to spend a little, which doesn’t cover them up till retirement.
People want a quick return, which is why the market gets volatile for instant getting in and out. In a word, investors mostly don’t prefer investing in Bitcoin for a more extended period or as their retirement plans.
4. Less Possibility of Risk Diversification
When people invest in digital currencies and confront with a volatile market, they tend to diversify assets. The crypto market is ruled mainly by Bitcoin alone. Most investors prefer investing in Bitcoin, and they cannot convert fiat. Risk diversification isn’t widespread yet in the crypto market as investors want it to.
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5. Security Issues Remain a Concern
It is an open secret about the crypto market scams and fraudulence activities now. Investors invest in cryptocurrency despite the matter of their security issues. A study shows that about $1.1 billion digital currency was hacked in 2018. And the hacking number is not decreasing anyway.
Hacking and fraudulence in the digital currency market are growing because the transaction process is a lot easier to do rather than the banking process. So, before investing in Bitcoin in 2021, make sure you are ready for this, just in case.
6. The Higher Authority Can’t Even Help You
If you experience fraudulence or hacking with your account or credit in digital currency investment, remember that the Securities and Exchange Commission (SEC) cannot even help you with that. They have already declared clearly that their hands are tied.
They have told that decentralized trading and exchanges can often occur and exist outside the restriction of the US borders. Therefore, digital currency transactions are slightly anonymous, that becomes impossible to recover.
7. Market Control is Widespread
Crypto market exchanges have several levels of liquidity, and it determines the price of the digital currencies. There is no centralized or fixed entity to control the entire crypto industry.
Being a decentralized type, cryptocurrency investors cannot rule the market as they want. The price increases or decreases for the demand and supply, and the entire procedure differ between exchanges.
For example, if an investor invests a lot of Bitcoin on a small exchange, other investors will buy the same crypto following the track, and it will increase the price.
8. Higher Tax Rates are a Nightmare
Cryptocurrency taxes are undoubtedly a pain in your teeth. You cannot avoid it. It was a long time ago when investors could avoid taxation issues in cryptocurrency, but those days are long gone. Crypto investors are now reported with every sale and transaction. It also includes showing when you purchase services or goods.
Except that, there is no guarantee to get a fixed exchange after investing the money. But you have to pay for the taxes.
9. Regulation Can Bring both Favor and Unfavor
Volatility and higher tax issues are two of the most common risk factors of cryptocurrency. In that case, supervision is highly required here. But unfortunately, regulation in digital currency can play the role of a double-edged sword.
At first, the tight regulations will reduce the possibilities of high fraudulence alert or hacking activity in the digital currency market. Secondly, it will reduce volatility and improve liquidity.
But the things will happen then are regulations will remove the anonymous procedure in crypto. Therefore, it will be a fear within the crypto industry. And thus, it may end up leading to massive volatility in the future.
In a word, investing in Bitcoin in 2021 could be a real challenge for you despite all the good returns and profits. You can make money through this, but it’s undoubtedly an unpredictable option.
What you can do is knowing about the Bitcoin industry more than any investors could ever know. The more knowledgeable you become, the fewer possibilities are here to get fraudulence alert.
Make sure you have enough money to cover yourself up after an unexpected loss or hack (if it occurs). You have to be prepared from the very beginning to avoid any future complications after investing in Bitcoin.
Plus, the market condition these days are not very stable due to the Pandemic situation. So, 2021 can be a challenging year to invest your money in this volatile market.