Bitcoin had a solid start to 2021, hitting an all-time high of nearly $65,000 in April. But the digital coin closed out the first half of the year down about 47% from its record — and a number of looming risks could result in further pain ahead.
There are always several things going on in the cryptocurrency market at the same time. You have to be aware of what the risks entail in your investment. Here are 5 risks that bitcoin might have to face in the future.
It is one of the biggest risks that the Bitcoin market can face. The crackdown of Bitcoins in China has been one of the biggest ones that the world has seen with Bitcoin miners moving out of the country.
Extreme swings in the Bitcoin market is going to be a problem. “Limited, highly inelastic supply on single cryptos can exacerbate volatility,” says UBS. “Limited real-world use and extraordinary price volatility also indicate many buyers are seeking speculative gains.”
3. Environmental Concerns
Questions about bitcoin’s effect on the environment might be another reason why people will back away from investing in it.
4. Stablecoin Scrutiny
So-called stablecoins, whose prices are meant to be pegged to real-world assets like the U.S. dollar, are also facing growing scrutiny.
Rising speculation in crypto markets could prove another risk for bitcoin. “Another concern is the number of scams that have appeared throughout the year,” StormX’s Yu said. “With certain meme coins, we’ve seen many pump and dump activities and have seen retail investors getting burned.”
So make sure that you are well aware of what you are getting into.