Bitcoin has seen some really impressive growth this year in terms of value and mainstream interest, but what are the risks?
Bitcoin is currently the largest and most valuable cryptocurrency on the market. According to Coindesk, it is valued at little over $19,000 for a single coin. However, despite the coin’s meteoric rise in recent months, there are some concerns that the cryptocurrency is a bubble waiting to burst. These concerns have grown especially pronounced as the coin approaches the milestone price of $20,000.
These concerns aren’t completely unfounded, as Bitcoin has crashed a few times in the past. According to Dr. Daniele Bianchi, of Warwick Business School, those crashes were due to increased competition from other cryptocurrencies, government intervention, and technological issues.
“This tells one simple story; the main risk for Bitcoin comes from external factors such as regulatory intervention and security breaches which might hit the credibility of the entire protocol and its effective usefulness as a method of payment/store of value,” Bianchi told Forbes.
In terms of competition, Bitcoin has plenty, but so far, the currency has managed to maintain its lead due to the fact that it was one of the first to hit the market. In terms of price per coin, Bitcoin Cash is the second most valuable cryptocurrency at $1,861, though it lags behind both Bitcoin and Etherum in terms of market cap.
The recent move by investment firms to set up Bitcoin futures markets have had a mixed effect upon the cryptocurrency. On one hand, the investments are likely one of the reasons the coin’s value has continued to rise over the past month. If we do see Bitcoin break the $20,000 mark before Christmas, it will likely at least partially be thanks to those investors.
On the other hand, the increased interest from major investment firms means that we’ll likely see various government agencies taking a closer look at the currency and possibly implementing stricter regulations. Right now, the U. S. government has largely taken a hands-off approach to the coin, but if it continues to grow in value and attracts the attention of Wall Street, it’s unlikely that the federal government will sit idly by.
As for the alleged Bitcoin bubble, it remains to be seen what the future holds, though as with many investments, there is potential for a great payoff alongside some pretty high risks.
