- The financial value of a bitcoin is highly volatile and may oscillate every hour, being an unsafe investment. The IRS considers bitcoins as property and not currency.
- Bitcoin transactions are irreversible. If you send bitcoins to the wrong person, or it has been stolen from your wallet, it might be very difficult if not impossible to get it back.
- Since bitcoin transactions, just like every cryptocurrency, do not involve third parties and can reimburse your funds, you cannot rely on a safe storage of your bitcoins.
- Just like for every cryptocurrency, there is a risk of potential cyberattacks. In 2013 Mt. Gox, (handling about 70% of bitcoin's trading volume at the time) became a victim of a cyberattack with the theft of 850,000 bitcoin (worth $6.8 billion today) and cash. Consequently, bitcoin lost more than 80% of its value. Today, cryptocurrency exchange Bitfinex handles around half of all bitcoin transactions. A cyber attack on the platform would drastically lower bitcoin’s value.
- Since the value of bitcoin is determined by investors it allows their emotions to influence their investing decisions, which usually does not end well. Most of the oscillations of value are because of investors' active interest or bailing out of bitcoin based on the latest news.
- Since bitcoin is a rival for some governments, due to its possible use in the black market, for money laundering, illegal activities and tax evasion, authorities might consider banning, restricting and regulating the versatile uses of the cryptocurrency. Some countries, like Bolivia and Ecuador, have already done so. Other governments are contemplating regulations. An example is the New York State Department of Financial Services, which has agreed upon regulations in 2015. These regulations require a record keeping of the customers’ identity, have a compliance officer and maintain capital reserves during a bitcoin transaction. Any transactions exceeding a maximum of $10,000 will have to be recorded and reported. These government interventions question bitcoin’s liquidity, universality and longevity.
- Bitcoin is a digital currency and some transaction platforms are under the risk of theft by hackers, who can transfer bitcoins to another account. Since there is no third party or payment processor, there is no source of protection or appeal incase of such problem.
- Unlike normal bank accounts, that are insured through the Federal Deposit Insurance Corporation, bitcoin accounts are not insured by any government program.
Picture resouces: https://kryptomoney.com/hackers-demand-two-bitcoins-for-decrypting-governmnet-computer/