Bitcoin Forum

  When people invest in the market, the first thing that usually comes to mind is, “How much would I make?” whether that’s in terms of bitcoins or percentages. However, the downside is just as important. Risk and return go hand in hand, after all.
The following is a multiple risk that attentive investors should know before doing any transaction.


Regulatory Risk[/b]

Bitcoins are a rival to government currency and may be used for black market transactions or tax evasion. Governments may seek to regulate, restrict or ban the use and sale of Bitcoins. Some governments have already put this into practice.

Security Risk

Bitcoin exchanges are entirely digital and, as with any virtual system, are at risk from hackers, malware and operational glitches. If a thief gains access to a Bitcoin owner's hard drive and steals his private encryption key, he could transfer the stolen Bitcoins to another account. This is particularly problematic once you remember that all Bitcoin transactions are permanent and irreversible.

Insurance Risk

Some investments are insured through the Securities Investor Protection Corporation, like normal bank accounts, which are insured through the Federal Deposit Insurance Corporation up to a certain amount depending on the jurisdiction. Bitcoin exchanges and Bitcoin accounts are not insured by any type of federal or government program.

Fraud Risk

While Bitcoin uses private key encryption to verify owners and register transactions, fraudsters and scammers may attempt to sell false Bitcoins. For instance, in July 2013, the SEC brought legal action against an operator of a Bitcoin-related Ponzi scheme.

Market Risk

Like with any investment, Bitcoin values can fluctuate. Indeed, the value of Bitcoin has seen wild swings in price over its short existence. If fewer people begin to accept Bitcoin as a currency, these digital units may lose value and could become worthless.

Tax Risk

The IRS has already announced that it treats Bitcoin as property for federal tax purposes. As Bitcoin is ineligible to be included in any tax-advantaged retirement accounts, there are no good, legal options to shield investments in Bitcoin from taxation.

about the fraud risk, i'm interested to know this, how can you sell false bitcoin aside from double spending?

Imagine that i'm a buyer and i have 1 BTC ok ? and i have to buy two goods each one price's 1BTC,so i need 2 BTC to buy them,but the principal idea of fraud is to buy them in same time exactly before one of them complet its 6 confirmations,if i do that i can earn tow good's amunt 2btc against 1 btc,
One of the transaction will be completed and the other cancled,i hope its clair

that what you explain is double spending. he wasn't talking about double spending. selling false bitcoins can be done if people have an altcoin wallet installed that makes the owner think it is a bitcoin wallet. when you think you receive 1btc you basically receive 1 shitcoin. newbie users install lots of stuff that they don't know.

bitcoin work like aaaaaaaaall other exchange.
highest it is the risk,
highest could be the gain...
so...
you are listing a lot of risky points...
and i think with bitcoin there may be an high gain

Compare the risk ,the profit also may very attractive, there are a huge chance the price of bitcoin may over $10000. ;D

I'm not sure i would agree to all the statement provided. For me regulatory risks presents minimal problem. A government can ban bitcoin but there's no way to completely shutdown the internet in order to achieve a complete blanket ban. As for fraud, it's a matter on how to choose and make decisions to protect yourself.

Well that's not bitcoins fault, it can happen with fiat as well, lots of "enter your credit card "frauds out there. Nothing will ever be extent from frauds, but BTC defeats the cons with the pros.

this might make more sense, something like a client called "bitcoins" could easily trick a newbie mind, but i might not see this working always, and anyway only with a very unprepared and clumsy user

Isnt that too hopeful.

I`m more realistic it`ll have to have some serious work w. new faces to bitcoin to get on that level.

When I mean new faces, like old folks and all those people who have deep pocket money that been saving up all their life into a traditional invesment them thinking bitcoin is some internet google company without educating them too much.

Sure, but that is the fault of the seller in my opinion. Every seller should wait until the transaction has got at least 10 confirmations in order to get sure that the transaction will not be cancelled through double spending.

I think that's a good list OP. I might add a "black swan" sort of risk. That is to say that an unknown flaw or exploit in the protocol could emerge. Or some other, as yet unconsidered, event. Perhaps a dramatic change in the free and open use of the internet? It's not risk free. 

I don't think that regulatory risk and tax risk should be on that list. Even if a government tries to tax and regulate bitcoin, it wouldn't really help much. That's kind of the point with bitcoin, as there's no one to control it is harder for governments to interfere with it in any way, let alone apply regulations and make sure that everyone is going to follow them. Even from a legal perspective, avoiding a countries laws on bitcoin would be as easy as relocating.

That's for those that look to invest into bitcoin as an entity. If you're looking to invest into companies dealing with bitcoin, well that's a whole another subject. Investing into a company can be much more complicated, especially for larger investors. But that's probably not what OP is about.

didnt that happen back in 2013 ish or something way back when.

When double spending happened, and we had to wait like forever for transactions to find our block.

Risk is definitely not tied to gain. It's risky to put foil in a microwave, do I really gain anything from doing that?

Most of the risks listed here aren't related to growth or undervaluation.

I think "technology risk" could be an added category.  Any other coin or new currency technology could make bitcoin irrelevant.  I don't personally see that happening but no one can really predict the future.

And despite all the risks, bitcoin is still going strong.

There's no basis to be sure what bitcoin's value will be or if it will even have a value.
Investors should think of bitcoins as a long-term speculation rather than a short-term trade or a long-term investment

10 confirmations look way too much, 6 are more than enough, and small merchants can wait that long for their business, i'm talking also about real life bitcoin activity

I can't remember exactly, I think that led to a fork? But yes, certainly and unexpected and unwelcome hiccup. 

I think the bitcoin exchanges are not official and certified , and this is a big danger waiting
bitcoin traders as you saw in the past years many exchanges claim hacked wallets ,,,
and the holders just loose simply their money , also the security of personel wallets
not low , I don't think that's easy to hack a wallet , and its also impossible to generate
or Brute Force a wallet private key and that a big deal  ;) .

Bitcoin Boy .

I don't worry about those things. The internet is going to be decentralized eventually, and we the people will run it instead of centralized servers. Will not even need a ISP. Look up on Maidsafe and meshnet.

Official certification isn't a guarantee that an exchange is solvent. Coinbace for instance, is the biggest bitcoin exchange if you look at it from the perspective of investments. While it seems extremely unlikely to have your deposited coins there stolen they still have never disclose whether they practice fractional reserve with user deposited funds. The best proof about their solvency we have is Andreas Antonopoulos reviewing them on February 2014 and saying that they do indeed have all the coins they're supposed to. Actual proof of solvency a good way for exchanges to prove that they're responsible with user funds. Other than that, a good level of personal security and not keeping funds in a third party's wallet for too long can also be proven vital.