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6 Dangers Ahead for Bitcoin

Even though Bitcoin is the most popular cryptocurrency around its days might be numbered. There are some dangers on the horizon which might destroy the oldest and most widely used altcoins.

[Also Read: 4 Best Cryptocurrency Hardware Wallets]

The threats to Bitcoin are almost too many to name but a few menaces stand out. Every investor should be aware of these risks and be ready for them. Some of these dangers have the potential to destroy the value of Bitcoin overnight.

The Greatest Dangers to Bitcoin Are

  1. Government Action
  2. New Technologies Such as Quantum Computing
  3. Artificial intelligence (AI)
  4. Government-Sponsored Cryptocurrencies
  5. Ethereum
  6. Market Insanity

Here are the threats to Bitcoin that investors should worry about most:

Government Action

There are many ways governments that governments can disrupt Bitcoin transactions and send the cryptocurrency’s price down. Regulators in the People’s Republic of China shut down all cryptocurrency exchanges in that country and blocked legal access to foreign altcoin providers like Coinbase in mid-September, The Verge reported. The actions of other governments have been less extreme but can be just as disruptive.

[Also Read: How to Get Started Trading Altcoins]

The most disruptive government action against Bitcoin might be taxation rather than regulation. America’s national tax-collection agency the Internal Revenue Service (IRS), is now trying to identify altcoin owners so it can tax them, Forbes reported. Just the threat of action by agencies like the IRS or Britain’s Inland Revenue might lower Bitcoin’s value.

New Technologies Such as Quantum Computing

A quantum computer is a superfast machine that has the potential to crack any encryption. Andersen Cheng of the cybersecurity firm Post Quantum thinks the advent of Quantum Computing would kill off Bitcoin by cracking its encryption. A major danger here would be quantum computing in the hands of criminals who would use it to steal altcoins.

Artificial intelligence (AI)

An AI might be able to track and identify cryptocurrency users using machine learning. In machine learning, AIs learn to discern patterns. If an artificial intelligence were able to identify the behaviours of specific altcoin owners it might be able to determine their identities. Like quantum computing, AI would be a huge threat to all cryptocurrency owners if it fell into the hands of criminals.

Government-Sponsored Cryptocurrencies

This might be the greatest danger to Bitcoin and it is an underappreciated one. Historically governments tried to suppress private currencies once they started printing paper money and minting coins. A number of governments and central banks around the world are researching the possibility of national cryptocurrencies. News reports indicate the People’s Bank of China is testing such an altcoin. Another danger from government cryptocurrencies is that consumers and investors would prefer them to private alternatives like Bitcoin.

Ethereum

This blockchain technology is a tremendous threat to Bitcoin because it is far more versatile. Bitcoin is simply a currency, Ethereum is an operating that lets users do a lot more including creating smart contracts, markets, and Initial Cryptocurrency Offerings (ICOs) new altcoins. Many large corporations including IBM are experimenting with Ethereum and governments are investigating the possibility of using it as a basis for national cryptocurrencies.

Market Insanity

Another massive danger that many altcoin users do not understand. Markets often behave in completely insane ways; because the main actors in them, human beings are inherently irrational. A good example of this is the way Bitcoin prices drop because of news stories. Bitcoin’s value fell by around $300 in mid-September 2017 after news stories about the Chinese government’s closing of exchanges appeared. Bitcoin prices also dropped after reports that JPMorgan Chase CEO Jamie Dimon was badmouthing the currency appeared. These fears proved irrational because Bitcoin’s price stabilized at around $4,300 in just a few weeks.

All of these potential dangers to Bitcoin are real but they are also theoretical. Investors should realize that none of these threats might actually materialize.

An even greater threat will be the one that nobody sees coming. Dangers nobody prepares for will do far more damage than those investors expect.

How to Protect Yourself from the Bitcoin Dangers

There is a simple means of protecting yourself from the Bitcoin dangers. It is a classic investment strategy called diversification.

Diversification simply means putting your money in a variety of investments, so all of it will not be lost to a danger. A great way for cryptocurrency users to diversify is to own a number of kinds of altcoins. Another is to keep some of your money in a hardware wallet so it will be safe from dangers on the internet.

A final step every altcoin investor should take is to keep some of your money in something besides cryptocurrencies. Good alternatives include stocks, government-insured bank accounts, and investment funds.

Understanding the potential dangers to Bitcoin can keep you from losing all your money.

The post 6 Dangers Ahead for Bitcoin appeared first on TectoGizmo.



This post first appeared on TectoGizmo - Bringing Tech Home, please read the originial post: here

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