Many people view Bitcoin as a “risk-adjusted” investment, meaning the gains justify the risk. Say you bought into Bitcoin at 1,000 bucks, and now, it’s worth 50 grand. That’s a 4,900 percent return on investment. Although it isn’t for the faint of heart, there’s the good reason investors continue to take the plunge on the popular and ever-expanding cryptocurrency. When thinking logically, there are a rising number of threats associated with Bitcoin, however. Whether you’re thinking of investing or already have, read on below to see if the overall risks involved may begin to outweigh even the highest ROI!
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Bitcoin is already using more energy than Sweden.
Bitcoin’s energy usage isn’t obscene, but it is quickly rising. According to Tech Insider, the amount of power required to maintain blockchain has doubled to over 100 Terawatt hours since 2017. Any government, who is a part of The Paris Climate Agreement, can no longer shrug off the rising power usage of Bitcoin. They’ll have to crack down on its energy consumption, potentially stepping in to shut down commercial mines, which will ultimately threaten the blockchain’s integrity. Inner Mongolia has already closed its biggest mine and banned future mining in an effort to cut down on emissions. Despite what Bitcoin’s CEO says, the world doesn’t need the cryptocurrency sucking up any green energy resources, either.
More countries could ban Bitcoin over time.
The list of countries that have banned Bitcoin is small yet it is expanding. India is predicted to follow China’s example in 2021, banning and criminalizing all forms of crypto trading and mining. Bolivia and other South American countries have deemed all crypto activity illegal, as have North African nations, like Algeria, Egypt, and Morocco. While the United States, the United Kingdom, and Denmark have given cryptocurrency the green light, many governments fall somewhere in the middle, and global consensus on Bitcoin is “too early to call,” leaving its future up in the air. The hardest part about it all is its regulation, as many world governments don’t know how to tax it – a day which may never come, leading to its ban.
A Bitcoin “winter” could be fast approaching.
Perhaps, the biggest – and most obvious – risk of all is that your Bitcoin investment will not make any money. Sure, the value of a single BTC has been steadily rising since 2009. It may have suffered stagnation from 2018 through 2020, but it has peaked at 600 percent of its pre-bubble valuation. But, like any bubble, Bitcoin is sure to burst – and soon. Remember, Bitcoin as an investment isn’t like a stock or real estate. There isn’t an earnings report or federal interest rate to base its past, current, or future performance on. Its value isn’t based on anything intrinsic or even predictable – just demand. Prominent Bitcoin investors are warning others of an impending “Bitcoin winter,” which is like a bubble burst but longer.
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