Though bitcoin has been awesome in poverty alleviation in the recent time, but here are some disadvantages why people might be discouraged from investing in it....
Extreme volatility
Investing in cryptocurrencies involves very high risk, as prices have been extremely volatile.
Many experts are sceptical about Bitcoin as an investment primarily because there is nothing for them to analyse. Vivek Belgavi, Partner and Fintech Leader, PwC says, There isnt enough of an ecosystem surrounding Bitcoins to allow fundamental analysts to study it as an investment.
People are therefore investing with imperfect information and joining the herd of speculators. Since these cryptocurrency prices are not regulated, as more people enter the market lured by the high prices, the prices climb ever higher.
This might lead to formation of a bubble that will eventually burst and cause widespread losses.
An unregulated space
Unlike other investment avenues, cryptocurrencies are not regulated by government entities or banks.
There is no authorities like Sebi that you can approach for grievance redressal, says Vikram Pandya, Director, Fintech, SP Jain School of Global Management.
Remember, If we buy something with a credit card and get ripped off, we can call the bank and ask to be compensated.
But if we get ripped off in a Bitcoin transaction, it is impossible to get the money back. As Pethe has realised a little too late, therein lies the pain of investing through unregulated schemes.