- Regulation is the greatest threat
Shidan Gouran, president of Global Blockchain Technologies Corp, explains Bitcoin's appreciation past the $10,000 mark has made headlines everywhere, and has made the market activity for this digital currency-cum-commodity very bullish. While the majority of the attention has been on Bitcoin's growth, it behooves the forward-thinking and savvy investor to consider what outside threats stand to send the cryptocurrency's value plummeting.
"We believe that the greatest threat is regulation," said Gouran. "Several governments across the world have clamped down on exchanges, some halting trading altogether. Others have gone on to outright ban the use of Bitcoin. Sudden government actions in major Bitcoin trading hubs stand to disrupt the market, with the potential to severely affect the utility of bitcoin - and accordingly, the value."
Indeed, Bitcoin took a hard pounding in September amid China initial coin offering (ICO) ban, and regulation in Russia could also be a threat to the cryptocurrency's value. Of course, as the cryptocurrency gains mainstream adoption, those crack downs may prove more difficult to implement.
"Banning bitcoin in any democratic country will be extremely difficult," said Abhishek Pitti, CEO of Nucleus Vision. "Bitcoin's decentralized approach to currency is very people-centric and as it becomes more mainstream, more people will understand its benefit. Any democratic government that bans something so beneficial for the people risks losing power."
- What if there is another Mt. Gox style breach?
Newcomers investing in Bitcoin might be unaware of the Mt. Gox breach that happened in early 2014. Back then, Mt. Gox, the world's largest Bitcoin trading exchange, collapsed, and more than 24,000 customers around the world lost access to hundreds of millions of dollars' worth of cryptocurrency.
"Aside from regulation, another exchange breach such as what happened to Mt Gox will considerably degrade the public's comfort with Bitcoin," Gouran said. "We maintain our stance that more decentralized Bitcoin exchanges are needed to address this. Until this market gap is resolved, that vulnerability represents a major opportunity for bitcoin to sink overnight."
Gouran believes that with community disagreements the conflicts that result from this -- such as too many hard forks -- also have the potential to create dangerous turbulence in the marketplace. While nothing severe has happened just yet, this possibility becomes greater as the market gains momentum and the stakes become higher.
"Bitcoin has found a way to overcome many obstacles in the past," said Pitti. "The industry learned from Mt. Gox and wallets and exchanges have dramatically stepped up their security game."
But such a raid on the exchanges with hackers growing craftier and with those controlling the exchanges often operating without significant checks and balances in place.
- Possible Black Swan scenario
Tatu Karki, communications director at Aragon, a management tool developed for decentralized companies, explains that the price of Bitcoin has been climbing for quite some time now and any black swan event could make people, especially those who are new to the cryptocurrency space, quickly lose their confidence in it and make the price drop rapidly.
"The biggest issue that Bitcoin is currently facing is related to scalability," Karki said. "The price and delay in transactions are making it difficult to actually use. Some people seem to prefer this, it portrays Bitcoin as a good store of value in their minds, while others would like to see it have some utility."
Francesco Nazari Fusetti, CEO and Founder Charity Stars a platform using Blockchain to raise capital explains corrections are inevitable and only natural. Bitcoin has gotten increasingly stronger in the face of the threat posed by hard forks, and a sinking Bitcoin is not necessarily an imminent scenario.
"This is a market used to double digit price swings both upwards and downwards and holding can mostly be considered the most effective action to take in turbulent times," Fusetti said.
Jeffrey Van de Leemput, founder Bitcoin mentoring group Cryptocampus, is adamant the price will never be pushed back down.
"The price of Bitcoin will never be pushed back to the levels it has been at the beginning of this year," he said. "After seven years it has proven to me to be unstoppable, just like the internet was."
It's extremely difficult to predict how large scale events could affect the valuation of Bitcoin in the long-term. But starry-eyed investors should definitely be on the look out for these three risk areas.
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