Welcome to Lesson 13 of the Cryptocurrency series by PROP365 Academy. In this lesson, we answer the question: is Bitcoin risky? From extreme volatility to regulatory crackdowns and cybersecurity threats, we'll break down the key risks of trading and investing in Bitcoin and what every trader should be aware of.
Bitcoin has delivered gains unmatched by most traditional assets. In 2017, Bitcoin surged from under $970 to over $16,500—a return the stock market would take decades to achieve. But while traditional markets like stocks return an average of 7% annually when adjusted for inflation and dividends, Bitcoin is a different beast. The main concern is volatility. In one year alone, Bitcoin suffered crashes of 38%, 40%, and 29%. When asking "how risky is Bitcoin?"—these swings say it all.
Key Risks of Investing in Bitcoin
Here are the top factors making Bitcoin a risky investment:
- Blockchain Viability: Bitcoin’s blockchain was upgraded in 2017 to improve scalability, but faces competition from Ethereum and others. If it fails to remain the preferred enterprise solution, its value could drop.
- Merchant Adoption: While some brand-name businesses accept Bitcoin, continued volatility may force them to reconsider. If large merchants exit, Bitcoin's use case weakens.
- Regulatory Shifts: Japan recognized Bitcoin as legal tender, but countries like China and South Korea banned ICOs and closed exchanges. Global regulation swings create constant uncertainty.
- Cybersecurity Threats: History has proven how fragile the market can be. After the Mt. Gox hack in 2013, Bitcoin lost 80% of its value. Today, exchanges like Bitfinex remain high-risk targets.
- Futures Market Pressure: With CME Group enabling futures trading, institutional shorting could intensify market dips. Leverage could fuel margin calls and escalate price collapses.
- Investor Sentiment: Bitcoin’s price is often driven by emotion. Retail investors chasing hype—or panic-selling on negative news—add to its instability.
How Risky Is Bitcoin for the Average Investor?
The truth is this: Bitcoin’s risk level depends on how you engage with it. For short-term traders, price fluctuations can mean big losses. For long-term holders with strong risk tolerance, the reward may outweigh the risk. Still, when asking "is Bitcoin a risky investment," the evidence from its history, market structure, and sentiment-driven pricing points to a high-risk profile.
Summary
So, is Bitcoin risky? Yes—Bitcoin is highly volatile, subject to regulatory threats, vulnerable to cyberattacks, and influenced by unpredictable investor sentiment. These are the key reasons why Bitcoin is risky, especially for traders without a clear strategy.If you're serious about learning to manage these risks in a real trading environment, try PROP365. Our platform offers flexible crypto challenges, fast payouts, and unlimited trading time — helping you trade smarter in a volatile market.
