Bitcoin (CRYPTO: BTC) continues to prove that it’s one of the best-performing assets out there. In the history five years, it has soared 1,200%, with a monster 127% earnings just in 2024 (as of Dec. 4) to push above the $100,000 mark for the first period. Bitcoin’s tremendous momentum is certainly drawing lots of investor attention for those looking to potentially boost their capital collection returns.

But before you buy theglobe’s most valuable cryptocurrency, here are five risks you require to recognize.

1. Government intervention

Because Bitcoin is a global and decentralized digital funds that isn’t controlled by a single authority, it is a direct threat to central banks across the globe, as well as their fiat currencies. Consequently, it’s obvious that a uncertainty would be governments making it illegal to own and mine the crypto within their borders, thus aiming to eliminate a competing monetary structure.

With a Trump administration entering the White House, the economy is optimistic that regulations amiable to the crypto industry will be put into place here in the U.S. There’s even talk of creating a national Bitcoin strategic savings.

2. Technical challenges

Other well-known cryptocurrencies, like Ethereum, Solana and Cardano, aim to be top networks for the advancement ofdecentralized applications. And as a outcome, they all have complicated plans to implement software updates that work to enhance functionality and safety.

But there’s always a uncertainty that a recent update introduces technical challenges if there are software bugs or errors. Bitcoin is different in that its setup is very straightforward.

That hasn’t prevented the throng from occasionally adding updates to the blockchain, whether it’s to enhance scalability or privacy. If a complicated upgrade is introduced, one that exposes Bitcoin’s network to malicious actors, it could outcome in lost confidence and a worth that tanks.

3. Quantum computing

Bitcoin’s safety comes from something called community keycryptography. Only the person who knows theprivate keys is able to send their Bitcoin holdings.

There are worries that quantum computing, which essentially consists of supercomputers that can handle extremely complicated problems, could crack Bitcoin’s cryptographic setup. This could expose everyone’s private keys, making the entire network worthless.

In this unfavorable scenario, other highly secure data repositories would also be in solemn trouble. ponder about government nuclear codes or banking information held by monetary institutions. The globe would be in large trouble.

I don’t question that Bitcoin developers are challenging at work trying to defend the network against quantum computing. Or even better, maybe there’s a way to incorporate quantum computing tactics to strengthen Bitcoin.

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4. How to boost speed

One of Bitcoin’s most notable criticisms is that it’s too leisurely. As of this writing, its blockchain can procedure only about six transactions per second. That’s far below Visa’s 65,000.

TheLightning network, a Layer-2 scaling answer meant to speed up deal times and lower costs, is a feasible fix. This could make Bitcoin a more viable way of settlement.

But what if it is never able to scale up in a secure manner and handle more transactions? Then being a store of worth will be its only real use, a perspective that could feed the bearish narrative.

5. Volatility concerns

Given its incredible historical act, Bitcoin has undoubtedly been able to raise someone’s purchasing power over period. But there are still critics who will point to its setback at becoming a factual store of worth. That’s due to its heightened volatility. The crypto has experienced multiple drawdowns of greater than 50% in the history, which can be extremely challenging to deal with.

As Bitcoin matures, with more owners and more capital flooding in, perhaps its volatility will commence to decline. It’s no longer still an esoteric internet money. Instead, it’s a legitimate global monetary property now.

But if volatility remains, it could keep a large of number of investors away. And this hurdle could cap Bitcoin’s factual potential.

Neil Patel and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin, Cardano, Ethereum, Solana and Visa. The Motley Fool has a disclosure policy.

The Motley Fool is a USA TODAY content associate offering monetary information, analysis and commentary designed to assist people receive control of their monetary lives. Its content is produced independently of USA TODAY.

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