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Bitcoin's boom was one of the greatest times for investors ever made, and it was a time that saw a huge amount of interest in cryptocurrency. After Bitcoin's value soared to over $20,000 per coin, the cryptocurrency market suddenly crashed, with Bitcoin then dropping to about $5,000 or so per pop.
Ever since then, it's been assumed that Bitcoin won't reach its fever pitch high again. That might be true, but that reason alone isn't why people and finance experts are worried about Bitcoin.
Bad as it may seem, it's looking like there may be signs of a further crash. Here's why...
The market is starting to look like a "dead cat bounce."
When a stock is about to die out, it'll have multiple rallies. In other words, it'll dip up a little bit, then drop further, then dip up slightly again, then drop even further. Many traders call this a "dead cat" bounce.
Traders are worried about Bitcoin because it's looking like a dead cat moment. While this could be a false warning, it's worrying enough that some people are starting to pull out of the crypto game altogether.
Some also believe that Bitcoin may be fundamentally flawed.
Due to the fact that Bitcoin is the first cryptocurrency, its design isn't as durable as other cryptos on the market. Many believe that Bitcoin is fundamentally flawed and built to fail.
As most people know, the algorithms that are run in order to complete a Bitcoin transaction require a third party to verify them. Each algorithm gets harder the more transactions are done, and that means Bitcoin mining gets harder and harder every time you do it.
With even the best Bitcoin mining hardware becoming incredibly expensive, people are worried about Bitcoin's ability to keep mining (and therefore transactions) possible without it becoming impossible for those on a normal budget to do.
Should mining become too tough to do, Bitcoin will collapse. That being said, it's very likely that tech will advance to the point that this will not happen. Hopefully, anyway.
Bitcoin's criminal stigma is still there, too.
Though the stigma has started to fade, the belief that Bitcoin is the new criminal currency has not subsided entirely. Many people are worried that Bitcoin's past will eventually catch up to it, and have it become criminalized as a result.
So far, a number of countries have passed legislation against Bitcoin mining or against the use of cryptocurrencies. Needless to say, this is one of the more legit reasons people are worried about Bitcoin's future.
Some are also concerned that the increased legislation will make Bitcoin worthless.
Governments are meant to help protect people from scams, and that's why many people are relieved to see that laws are being passed regarding Bitcoin and other cryptocurrencies. As good as protective laws can be, there's a downside to them, too.
The problem with laws is that they can be hard to handle and even harder to enforce. Additionally, certain laws may actually prevent Bitcoin from reaching record highs once more. If that happens, then it could spell disaster for Bitcoin.
So far, the Commodity Futures Trading Commission hasn't done too much damage to Bitcoin. However, that doesn't mean it won't happen in the future.
Unlike regular stocks, Bitcoin isn't really predictable.
Bitcoin's value isn't really tied to anything in particular. It's not associated with the stock market, any form of fiat money, or any other form of business. Since there's nothing backing the value of Bitcoin, it's really hard to predict where the price of Bitcoin will go.
Of course, if Bitcoin crashes, this also means that every investor will lose everything. Terrifying, isn't it? All things considered, the unpredictability of digital currency is one of the most common reasons why people worry about Bitcoin and avoid investing in it.
Sometimes, it's the people who decry Bitcoin that make others concerned.
Bitcoin has quite a few celebrity sponsors at this point, but that doesn't mean that it doesn't have its detractors either. When you hear some of the biggest names in Wall Street warning against an investment, it's hard to ignore their advice.
They're the geniuses, right? That means you should listen, right? Most likely. That's why many people rethought their Bitcoin investments after Warren Buffett called it "rat poison" as an investment.
Recent political events suggest Bitcoin might see a crackdown that would permanently cripple it.
It's not surprising that many criminals and tax dodgers have used Bitcoin as an almost-untraceable currency for illicit transactions. Now that it's become clear that Bitcoin was involved in Russia stealing the election, it's quite possible that we will see a lot of government crackdown in Bitcoin use.
Depending on how the crackdown happens, it could end up wrecking Bitcoin's ability to function at all—or it could just grossly decrease Bitcoin's value as fewer people will need to own it once the anonymity disappears.
Despite all the major hacks that have happened, people still don't seem to have a fix for Bitcoin's security issues.
We all remember the awfulness that was the Mt. Gox breach. We also remember all the problems that happened with people who lost everything they owned in Bitcoin due to the sheer amount of hacking that happens on the trading platform.
The rate of hacks continues to rise. So, at what point are people going to say that it's no longer worth investing in? Depending on who you ask, that point is about to be reached.
Bitcoin and other cryptos don't really seem scalable.
Right now, market data shows that the entire cryptocurrency world has a market cap of around $400 billion—which is less than half of what Apple is worth on the stock market. That sounds pretty big, until you realize that only 8 percent of Americans have invested in cryptocurrency.
The truth is that much of Bitcoin's model isn't scalable. There's a maximum amount of Bitcoins that can be released, the cost of mining Bitcoin continues to skyrocket, and let's just be real, not everyone will be smart enough to handle Bitcoin investing, either.
Scalability is an issue that might actually be the death of cryptocurrency, since we don't really know how much it would take to be able to scale all the currencies without extreme slowdown.
Finally, the biggest reason why people are worried about Bitcoin is because of the fact that it's new.
There's never really been anything like Bitcoin in recent history. Everything that is happening could be happening for the first time ever. So, we don't really know what will happen to the world of cryptocurrency because it's so unprecedented.
Scary as it is, it's still important to invest. You never know what the future will hold.